What is a consumer debt
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The Fair Debt Collection Practices Act is designed to protect consumers from abusive or harassing conduct, false or misleading statements or unfair act by Debt Collectors.
The second question that is key to ask, is What is a debt that is covered by the act?
Not all debts are “debt” for purposes of the Fair Debt Collection Practices Act.
We always start with the statutory definition.
16 USC 1692a[5] says “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
What this means is that if the debt was incurred to pay for something for you, or your houshold, it is a consumer debt. Examples include credit cards used to pay for family vacations, groceries or gas. It includes your store brand credit cards, if you use them for your self. Your car, if its for your personal use.
It does NOT include debts that are for business, or debts that are not from a transaction.
Lets go over some examples of not-transactions
Taxes, fines, levies, and other tort damages, like car wrecks or assault or shoplifting debts. These are debts that you owe, but there was no bargained for transaction. You did not do something, like negotiate for how much you would pay in taxes, and get something in return (well, maybe you did get something, but police protection, fire departments and roads are not something you negotiate for, you get them because you live there).
A car wreck is another perfect example. You did not agree to get into a car wreck and cause $5,000.00 in damages. You had an accident. This is a tort, called negligence.
So what IS covered?
Basically, anything that is a contract.
Your car loan, for the car that you use to take the kids to soccer, go to the grocery store, and drive to your place of employment, is a contract, for a purchase that you made for your personal use, and for the good of your household. But if you use that car for work- for example, a delivery driver, that car may not be a “personal” use car. It may be a business use.
How about store cards? Lets use a home improvement/hardware store card, as our example, because we can have that for many different purposes.
Lets says you have a credit card with the store, and you want to build a deck on your home. So, you charge the materials, and the brand new circular saw, and the saw horses, and the hammers, and all the other stuff. You are building a deck on your home. This is a debt for personal, family or household purposes.
Lets say you are a contractor, building a deck on a customer’s house. So, you charge the materials, and the brand new circular saw, and the saw horses, and the hammers, and all the other stuff. You are building a deck on your customer’s house. You make a living (we assume) doing construction, so the debt to the store is for a business debt, not a consumer debt. This debt would NOT be covered by the Fair Debt Collection Practices Act.
How about a check to the local grocery store?
The same analysis applies.
Did you buy groceries for you and your family? That is a consumer debt, and is covered by the Fair Debt Collection Practices Act.
Did you buy groceries because you are a caterer, and need supplies for your next job? That is NOT a consumer debt, that is a business debt, and not covered by the Fair Debt Collection Practices Act.
Why is this important?
Because when a debt collector does something that is abusive, false or misleading or unfair, to collect on a CONSUMER debt, they violate the Fair Debt Collection Practices Act. A violation of the Fair Debt Collection Practices Act allows you to sue a debt collector for actual damages, an additional $1,000.00, plus attorneys fees and costs. Please note that the $1,000.00 is NOT per violation, but for all violations that occur.
Read more about what we can do to assist you in protecting yourself from collection harassment or abuse, false or misleading statements or unfair and deceptive acts in the main section of our website.
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Krumbein Consumer Legal Services, Inc.
1650 Willow Lawn Drive
Suite 300
Richmond, VA 23230
Hello! I ran into your site totally by accident, and it worked out great! This is very interesting, and I can tell you have spent some time studying this. Thanks!
Debt negotiation definitly seems to be increasing as a potential strategy for consumers suffering with unsecured credit card debt. I’ve been tracking the trend quite closely and it is quite difficult to to define what you receive for your investment. I know there are a large group of service providers in the market that serve up outstanding debt solutions and the customers really feel the benefit, but I have also heard there are a group of debt settlement companies out there that are only focused on collecting new customer fees and enrolling new members. This is obviosly why there seems to be brand new government regulation in the debt consolidation industry. My cousin utilized a debt consolidation operation and is very extremely satisfied with the results.