Randolph C. Knepper, Esquire
Dear Mr. Knepper:
Thank you for your letter of January 26, 1989 outlining your objections to the collection practices of Alexander, Rand & Parker, Ltd. You state that your client, SmartNames Inc., engaged the firm of Alexander, Rand & Parker to collect on past due accounts. You assert that the collection firm has collected monies on these accounts, but none of the collection proceeds have been forwarded to SmartNames Inc. Furthermore, letters and phone calls to the collection agency have gone unanswered.
You believe that the collector has misled consumers into believing that their debts would be satisfied upon full payment, when in fact the money collected was not forwarded by the collector to its principal, SmartNames Inc. This deception on the part of the collection agency, in your view, violates Section 807 (2) (A) of the Fair Debt Collection Practices Act ("Act").
Section 807 of the Act contains a general prohibition against false, deceptive or misleading representations in connection with the collection of a debt. Further, Section 807 (10) specifies that it is a violation of the Act to use any false representation or deceptive means to collect or attempt to collect any debt. If a debt collector represents to a consumer that payment will be forwarded to the creditor and fails to do so upon payment by the consumer, such action would violate Section 807 (10) of the Act.
Section 807 (2) (A) prohibits false representations concerning (1) the existence of a debt, (2) the amount and (3) the legal status of a debt. Unless the facts indicate that the collector actually misrepresented to the consumer the existence, amount or legal status of the debt, the collector's actions outlined in your letter appear to fall within the purview of Section 807 (10) of the Act. However, any final determination as to whether there has been a violation of the Act would depend upon whether a valid debt existed and what actual representations were made by collector to consumers in connection with the collection activities at issue.
Should the facts demonstrate a violation of the Act by the collector, individual consumers would have a right of action under Section 813 of the Act and the government would have authority to initiate an administrative enforcement action under Section 814. As between the creditor (SmartNames) and the debt collection firm, any legal action would be a private matter of contract enforcement to be undertaken by your client. The Commission, as a matter of policy, does not intervene in such private controversies, but takes action only on behalf of the public generally. Nor is the Act intended to govern the relationship between a debt collector and his client.
You request an investigation of this matter. When we receive complaints about a particular problem, such as one about which you are concerned, we evaluate it to determine whether further inquiry is warranted. We consider factors such as the pervasiveness of the problem, the extent to which consumers are injured, and how the problem fits into our overall enforcement strategy. Should we decide to proceed further, a formal investigation is initiated. These investigations are non-public and may take some months to complete. We are adding your complaint to our enforcement files, and will retain it for use in our monitoring of credit reporting agencies.
I hope this information will be helpful. The opinions expressed in this letter are those of the Commission's staff, and, as such, are not binding on the Commission.
Roger J. Fitzpatrick