Collecting Debt: Limitations

By Richard Marmor, Esq.
AZSA Legal & Legislative Chair 

We’ve all heard the phrase, “You learn something new every day.” Some years ago, I decided to test that hypothesis. I started a log to see if I would indeed have a daily entry. It proved to be largely true, at least for me. For example, on April 12, 2016, I learned that you can solve any maze by hugging one wall, for example, the one to your right. Follow it wherever it leads, including in and then out again of every dead-end path along the way, but eventually you will always reach the exit. I mention this because I learned something new today. It concerns chasing tenants for back rent.

There is a federal law, the “Fair Debt Collection Practices Act,” aka the FDCPA. I knew that already. I also knew that it doesn’t apply to self-storage operators, which is why I didn’t think much about it beyond that. It only applies to “debt collectors”:

The term “debt collector” means any person who uses any instrumentality of inter­state commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

In other words, it applies to anyone who collects someone else’s debts for them, as for example, a col­lec­tion agency. But it doesn’t apply to landlords – we’re landlords, remember – trying to col­lect their own rents (except in New York, but that’s not our problem). That’s a good thing, be­cause were the law to apply, there are all manner of limitations, rules and requirements imposed, plus significant lia­bility if the law is violated.

Now here is where the new stuff comes in. It seems that although the FDCPA doesn’t apply to per­sons or companies chasing their own debts,* the Federal Trade Commission, which worries about such things, nevertheless doesn’t want people utilizing high-handed methods when trying to collect debts. So the FTC has concluded that portions of FDCPA do apply to anyone trying to collect a debt, those portions being the bad practices limitations. Here’s a partial list of “no-no’s”:

• Claiming to be a collection agency or an attorney when you’re not one.
• Mailing collection messages by postcard or in an envelope with debt collection information on the outside.
• Calling at unusual or inconvenient times or places (before 8:00 a.m. and after 9:00 p.m. are auto­matically considered to be inappropriate times, but Sundays, once considered inap­pro­pri­ate, are now okay).
• Calling the tenant at his/her workplace if you have reason to know that the tenant’s employer prohibits the tenant from receiving calls.
• Communicating collection information with anyone other than the tenant or his attorney, unless the tenant has authorized such third party communication.
• Threatening the use of violence or other criminal means to harm the physical person, repu­ta­tion, or property of any person.
• Using obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.
• Publishing a list of tenants who allegedly refuse to pay debts, except to a consumer reporting agency.
• Causing a telephone to ring, or engaging any person in telephone conversations, repeatedly or continuously with the intent to annoy, abuse or harass the called party.
• Calling and hanging up, or placing calls without meaningful disclosure of the caller’s iden­ti­ty.
• Making false or misleading representations about the debt, or about the ramifications of non-pay­ment of the debt.
• Threatening to take action that cannot legally be taken.
• Falsely appearing to be acting as, or with the authority of, any federal or state agency or court.
• Using false representations or deceptive means to collect or attempt to collect any debt or to obtain information concerning a tenant.
• Misrepresenting the amount of any debt.
• Threatening to foreclose your self-storage lien and sell the tenant’s property when there is no actual intention to do so.

There are more, but I think you can get the gist of what not to do.

*A person collecting debts on behalf of his/her employer is not considered to be collecting on behalf of another.

[This article deals with a law related subject at a general level and I not intended for you to rely on. You should consult a lawyer before making a final decision in a situation involving any legal issue.]

Richard Marmor has been in the self-storage industry for over 30 years, as a facility owner and consultant. He was the founding president of AZSA and is its lobbyist at the Arizona Legislature, where he authored many of the self-storage industry’s laws. An attorney, Richard also wrote the AZSA standardized lease; created most of AZSA’s forms; he is a regular speaker at AZSA educational workshops around the state; and his articles appear regularly in the AZSA newsletter and website.

Source: Behind Closed Doors, AZSA Newsletter Archives