You want your money. The bad tenant who recently moved out owes you a lot. Now you want to collect. In your eagerness to get your money, be careful. You could fall under your state’s version of the Fair Debt Collection Practices Act (FDCPA).
The Federal Fair Debt Collection Practices Act regulates the tactics collection agencies are allowed to use to collect money. Landlords, as long as they are collecting money owed from their own properties, probably don’t fall under the purview of the federal law, but many states have laws that are more restrictive. They include the creditor as well as the collection agency under the provision of their version of the FDCPA.
Probably the only time a landlord could get into trouble under the federal law would be if he were to pretend that he was a collection agency or attorney in an attempt to scare the bad tenant into paying the bill.
Check your own state law or contact your attorney regarding debt collection practices, you may well be covered by the law.
With that in mind, here are some things you do not want to do.
DO NOT call the debtor at work
You can call a debtor at his or her job, unless you know or suspect that the debtor’s employer prohibits him or her from getting calls that are not related to work.
Many companies do have policies prohibiting personal phone calls at work, and the burden of proof is on you to know. One way to find out, of course, is to call the company and ask. Just make sure you don’t mention whom you are calling about. Just say you are making an inquiry. You can identify who you are and why you would be calling, you just can’t say whom the person is who owes you money.
You could end up saying the wrong thing just because of what the receptionist asked you. For example, the receptionist refuses to put you through unless you identify your company and the nature of your business. What do you say? Under no circumstances may you imply that your call has to do with debt. It is best to say that your call is personal and confidential, and that you are not at liberty to say the nature of your call.
Calling a debtor’s work is probably the most dangerous, lawsuit-potential activity you can take in trying to collect a debt. The resulting expense to you of the wrong phone call could end up being far more than what the bad tenant owes you.
Sending mail to a debtor’s business is also risky, because often mail is opened by someone other than the person to whom it is addressed. If you must send mail, write “personal and confidential” on the envelope. But even that is no guarantee the letter won’t be opened by accident. Under no circumstances think about, consider or even dream of sending a post card.
DO NOT deceptively find a debtor
Unless the debtor can easily tell that you are trying to get his address or bank information, you are not allowed to do it. One thing people do is send a check for a small amount of money (say $5) to the debtor in hopes that he will cash it and they can find out what bank he uses. Once you know that you can attach assets. But he or she is just as likely to simply get the check cashed somewhere else anyway, then you are out the money.
DO NOT Threaten the debtor
Unless you have a definite plan to and time for doing so, do not threaten the bad tenant with a lawsuit or say things such as “I’m turning the whole matter over to the Sheriff unless you pay up now!” If you indeed plan to take legal action the next day, by all means you can say so. But you may not use it as an idle threat.
Likewise avoid making statements that are simply informational, such as “I have the following options. . .” These would probably be construed by your state’s attorney general’s office as threatening something, when you have no intention of doing it.
The following are things you may not do or say when you contact your debtor tenant:
• use threats of violence or harm against the person, property or reputation
• use obscene or profane language
• state that they will be arrested if they don’t pay their debt
• state that you will seize, garnish, attach or sell their property or wages, unless you intend to do so and it is legal to do so
• state that actions, such as a lawsuit, will be taken against them, which legally may not be taken, or which you do not intend to take
DO NOT use “fake” court documents
Make sure any letters or statements you send look like just that. Don’t make them appear as if they are court documents or legal papers. You might be tempted to type up something that looked like a lawsuit, you know, the papers with the line numbers down the left side of the page. Wouldn’t that scare them?
Similarly, if you send a debtor form documents that were obtained from a court or some government agency, but that have not been officially dated, authorized or filed amounts to the same kind of thing. That would scare them, too! It would also land you in a world of problems.
DO NOT call at Inconvenient Times
Call only between 8 am and 9 pm. Outside of those hours is considered harassment. One exception would be if you knew the debtor worked graveyard shift and slept until three o’clock in the afternoon. Then calling at 8 am would be considered harassment.
DO NOT keep on Calling
If the bad tenant tells you in writing to stop communicating with him, you have to stop. You can write back, or call, telling him that you won’t contact him anymore and that you are not going to attempt to collect from him anymore. You can also tell him what you would normally do under these circumstances, such as what legal action you would take. Just be careful how you word it, it could end up being considered a threatening letter. Ask your attorney how to phrase it.
DO NOT tell a third party about the debt
When trying to track down a bad tenant who has skipped, you call their friends and relatives looking for a new address, the ones they listed on the rental application. When you talk to them, under no circumstances may you state, confirm or imply that this person owes you money. This is true in federal law for both collection agencies and creditors themselves, such as landlords who have a bad debt from a tenant. In addition, attorneys read the law to prohibit anyone from informing third parties, including employers, of the existence of a debt.
The person with the bad debt has more of a right to privacy than you have a right to find him.
You MUST validate the debt
You have to tell the debtor, either at your first contact or within five days of it, that unless he or she disputes the debt or any portion of it within 30 days, you will assume that the debt is legitimate. Inform him or her also that if it is disputed, you will send a copy of the verification of the debt. If the bad tenant does not dispute the fact that he or she owes the money in that 30-day period, they have accepted the debt as owing.
This would apply if you did not have a judgment. Obviously with a judgment, the court has ruled that the bad tenant owes the money.
DO NOT publicize the bad debt
Wouldn’t it be fun to run an ad and tell everybody your bad tenant owes you money? Wouldn’t that embarrass him? Yes, it would, and it could also end up costing you lots of money in legal fees and damages. Any debtor who has not been convicted by a court for failing to pay a debt is still considered an “alleged” debtor, and you may not publicly display his name. Notice though, that once you have a judgment he is no longer an “alleged” debtor, it is a matter of public record and you may tell everyone about the debt.
By no means does this cover the entirety of the Fair Debt Collection Practices Act, but these are some of the common pitfalls and cautions that landlords need to be wary of in their eagerness to get the money owed them. Get a copy of your state’s rules on debt collection. You can probably get one from the state consumer protection or consumer affairs department. And if you have any doubts whatsoever, call your attorney. This is one field of law that just about every attorney is familiar with.
The Federal Trade Commission offers the following warnings to landlords and instructions to debtors.
If a debtor owes more than one debt, any payment must be applied to the debt the payer indicates. You may not apply a payment to any debt the bad tenant indicates or believes he or she does not owe.
If you violate the law the bad tenant has the right to sue you in a state or federal court within one year from the date the law was violated. If he or she wins, you may have to pay money damages plus an additional amount up to $1,000. Court costs and attorney’s fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever is less.
It pays to know and to be law abiding when collecting from a bad tenant.