The Federal Trade Commission has issued a proposed statement of enforcement policy regarding communications in the collection of decedents' debts. The proposal—published in the Federal Register on October 8, 2010—describes how the FTC intends to enforce the Fair Debt Collection Practices Act and Section 5 of the FTC Act in this area. It follows media reports, a congressional inquiry, and an FTC investigation regarding possible federal law violations.
The FDCPA, with certain exceptions, prohibits debt collectors from communicating with anyone other than the "consumer" whose debt is being collected. The policy statement recognizes that changes in state probate law and practice since the FDCPA's enactment have expanded the categories of persons with authority to pay a decedent’s debts from the estate's assets beyond those categories included in the FDCPA's definition of "consumer," such as the debtor's executor or administrator.
Under its proposed policy, the FTC would not initiate enforcement action under the FDCPA against a debt collector who communicates with a person who has authority to pay a decedent's debts even if that person does not fall within the FDCPA's definition of "consumer." Examples of such persons include a personal representative under an informal or summary administration procedure, a person appointed as a universal successor, a person who signs a declaration or affidavit to effectuate the transfer of estate assets, and a person who assumes the responsibility of disposing of the decedent's assets extrajudicially.
The policy statement provides guidance on how a debt collector can locate a person with authority to pay a decedent's debts from the estate's assets when that information cannot be obtained from a review of probate court filings or records. Debt collectors would be permitted to initiate a written or an oral communication to the decedent's estate and would be required to treat those communications as location communications under the FDCPA. Despite the FDCPA prohibition on a collector revealing to a third party that the debtor owes a debt when seeking location information, the policy statement would allow a collector to state that it is seeking to identify a person with authority to pay the decedent's outstanding bills.
The policy statement also cautions debt collectors against creating a misimpression regarding an individual's personal liability for a decedent's debts or using high-pressure tactics to persuade an individual to pay such debts from his or her own assets, as such conduct could violate the FDCPA and/or Section 5 of the FTC Act. In determining whether a collector has created such a misimpression, the FTC would consider whether the collector has included in its communications certain disclosures described in the policy statement. It would also consider whether the collector has obtained an acknowledgment at the time of the first payment that the person making the payment understands he or she is not personally liable to pay the decedent’s debts. Comments on the proposal must be received by November 8, 2010.