Consumer Group Warns on New FTC Position on Deceased Debt Collection

A proposed policy statement on the collection of debt owed by deceased consumers will potentially weaken the consumer protections of survivors, according to a consumer law group.

The National Consumer Law Center said Wednesday in a statement that a policy statement proposed by the Federal Trade Commission “could encourage more aggressive tactics by debt collectors” seeking to recover debts left by decedents. The FTC announced their proposed policy statement in early October (“FTC Proposes New Policy Statement on Collecting Deceased Debt,” Oct. 5).

The FTC said its proposal clarifies that it will not take enforcement action against debt collectors who communicate with a decedent’s spouse or executor, administer and persons authorized to handle a deceased person’s estate.  But the agency, which is responsible for enforcing the Fair Debt Collection Practices Act along with the new Consumer Financial Protection Bureau, said the proposed policy guidelines make clear that misleading consumers about their personal obligation in paying a deceased person’s debt is a violation of FDCPA.

The FDCPA does not bar debt collectors from contacting the decedent’s spouse, executor or administrator of the decedent’s estate. But most state probate courts have expanded the list of people who can be authorized to pay a decedent’s debts from assets in the estate beyond what is allowed by the FDCPA, the FTC said.  The Commission wants to reconcile the FDCPA mandates with new state probate laws.

NCLC attorney Robert Hobbs said that contact with anyone other than the debtor is barred by the FDCPA, so the FTC’s proposed policy removes consumer protections.

"The plain language of the Fair Debt Collection Practices Act does not allow collectors to contact friends, neighbors or relatives except to obtain contact information for debtors," Hobbs said. "This proposed rule could open the door for collectors to seek money by prodding and misleading grieving relatives and friends into thinking they have obligations that they don’t."

The FTC is currently accepting comments on the policy statement through November 8, 2010. Electronic comments can be filed with the FTC at https://ftcpublic.commentworks.com/ftc/deceaseddebtcollection/.