4. Follow all instructions given by clients in the processing of an account or promptly give reasons for not doing so and ask for further instructions. 5. Make settlement with clients at least once each calendar month, and such settlement shall not be later than 20 days after the close of the calendar month for which the settlement is made. 6. Give preference, wherever possible, in disbursing to clients in the order of priority as established by the receipt of the accounts, where a number of accounts against the same debtor are being collected in installments, unless it is necessary to do otherwise to prevent some accounts from being outlawed or unless debtor demands payment be applied to certain accounts; but if a client supplied material information or assistance by reason of which the collection was made possible, then such client shall receive preference. 7. Allow a client the right to withdraw any and all accounts six months after they have been listed, within 30 days of receipt of such request in writing, providing that there has been neither payment nor promise of payment since the listing for collection, unless some progress shall have been made which reasonably entitles the member to retain the account or accounts for further effort. 8. Answer all business letters and communications within a reasonable period of time. 9. Maintain a separate clients' trust fund, and deposit in that bank account, within ten days of its receipt, all money collected and due to creditor-clients on accounts placed with the agency for collection; the balance in that trust account shall be sufficient to cover all funds due to creditor-clients at any time and all remittances to the clients shall be made from that account. 10. Not knowingly accept accounts from firms which engage in questionable or improper business practices, or whose accounts generally cannot be sustained by proper documentation. 11. Not accept or give any gratuities, gifts or favors that might compromise the actions and/or judgment or creditor-clients or their representatives, impair or compromise the judgment and/or quality of service offered by the collector, nor offer any unethical or illegal favor, service or thing of value to obtain a special advantage. 12. Not knowingly misrepresent his qualifications, capacity, experience and abilities. 13. Adhere to the terms of a contract or agreement unless these terms have been legally terminated, falsely represented, or substantially altered by unilateral action of the other party to the contract. In his relationships with fellow association members, each ACA member shall: 14. Compete in a fair and honorable manner, never publicly attacking the reputation of a competitor. 15. Comply with the ACA Rules and Regulations governing the forwarding and the handling of forwarded accounts. 16. Comply with the provisions as outlined in the preceding section when accounts are forwarded to or received from fellow association members, and a client-collector relationship exists. 17. Be continuously aware of ways in which he can help fellow association members to improve the operation of their businesses, when such help would not be competitively detrimental. 18. Avoid communicating directly with his forwarder's clients, except with the consent of the forwarder. 19. Not knowingly distort an evaluation of competitors and colleagues, but supply information to appropriate offices only when such disclosure serves the purpose of correcting and eliminating unethical or illegal practices. 20. Be continuously alert to ways in which members can improve their awareness of and compliance with the Association's Code of Ethics and Operations, and assist members in understanding and complying with them. In his relationship with attorneys and in areas defined as the practice of law, each ACA member shall: 21. Negotiate directly with an attorney engaged by a debtor to represent him in the collection matter at hand, and not negotiate with the debtor until such time as the attorney removes himself from such relationship, or neglects or refuses to answer correspondence or other communications. 22. Refrain from: (a) Soliciting claims for any purpose at the instigation of any attorney which would place the attorney in the position of violating the Canons of Ethics of his own association. (b) Soliciting claims for the purpose of having any legal action or court proceedings instituted thereon. 23. Refrain from: (a) Assuming authority on behalf of clients to employ or terminate the services of an attorney or to arrange the terms or compensation for such services. (b) Intervening between client and attorney in any manner which would control or exploit the services of the attorney or which would direct those services in the interest of the agency. (c) Demanding or obtaining in any manner a share of the proper compensation for services performed by an attorney in collecting a claim, irrespective of whether the agency may have previously attempted collection thereof. 24. Refrain from: (a) Furnishing legal advice or performing legal services or representing that he is competent to do so; or instituting judicial proceedings on behalf of other persons. (b) Communicating with debtors in the name of an attorney or upon the stationery of an attorney; or preparing any forms or instrument which only attorneys are authorized to prepare. 25. Refrain from employing instruments simulating forms of judicial process or forms of notice pertaining to judicial proceedings. In his relationship with consumers, each ACA member shall: 26. Show due consideration for the misfortunes of consumers in debt and deal with them according to the merits of their individual cases. 27. Do everything reasonable to assist the consumer in the solution of any financial problems he may have and to help him to have a better understanding of the use of credit and importance of using it wisely, by utilizing appropriate channels of communication, including programs of consumer education. 28. Avoid deceptive practices, statements, or materials which would cause the consumer to believe that he was dealing with someone other than the collector. 29. Provide effective channels for receiving and acting on consumer complaints and suggestions, including but not limited to utilizing the resources of its AssOciation, Chamber of Commerce, Better Business Bureau, recognized consumer groups, and other appropriate bodies. 30. In the event of a disputed account, make available to the consumer all related supporting information and documents with an explanation of all charges, and provide trained personnel to assist the consumer and/or creditor-client im attempting to resolve any existing dispute regarding his account. 31. When a consumer absolutely refuses to pay or even discuss an account, cease further direct collection efforts with the exception of advising the consumer that the collector's further efforts are being terminated and that there is a possibility of the creditor's attorney invoking the creditor's remedies locally available. 32. Not publish, post, or cause to be published or posted any list of debtors commonly known as a "deadbeat list" for the purpose of forcing or attempting to force collection thereof. 33. Cooperate with qualified community counseling services and other appropriate agencies and refer consumers to them as such needs appear. 34. Make telephone and personal calls during such hours and with such frequency as would be regarded as reasonable. EXHIBIT B AMERICAN COLLECTORS ASSOCIATION, INC.. To: All Unit Presidents and all National Directors. DEAR UNIT PRESIDENT: Attached is a copy of a model state fair debt collection practices regulatory act which was written by the Merchants Research Council and slightly amended by the ACA Legislative Council· On the recommendation of the Council, the Board of Directors approved this particular bill as a good model for all ACA state Units to follow in enacting this type of legislation in your states. We urge you to read it carefully, have it considered by your state legislative committee, and work with the retailers' groups in your states to enact this type 1 ACA amendments in italics-deletions in parentheses. of legislation. As their organization has already approved it, they very likely will be taking the lead to attempt to enact it, and possbly would be contracting you or welcoming your help when the time is appropriate. In reading it, you will notice that it has several good points for the creditors and their representatives, and at the same time governs collection practices of credit grantors as well as their collection services. If you have further questions, please let us know. JOHN W. JOHNSON, Executive Vice President. MODEL FAIR DEBT COLLECTION PRACTICES ACT PREPARED BY MERCHANTS RESEARCH COUNCIL, INC., ENDORSED, AS AMENDED, BY THE This act may be cited as the Fair Debt Collection Practices Act. CHAPTER 1-GENERAL PROVISIONS Sec. 2. Findings and purposes (a) The Legislature makes the following findings : (1) The banking and credit system and grantors of credit to consumers are dependent upon the collection of just and owing debts. Unfair or deceptive collection practices undermine the public confidence which is essential to the continued functioning of the banking and credit system and sound extensions of credit to consumers. (2) There is need to ensure that debt collectors and debtors exercise their responsibilities to one another with fairness, honesty and due regard for the rights of the other. (b) It is the purpose of this Act to prohibit debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and to require debtors to act fairly in entering into and honoring such debts, as speci· fied in this Act. Sec. 3. Definition and rules of construction (a) Definition and rules of construction set forth in this section are applicable for the purpose of this Act. (b) The term "debt collection" means any act or practice in connection with the collection of consumer debts. (c) The term “debt collector" means any person who, in the ordinary course of business, regularly, on behalf of himself or others, engages in debt collection. The term includes any person who composes and sells, or offers to compose and sell, forms, letters, and other collection media used or intended to be used for debt collection, but does not include an attorney or counselor at law. (d) The term “debt” means money, property or their equivalent which is due or owing or alleged to be due or owing from a natural person to another person. (e) The term "consumer credit transaction" means a transaction between a natural person and another person in which property, services or money is acquired on credit by that natural person from such other person primarily for personal, family, or household purposes. (f) The terms “consumer debt” and “consumer credit" mean money, property or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction. (g) The term "person" means a natural person, partnership, corporation, trust, estate, cooperative, association of other similar entity. (h) The term "debtor” means a natural person from whom a debt collector seeks to collect a consumer debt which is due and owing or alleged to be due and owing from such person. (i) The term "creditor" means a person who extends consumer credit to a debtor. (j) The term "consumer credit report" means any written, oral or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor 1 ACA amendments in talics-deletions in parentheses. in establishing the consumer's eligibility for (1) credit or insurance to be used primarily for person, family, or household purposes, or (2) employment purposes, or (3) other purposes authorized under any applicable Federal or State law or regulation. The term does not include (A) any report containing information solely as to transactions or experiences between the consumer and the person making the report; (B) any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device; or (C) any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys his decision with respect to such request, if the third party advises the consumer of the name and address of the person to whom the request was made and such person makes the disclosure to the consumer required under any applicable Federal or State law or regulation. (k) The term "consumer reporting agency" means any person which, for monetary fees, dues, or on a cooperative non-profit basis, regularly engages, in whole or in part, in the practice of assemblying or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer credit reports to third parties, and which uses any means or facility for the purpose of preparing or furnishing consumer credit reports. CHAPTER 2--DEBT COLLECTOR RESPONSIBILITIES Sec. 4. Coercion or threats of coercion No debt collector shall collect or attempt to collect a consumer debt by means of the following conduct : (a) The use, or threat of use, of physical force or violence or any criminal means to cause harm to the person, or the reputation, or the property of any person; (b) The threat that the failure to pay a consumer debt will result in an accusation that the debtor has committed a crime where such accusation, if made, would be false: (c) The communication of, or threat to communicate to any person, except as permitted in Section 6 hereof, the fact that a debtor has engaged in conduct, other than the failure to pay a consumer debt, which the debt collector knows or has reason to believe will defame the debtor; (d) The threat to the debtor to sell or assign to another person the obligation of the debtor to pay a consumer debt, with an accompanying false representation that the result of such sale or assignment would be that the debtor would lose any defense to the consumer debt : (e) The threat to any person that non-payment of the consumer debt may result in the arrest of the debtor or the seizure, garnishment, attachment or sale of any property or the garnishment or attachment of wages of the debtor, unless such action is in fact contemplated by the debt collector and permitted by the law; or (f) The threat to take any action against the debtor which is prohibited by this Act. Sec. 5. Harassing or abusive communications No debt collector shall collect or attempt to collect a consumer debt by means of the following practices: (a) Using obscene or profane language or language that is intended to reflect unreasonably upon the character, morals or habits of the debtor: (b) Placing telephone calls without disclosure of the caller's identity with intent thereby to harass or threaten the person called: (c) Causing expense to any person for long distance telephone calls, telegram fees or charges for other similar communications, by misrepresenting to such person the purpose of such telephone call, telegram or similar communication; (d) Causing a telephone to ring repeatedly or continuously with intent to annoy or harass the person called: or (e) Communicating, by telephone or in person, with the debtor with such frequency as to be unreasonable and to continue an harassment to the debtor under the circumstances. Sec. 6. Unreasonable publication No debt collector shall knowingly collect or attempt to collect a consumer debt by means of the following practices: (a) Communicating with the debtor's employer regarding the debtor's consumer debt unless there has been a default in any payment, in whole or in part, of the debt for at least 30 days and at least 10 days prior notice of the intention so to communicate with the employer has been given to the debtor, except that this subsection (a) shall not apply when the communication is made after a judgment on the consumer debt, in whole or in part, has been entered against the debtor by the creditor, or where the purpose of the communication is to locate the debtor, or where the debtor or his attorney has consented to such communication; (b) Communicating information regarding a consumer debt to any member of the debtor's family, other than the debtor's spouse or the parents or guardians of the debtor who is either a minor or who resides in the same household with such parent or guardian, prior to obtaining a judgment against the debtor, except where the purpose of the communication is to locate the debtor, or where the debtor or his attorney has consented to such communication; (e) Communicating to any person any list of debtors which discloses the nature or existence of a consumer debt, commonly known as "deadbeat lists," or advertising any consumer debt for sale, by naming the debtor; or (d) Communicating with the debtor by means of a written communication that displays or conveys any information about the consumer debt or the debtor other than the name, address and telephone number of the debtor and the debt collector and which is intended both to be seen by any other person and also to embarrass the debtor. Notwithstanding the foregoing provisions of this Section, the diselosure, publication or communication by a debt collector of information relating to a consumer debt or the debtor to a consumer reporting agency or to any other persons reasonably believed to have a legitimate business need for such information shall not be deemed to violate this Act. Sec. 7. Fraudulent, deceptive or materially misleading representations No debt collector shall collect or attempt to collect a consumer debt by means of the following practices: (a) Any communication with the debtor other than in the name either of the debt collector or the person on whose behalf the debt collector is acting; (b) Any false representation that any person is an attorney or counselor at law: (c) Any communication with a debtor in the name of an attorney or counselor at law or upon stationery or other like written instruments bearing the name of the attorney or counselor at law, unless such communication is by an attorney or counselor at law or shall have been approved or authorized by such attorney or counselor at law; (d) The false representation that any debt collector is vouched for, bonded by, affiliated with, or is an instrumentality, agent or official of any federal, state or local government or any agency of federal, state or local government; (c) The use of any written communication which simulates or is falsely represented to be a document authorized, issued or approved by a court or agency of any federal, state or local government; (f) The false representation that the consumer debt may be increased by the addition of attorney's fees, investigation fees, service fees, finance charges, or other charges if, in fact, such fees or charges may not legally be added to the existing obligation; (g) The false representation that information concerning a debtor's failure or alleged failure to pay a consumer debt has been or is about to be referred to a consumer reporting agency; (h) The false representation that a debt collector is a consumer reporting agency; (i) The false representation that collection letters, notices or other printed forms are being sent by or on behalf of a claim, credit, audit or legal department; (j) The false representation of the true nature of the business or services being rendered by the debt collector: (k) The false representation that legal proceeding will be instituted unless payment of a consumer debt is made; or (1) The false representation that a consumer debt has been, is about to be, or will be sold, assigned, or referred to a debt collector for collection. Sec. 8. Unfair practices No debt collector shall collect or attempt to collect a consumer debt by means of the following practices: (a) Obtaining an affirmation from a debtor who has been adjudicated a bankrupt, of a consumer debt which has been discharged in such bankruptcy, without clearly and conspicuously disclosing to the debtor, in writing, at the time such |