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New FTC rules seek to protect the heirs of the deceased, but are in conflict with FDCPA laws

By December 20, 2011Uncategorized

Buffalo, NY — Generally speaking, the debt collection, or as they prefer, “accounts receivable” industry leaves no stone unturned in their efforts, including pursuing credit card and other forms of debt left by the deceased. Legally, creditors can collect from the estate of a person who is deceased, however, they are required to use appropriate methods for their collection efforts. After an increase in complaints from consumers, last August the Federal Trade Commission (FTC) found it necessary to impose new rules to restrain aggressive creditors attempting to collect after the death of an individual.

“Grieving family members were being pressured to pay the debts of the deceased immediately, and from their own pockets,” said Jeffrey Freedman, senior partner, Jeffrey Freedman Attorneys at Law. “Legally, relatives and friends are not required to pay these accounts. The funds should come from the deceased’s estate. However, people are vulnerable at these times, plus, they often don’t know their legal rights and obligations.”

Although the law varies from state to state and according to the circumstances surrounding the deceased’s estate, the FTC’s new rules restrict collectors from trying to obtain funds from family and friends unless the person has co-signed for a debt incurred by the deceased. Assets that are jointly owned may automatically pass upon death to the living partner(s) (such as joint bank accounts or real estate) outside the estate and not be subject to collection. And benefits such as life insurance proceeds are paid directly to the beneficiary. Anything that is remaining, however, is part of the estate and creditors can request payment from those assets.

“We recommend to our clients who are not the executor or administrator of the estate, that if they receive a letter or a phone call from a collector regarding a debt left by their deceased relative, they do not respond in any form to the request,” said Brad Davidzik, an attorney who handles Fair Debt Collection Practices cases with the Freedman firm. “Any interaction can lead the survivor to feel obligated and to pay off a debt he or she doesn’t have to pay.”

The Fair Debt Collection Practices Act (FDCPA) allows collectors contact with only the executor or administrator of a deceased’s estate. The FTC Policy Statement, however, allows collectors to contact family members and friends in order to find the executor or administrator, which leaves the door open for harassment.

“Consumers should never feel harassed by debt collectors and if they do, they should call an attorney who is familiar with Fair Debt Collection Practices law,” Davidzik said. “Our firm has handled a significant number of these cases. We stop the harassment and hold collectors accountable for their actions.”