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Significance Of A Creditor Lawyer According To FDCPA

As you may know taking on a loan is easy now as everything happens online. Approvals and disbursals of pre-approved loans can happen almost instantly. However, there are lots of technicalities and legalities involved in the loaning process that you should know right from the very beginning.

This will help you to manage your debts more easily and proficiently. An attorney can help you with the law regarding debt management and relief and also help you to go about the process successfully and easily.

When you take on a loan you automatically and by law become indebted to the person or the company lending you the money. You are obligated to repay the money borrowed within the agreed time limit along with an extra amount as interest. The law prohibits you as well as the lender to act according to your whims and fancies. Ideally, both of you will have to abide by the set rules and regulations to the last word or face legal consequences.

Well, you may think this is where the significance of the attorney comes in. However, there is more into it and to know about it all you will need to start right from the very beginning.

Overview of FDCPA

Primarily, all attorneys for centuries have been regulated, disciplined and overseen by the state supreme courts from where they are licensed and not by the federal agencies or the Congress. Unfailing this age old principle, the Fair Debt Collection Practices Act or FDCPA was designed. It had a few significant features that were reviewed and revised in the following years.

  • Originally FDCPA exempted the attorneys completely from collecting debts on behalf of the creditors. However, in 1986, Congress wanted to eliminate such exemption of the attorneys and voted based on their belief that this revised Act will only permit regulating the non-litigation collection activities of the attorneys.
  • Notwithstanding the intent of the Congress, the courts however applied FDCPA to creditor attorneys even if they are involved with litigation activities on behalf of their clients.

As a result of this difference, several creditor attorneys are now being unfairly sued for filing lawsuits to collect genuine debts and are alleged for technical violations of the FDCPA. This is irrespective of the fact that the consumers did not suffer any actual harm in the process.

The reform proposed

In 2010, the Congress passed a new Act called the Dodd-Frank Wall Street Reform and Consumer Protection Act, more commonly known as DFA or Dodd-Frank Act.

  • This Act permitted the new Consumer Financial Protection Bureau to regulate the debt collectors.
  • It also provided CFPB with an authority to enforce the FDCPA.
  • According to the Section 1027(e) of the DFA, it exempted most of the consumer attorneys who are engaged in any sort of practice of law from the authority of CFPB.
  • Apart from that, it does not seem to apply to creditor attorneys that file a lawsuit to collect debts legally owed to their clients.

This exemption has created a lot of problems and to address these, the ABA or American Bar Association and all its allies in the National Creditors Bar Association or NCBA are commending the Congress to pass the corrective legislation. This legislation is called the H.R. 5082 which is the Practice of Law Technical Clarification Act of 2018.

  • Apart from the above, there is also a bipartisan bill that is cosponsored by Reps. Alex Mooney, R-WV and Vicente Gonzalez, D-TX. This bill is supposed to preserve the regulations of a traditional state court.
  • The bipartisan bill will also oversee the legal profession of the creditor attorneys and will also clarify that the FDCPA and CFPB’s regulatory authority under the DFA does not apply to the creditor attorneys.

However, this is possible only when these attorneys are involved in any debt collection litigation practice. That means, these creditor attorneys will be under the direct command of the trial judge.

Importance to the creditors

When you take out a loan from a traditional bank there is a lot of risks that these banks and other lenders take. They allow you to borrow their money and use it for your personal reason in exchange of an interest. This is done entirely on the basis of trust that you have the eligibility to take on a loan and ability to repay it as well as it is evident from your credit score and other documents.

They offer secured as well as unsecured loans to you. For unsecured loans they have nothing but their belief and trust on you to expect they will be paid back but for the secured loans their risks are somewhat reduced as they have your property as collateral security for the money lent out.

However, you may face financial difficulty down the road and want to find alternative ways to get rid of your debts. You may even try to avail different debt management plans and relief programs offered by or others.

In such situations the creditors have a new risk of losing a considerable chunk of their money lent out. However, this amount of loss will largely depend on the type of relief you want. It will be almost zero if you go for debt consolidation but for debt settlement it may be quite a substantial amount.  On the other hand, if you opt for Chapter 7 bankruptcy the amount of loss will be much more just as in case of a Chapter 13 bankruptcy.

The creditor lawyer will help the creditors in a huge way in such situations by keeping them informed about the consequences, the possibilities, and the process to go about. They will let them know when and why you may file for bankruptcy or accept a settlement. They will help the creditors to know about the costs involved in each process and advice accordingly. They will also keep the creditors informed about the delays that are inherent in each process and the total amount of loss as well as the tax implications.