FDCPA Section 805(b): Literal Interpretation is a Mistake in the Probate Process

Contributed by Howard Enders, Phillips & Cohen Associates, Ltd.

When I started in this industry 13 years ago, the specialty area of servicing deceased accounts was much different than it is today.  In 1998, very few creditors did anything other than warehouse their deceased debt, and if they chose to outsource, they had extremely limited options.  Deceased debt service providers focused more on administrative functions than providing a comprehensive portfolio solution.

Thus, one of my partners and I, as attorneys, recognized the deceased care market as underserved and decided we could put bona fide legal intelligence behind altering the collection landscape.  In doing so we built a new vision and were instrumental in establishing a new revenue stream for our industry.  There are now multiple vendors who view these accounts from a performance perspective, not an antiquated, claim filing only strategy.  But with more service providers, comes more scrutiny, and not just from creditors, but from the government as well.

The FTC recently published a position paper regarding the deceased debt marketplace and invited public commentary.  One of the key areas of focus for the FTC centered on to whom a third party debt collection agency, or a creditor adhering to the regulations contained in the Fair Debt Collection Practices Act, can speak without violating third party disclosure restrictions.

It is our opinion that in order for the probate process to work in an efficient manner, a strict, literal reading of Section 805(b) of the FDCPA is a mistake.  The FDCPA prohibits a debt collector from speaking to any third party, excluding (among others) Executors or Administrators.  Both Executor and Administrator are legal terms of art.  The terms only apply in very specific situations – Executor when a will exists, and Administrator when a court names an individual to oversee the probate process when a will does not exist.

The issue arises when there is no will, no one petitions the court, yet there are assets to liquidate and distribute.  In addition, there are many state specific laws that allow for a probate process without ever formally naming an Administrator.  This leaves the industry with a quandary…only deal with a named Administrator and thereby follow the letter of the law contained in the FDCPA, or follow the spirit and intention of the law, and allow the industry to speak to those who are serving the same purpose of a named Administrator or Executor.  Fortunately, the FTC  recognized this precise issue as evidenced by their recent public comment.

Our legal and related research, as well as accepted industry practices, leads us to the conclusion that the practical realities prohibit a strict reading of the FDCPA.  It would prohibit lawful collection in those states where there is a formal probate process, but where no Administrator named.  It would prohibit lawful collection where a family does not petition the court, yet wants to liquidate assets of the decedent and pay the money owed to creditors.  It would result in creditors warehousing accounts, and requiring them to increase the cost to every living cardholder to make up for these losses which could then not be mitigated.  This is contrary to the express intention of the drafters of the FDCPA regarding the prompt resolution of debts as well as the economic interest of Americans today.

Howard A. Enders, Esq. serves as President and COO of Phillips & Cohen Associates, Ltd., a national collection agency specializing in deceased debt servicing.  Educated at University of Delaware and Widener University School of Law, Mr. Enders has overseen the growth of not only Phillips & Cohen Associates from one office at inception to five domestic and two international sites comprising approximately 400 employees, but also PCA Acquisitions V, LLC, a national debt buyer specializing in niche portfolio acquisition.

About Phillips & Cohen Associates
Phillips & Cohen Associates, Ltd. is a full service accounts receivable management company providing customized services to creditors in a variety of specialized market segments.  For more than a decade, the company has served as the industry leader in deceased account care by establishing processes based on compassion, understanding, and proven results.  Phillips & Cohen Associates is headquartered in Wilmington, DE, with additional offices in Colorado, Nevada, Florida, and New Jersey, as well as international offices in the UK and Canada.  For more information about Phillips & Cohen Associates visit http://www.phillips-cohen.com.