Handle with care

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If there were a master list of topics that need to be addressed gingerly, death and debt would rank at the top.  For debt collectors attempting to collect the debts of a deceased consumer, a recent policy statement issued by the FTC addresses changes in state probate procedures and emphasizes debt collectors’ obligation to make sure they’re acting within the law.

With a few narrow exceptions, the Fair Debt Collection Practices Act makes it illegal for debt collectors to talk to other people about someone’s debts.  (This video from the FTC outlines the general contours of the law.)  But what about when the person who owes the debt dies?

Two developments were causing concern and uncertainty.  First, family members typically aren’t obligated to pay a deceased relative’s debts from their own assets, but some debt collectors were nonetheless contacting grieving loved ones to collect.

Second, under the law, a company trying to collect the debts of a deceased person may contact only their spouse or the executor or administrator of their estate.  But since the FDCPA was passed in 1977, probate laws have changed.  In some states, the process for appointing the person responsible for the disposition of someone’s estate has been streamlined and there may be no formal executor or administrator.  But without a person officially in that role, some debt collectors were invoking the probate process, which can be expensive and can delay the distribution of assets to the family.

Following up on a proposal put out for public comment last year, the agency finalized a Statement of Policy clarifying that it won’t take enforcement action if debt collectors communicate with someone authorized to pay debts from the estate of the deceased or if they take lawful steps to find out who that person is. Beyond that, however, the FTC issued strong words of warning to debt collectors who cross the line.

The policy statement — and common decency — mandate that certain practices are beyond the pale.  For example, it’s illegal to mislead relatives into believing they’re personally liable for a deceased loved one’s debts or that they have legal authority to pay those debts from the deceased person’s estate when they don’t.

Furthermore, in keeping with the FDCPA’s long-standing ban on unfair, deceptive, or abusive practices, debt collectors can’t contact family members or others at unusual or inconvenient times or places.

In addition to guidance for the industry, the FTC has published Paying the Debts of a Deceased Relative: Who Is Responsible?, a brochure with information for consumers about what to do when a loved one dies and debt collectors come calling.  Why not print a copy and tuck it in that just-in-case file of important papers everyone should have?

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