[Federal Register Volume 60, Number 152 (Tuesday, August 8, 1995)]
[Rules and Regulations]
[Pages 40263-40265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19542]
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FEDERAL TRADE COMMISSION
16 CFR Part 237
Guides Against Debt Collection Deception
AGENCY: Federal Trade Commission.
ACTION: Elimination of guides.
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SUMMARY: Because the Commission's Guides Against Debt Collection
Deception have been superseded by, and submitted in, the Fair Debt
Collection Practices Act (FDCPA), the Commission has determined that it
is in the public interest to eliminate them.
The Guides were adopted in 1967 to codify the results of many debt
collection cases brought by the Commission against debt collectors and
creditors under Section 5(a)(1) of the Federal Trade Commission Act
(FTCA). Although the Guides covered creditors and the FDCPA generally
does not, proceedings still may be brought against creditors under
Section 5 of the FTCA for engaging in unfair or deceptive debt
collection practices, many of which are addressed in the FDCPA. Thus,
the Commission would expect creditors and other parties whose
collection activities are not covered by the FDCPA to look to the FDCPA
for guidance in this regard.
EFFECTIVE DATE: August 8, 1995.
ADDRESSES: Requests for copies of this notice should be sent to the
Public Reference Branch, Room 130, Federal Trade Commission,
Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
John F. LeFevre, Division of Credit Practices, Bureau of Consumer
Protection, Federal Trade Commission, Washington, DC 20580, (202) 326-
3209.
SUPPLEMENTARY INFORMATION:
I. Background
The Commission issued its Guides Against Debt Collection Deception
in 1967.\1\ The Guides reflect principles enunciated in a number of
prior debt collection cases brought by the Commission against debt
collectors and creditors under Section 5 of the Federal Trade
Commission Act.\2\ Among other things, the Commission found that
various misrepresentations made in connection with debt collection were
Section 5 violations, including false claims that (1) Accounts had been
referred to independent debt collection agencies and/or consumer
reporting agencies; (2) debtors' credit ratings would be adversely
affected if their debts remained unpaid; (3) legal action would be
taken; (4) collection agencies had legal divisions; and (5) dunning
letters were genuine legal documents, telegrams, or other ``official''
forms. The Guides served to inform the collection industry and the
general public of the Commission's position on a number of
``deception'' issues in debt collection that were regarded as
particularly pertinent at the time. However, they were never used as a
basis for instituting formal action against a debt collector for
violation of Section 5. On September 20, 1977, Congress enacted the
FDCPA, which became effective on March 20, 1978. Since that time, all
Commission debt collection cases against debt collectors have been
based upon violations of the FDCPA.\3\ Under the FDCPA, the Commission
can obtain, not only an injunction and affirmative relief, but also a
civil penalty, which is not obtainable under Section 5. The Guides have
not been useful to the Commission's debt collection enforcement program
since the enactment of the FDCPA.
\1\ 32 FR 15539 (Nov. 8, 1967), as amended at 33 FR 5661 (Apr.
12, 1968).
\2\ Testimony before the Subcommittee on Consumer Affairs of the
Senate Committee on Banking, Housing and Urban Affairs, on S. 918, a
proposed Fair Debt Collection Practices Act, May 13, 1977. See also
Parents Magazine Enterprises, Inc., 68 F.T.C. 980 (1965); State
Credit Control Board, 70 F.T.C. 1318 (1966).
\3\ The Commission has also initiated a few debt collection
cases against creditors as Section 5 matters, since the FDCPA
generally does not cover creditors. Aldens, Inc., 98 F.T.C. 790
(1981); J.C. Penney Co., Inc., 109 F.T.C. 54 (1987); American Family
Publishers, Docket No. 9240 (1991). If a creditor uses a deceptive
third-party name or furnishes deceptive forms in collecting debts,
however, it is covered by the FDCPA.
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II. Comparison of the Guides to the FDCPA
With few exceptions, the provisions of the FDCPA duplicate or
expand upon the Guides, as demonstrated by the following comparisons.
A. Definitions [Section 237.0]
1. Industry Member [Section 237.0(a)]
The standards of conduct in the Guides are directed at ``industry
members,'' which include all entities that collect debts or help others
in collecting debts, including creditors and skip-tracers.\4\
\4\ ``Industry Member shall mean any person, firm, partnership,
corporation, organization, association and any other legal entity
engaged in the practice of collecting or attempting to collect any
and all kinds of money debts for itself or others, or any person,
firm, partnership, corporation, organization, association, or any
other legal entity.''
The comparable provision in the FDCPA is the definition of the
``debt collector'' [Section 803(6)], which focuses mainly on the third-
party debt collection industry. Generally, creditors are not included
in the definition unless they (1) use a false name in their collection
activities to convey the impression that third parties are involved in
collecting debts or (2) sell deceptive forms. Congress also determined
that a number of other entities should not be included within the scope
of the definition, including government employees, non-profit
organizations, mortgage servicers and other designated groups.
Although the coverage of the Guides is greater than coverage under
the FDCPA, particularly with respect to creditors, it has been the
Commission's experience in enforcing the FDCPA that creditors look not
to the Guides but to
[[Page 40264]]
the FDCPA for appropriate criteria to use in collecting their own
debts. In addition, the Commission's jurisdiction under Section 5 has
been sufficient to regulate the collection activities of creditors when
necessary. Also, to the extent that the Commission has proceeded
against creditors for violations of Section 5 in their debt collection
activities, it has used the FDCPA as a model for appropriate standards
of conduct--not the Guides. Thus, the Guides have not been useful to
the Commission's debt collection enforcement program against either
creditors or debt collectors.
2. Debt [Section 237.0(b)]
The Guides' definition of ``debt'' is similar to that in the FDCPA
[Section 803(5)] except that it includes ``commercial'' as well as
``consumer'' debts.\5\ Congress determined in enacting the FDCPA that
there was no need to cover ``commercial'' debts. The Commission's
experience in enforcing the FDCPA supports this decision. The
Commission has received few complaints from commercial enterprises
about debt collection abuse. If the Commission finds that there is a
problem with the collection of ``commercial'' debts, the problem can be
addressed adequately under Section 5.
\5\ ``Debt shall mean money which is due or alleged to be due
from one to another.''
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3. Debtor [Section 237.0(c)]
The Guides define a ``debtor'' as one who owes or allegedly owes a
money debt. The FDCPA's definition of ``consumer'' as ``any natural
person obligated or allegedly obligated to pay any debt'' is analogous.
From the Commissions standpoint, they are substantively identical. The
absence of the Guides will have no effect upon who is considered a
``debtor.''
4. Creditor [Section 237.0(d)]
The Guides' definition of ``creditor'' includes all parties to whom
money is owned or allegedly owed. Since creditors can also be
``industry members'' under the Guides, the definition does not affect
the scope of the Guides' coverage. The FDCPA's definition of
``creditor'' is similar except that it excludes those who receive or
are assigned debts in default for purposes of collection.
5. Credit Bureau [Section 237.0(e)]
There is no provision in the FDCPA that is analogous to the Guides'
definition of ``credit bureau.'' \6\ Sections 806(3) and 807(16) of the
FDCPA, however, make two references to the definition of a ``consumer
reporting agency'' (credit bureau) contained in Section 603(f) of the
Fair Credit Reporting Act (FCRA).\7\ The FCRA definition of ``consumer
reporting agency'' has rendered the Guides' definition of ``credit
bureau'' obsolete; the FCRA definition is keyed to the concept of a
``consumer report'' in the FCRA and was obviously drafted in a credit
reporting context. The FCRA definition governs insofar as the
Commission's law enforcement activities are concerned.
\6\ ``Credit Bureau is any * * * legal entity engaged in
gathering, recording, and disseminating favorable as well as
unfavorable information relative to the credit worthiness, financial
responsibility, paying habits and character of * * * any other legal
entity being considered for credit extension, so that (the)
prospective creditor may be able to make a sound decision in the
extension of credit.''
\7\ Consumer reporting agency is ``any person which, for
monetary fees, dues or on a cooperative nonprofit basis, regularly
engages * * * in the practice of assembling or evaluating consumer
credit information on consumers for the purpose of furnishing
consumer reports to third parties.* * *''
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6. Collection Agency [Section 237.0(f)]
The Guides define a ``collection agency'' as any entity that
collects money debts for others. This is essentially the focus of the
FDCPA's definition of ``debt collector'' in Section 803(6) as one ``who
regularly collects or attempts to collect, directly or indirectly,
debts owed * * * another.'' Thus, the Guides' definition has been
subsumed by the FDCPA.
B. Deception (general), Guide 1 [Section 237.1]
Section 807(10) of the FDCPA is virtually identical to Guide 1.\8\
Thus, elimination of Guide 1 will have no effect on the Commission's
debt collection enforcement policy.
\8\ Guide 1 states that an industry member ``shall not use any
deceptive representation or deceptive means to collect or attempt to
collect debts or to obtain information concerning debtors.'' Section
807(10) states that a debt collector shall not ``use any false
representation or deceptive means to collect or attempt to collect
any debt or to obtain information about a consumer.''
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C. Disclosure of Purpose, Guide 2 [Section 237.2]
Section 807(11) of the FDCPA \9\ paraphrases Guide 2(a) of the
Guides,\10\ requiring that all communications made to collect a debt
contain a disclosure that the debt collector is attempting to collect a
debt and that any information obtained will be used for that purpose.
Guide 2(b) prohibits placing communications in the hands of others that
do not contain the required disclosure. Similarly, knowingly placing
communications in the hands of others that violate the FDCPA is a
violation of Section 807(10) as well as the preamble to Section 807 of
the FDCPA with respect to ``debt collectors'' covered by the Act. Thus,
Guide 2(b) is also subsumed by Section 807 of the FDCPA.
\9\ Section 807(11) requires that a debt collector ``disclose
clearly in all communications made to collect a debt or to obtain
information about a consumer that the debt collector is attempting
to collect a debt and that any information will be used for that
purpose.''
\10\ ``An industry member shall not use or cause to be used in
connection with the collection of or the attempt to collect a debt
or * * * obtaining or attempting to obtain information concerning a
debtor any * * * material printed or written which does not * * *
disclose * * * the purpose of collecting or attempting to collect a
debt or to obtain or attempt to obtain information concerning a
debtor.''
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D. Government Affiliation, Guide 3 [Section 237.3]
Guide 3 prohibits false representations of government
affiliation.\11\ Section 807(1) of the FDCPA is virtually
identical.\12\ Thus, elimination of Guide 3 will have no effect on the
Commission's debt collection enforcement policy.
\11\ ``An industry member shall not use any trade name, address,
insignia, picture, emblem or any other means which creates a false
impression that such industry member is connected with or is an
agency of government.''
\12\ A debt collector may not falsely represent or imply that it
is ``vouched for, bonded by or affiliated with the United States or
any State, including the use of any badge, uniform or facsimile
thereof.''
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E. Organizational Titles, Guide 4 [Section 237.4]
Guide 4 prohibits conveying a false impression that an ``industry
member'' is a ``credit bureau.'' \13\ The analogous provision in the
FDCPA is Section 807(16), which prohibits the same practice.\14\ As a
result, elimination of Guide 4 will have no effect on the Commission's
debt collection enforcement policy.
\13\ ``An industry member which is not in fact a ``Credit Bureau
* * * shall not use the term * * * in its corporate or trade name;
nor shall it use any other term of similar import or meaning * * *
as to create the false impression that such industry member is a
credit bureau.''
\14\ A debt collector may not falsely represent or imply that it
``operates or is employed by a consumer reporting agency. * * * ''
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F. Trade Status, Guide 5 [Section 237.5]
Guide 5 prohibits an ``industry member'' from creating the false
impression that it is a collection agency.\15\ Since the FDCPA
principally regulates the activities of genuine collection agencies, it
has no analogous provision. To the extent that it regulates the
activities of ``creditors,'' Section
[[Page 40265]]
803(6) prohibits creditors from using names other than their own that
would create the false impression that a third party (presumably a
collection agency) is involved. This addresses the problem highlighted
by Guide 5. Section 812 of the FDCPA also prohibits furnishing forms
creating a false impression of third-party collection agency
involvement. In the main, the practices addressed by Guide 5 are
addressed by the FDCPA.
\15\ ``In collecting debts * * * an industry member shall not,
through the use of any designation or by other means, create the
impression that he is a collection agency, unless he is such as
defined in this part.''
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G. Services, Guide 6 [Section 237.6]
Guide 6 prohibits an ``industry member'' from misrepresenting the
services it renders in soliciting accounts.\16\ Similarly, Section
807(2) of the FDCPA prohibits the false representation of ``any
services rendered or compensation received by any debt collector for
the collection of a debt.'' Thus, elimination of Guide 6 will have no
effect on the Commission's debt collection enforcement policies.
\16\ ``In the solicitation of accounts for collection or for
ascertainment of credit status, an industry member shall not
directly, or by implication, misrepresent the services he renders.''
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III. Conclusion
The Commission's Guides Against Debt Collection Deception have been
superseded by the FDCPA and are no longer needed. Few in the debt
collection industry are even aware that the Guides exist. The
Commission has never taken any enforcement action alleging violation of
Section 5 because the conduct at issue violated the Guides. Since they
are superfluous, the Commission has determined that it is in the public
interest to eliminate the Guides.
List of Subjects in 16 CFR Part 237
Credit, Trade practices.
PART 237--[REMOVED]
The Commission, under authority of Sections 5(a)(1) and 6(g) of the
Federal Trade Commission Act, 15 U.S.C. 45(a)(1) and 46(g), amends
chapter I of Title 16 of the Code of Federal Regulations by removing
Part 237.
By direction of the Commission.
Donald S. Clark,
Secretary.
Statement of Commissioner Mary L. Azcuenaga Concurring in 16 CFR Part
14, Matter No. P954215; Repeal of Mail Order Insurance Guides, Matter
No. P954903; Repeal of Guides Re: Debt Collection, Matter No. P954809;
and Free Film Guide Review, Matter No. P959101
In a flurry of deregulation, the Commission today repeals or
substantially revises several Commission guides and other
interpretive rules.\1\ The Commission does so without seeking public
comment. I have long supported the general goal of repealing or
revising unnecessary, outdated, or unduly burdensome legislative and
interpretive rules, and I agree that the repeal or revision of these
particular guides and interpretive rules appears reasonable.
Nevertheless, I cannot agree with the Commission's decision not to
seek public comment before making these changes.
\1\ Administrative Interpretations, General Policy Statements,
and Enforcement Policy Statements, 16 C.F.R. Part 14; Guides for the
Mail Order Insurance Industry, 16 C.F.R. Part 234; Guides Against
Debt Collection Deception, 16 C.F.R. Part 237; and Guide Against
Deceptive Use of the Word ``Free'' In Connection With the Sale of
Photographic Film and Film Processing Services, 16 C.F.R. Part 242.
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Although it is not required to do so under the Administrative
Procedure Act, 5 U.S.C. 553(b)(A), the Commission traditionally has
sought public comment before issuing, revising, or repealing its
guides and other interpretive rules. More specifically, the
Commission adopted a policy in 1992 of reviewing each of its guides
at least once every ten years and issuing a request for public
comment as part of this review. See FTC Operating Manual ch. 8.3.8.
The Commission decided to seek public comment on issues such as:
(1) The economic impact of and continuing need for the guide;
(2) changes that should be made in the guide to minimize any adverse
economic effect; (3) any possible conflict between the guide and any
federal, state, or local laws; and (4) the effect on the guide of
technological, economic, or other industry changes, if any, since
the guide was promulgated.
Id. The Commission has sought public comment and has posed these
questions concerning a number of guides since adopting its
procedures for regulatory review in 1992.\2\
\2\ See, e.g., Request for Comments Concerning Guides for the
Hosiery Industry, 59 FR 18004 (Apr. 15, 1994); Request for Comment
Concerning Guides for the Feather and Down Products Industry, 59
Fed. Reg. 18006 (Apr. 15, 1994).
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Notwithstanding its long-standing, general practice of seeking
public comment and its specific policy of seeking public comment as
part of its regulatory review process, the Commission has chosen not
to seek public comment before repealing or revising these guides and
interpretive rules. Why not? Has the Commission changed its view
about the potential value of public comment? Perhaps the Commission
knows all the answers, but then again, perhaps not. Although
reasonable arguments can be made for repeal or revision of these
guides and interpretive rules, public comment still might prove to
be beneficial.
In addition, the relatively short period of time that would be
required for public comment should not be problematic. The
Commission has not addressed any of these guides or interpretive
rules in the last ten years. Indeed, it has not addressed some of
them for thirty years or more. For example, the Commission
apparently has not addressed the interpretive rule concerning the
use of the word ``title'' in designation of non-ceramic products
since it was issued in 1950.\3\ The continued existence of these
guides and interpretive rules during a brief public comment period
surely would cause no harm because they are not binding and because,
arguably, they are obsolete. I seriously question the need to act so
precipitously as to preclude the opportunity for public comment.\4\
\3\ 16 C.F.R. 14.2.
\4\ Unfortunately, seeking public comment would not permit the
Commission to count the repeal and revision of these guides and
interpretive rules in its tally of completed actions in the
Regulatory Reinvention Initiative Report that will be sent to the
President on August 1, 1995, but perhaps that harm could be
mitigated by reporting to the President that the Commission is
seeking public comment concerning repeal or revision.
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In 1992, the Commission announced a careful, measured approach
for reviewing its guides and interpretive rules, and public comment
has been an important part of that process. Incorporating public
comment into the review is appropriate and sensible. Although I have
voted in favor of repealing or revising these guides and
interpretive rules, I strongly would have preferred that the
Commission seek public comment before doing so.
[FR Doc. 95-19542 Filed 8-7-95; 8:45 am]
BILLING CODE 6750-01-M