[Federal Register Volume 75, Number 195 (Friday, October 8, 2010)]
[Notices]
[Pages 62389-62395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-25346]


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FEDERAL TRADE COMMISSION


Statement of Policy Regarding Communications in Connection With 
Collection of a Decedent's Debt

AGENCY: Federal Trade Commission.

ACTION: Request for public comment.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') 
requests public comment on a proposed statement of enforcement policy 
regarding communications in connection with collection of a decedent's 
debts.\1\ The statement addresses three issues pertaining to debt 
collectors who attempt to collect on the debts of deceased debtors. 
First, the proposed statement announces that the FTC will not bring 
enforcement actions for violations of Section 805(b) of the Fair Debt 
Collection Practices Act (``FDCPA''), 15 U.S.C. 1692c(b), against 
collectors who, in connection with the collection of a decedent's debt, 
communicate with a person who has authority to pay the decedent's debts 
from the assets of the decedent's estate. Second, the proposed 
statement clarifies how a debt collector may locate the appropriate 
person with whom to discuss the decedent's debt. Third, the proposed 
statement emphasizes to collectors that misleading consumers about 
their personal obligation to pay a decedent's debt is a violation of 
the FDCPA and Section 5 of the Federal Trade Commission Act (``FTC 
Act''), 15 U.S.C. 45.
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    \1\ An enforcement policy statement describes the Commission's 
future enforcement plans, goals, and objectives with respect to a 
particular industry or practice. Enforcement policy statements do 
not have the force or effect of law, but they may reflect the 
Commission's interpretation of a legal requirement. The Commission 
issues this proposed statement pursuant to its general legal 
authority to enforce the Fair Debt Collection Practices Act, 15 
U.S.C. 1692l(a), and Section 5 of the Federal Trade Commission Act, 
15 U.S.C. 45.

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DATES: Public comments must be received by November 8, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form by following the instructions in the 
Invitation To Comment part of the SUPPLEMENTARY INFORMATION section 
below. Comments in electronic form should be submitted by using the 
following weblink: https://ftcpublic.commentworks.com//ftc/deceaseddebtcollection (and following the instructions on the web-based 
form). Comments in paper form should be mailed or delivered to the 
following address: Federal Trade Commission, Office of the Secretary, 
Room H-135 (Annex W), 600 Pennsylvania Avenue,

[[Page 62390]]

NW., Washington, DC 20580, (202) 326-2252.

FOR FURTHER INFORMATION CONTACT: Christopher Koegel or Quisaira 
Whitney, Attorneys, Division of Financial Practices, Federal Trade 
Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3224.

SUPPLEMENTARY INFORMATION:

I. Background

    Media reports and a Congressional inquiry have raised concerns that 
some debt collectors may be violating federal consumer protection laws 
when they attempt to collect debts from the relatives of deceased 
debtors (``decedents'').\2\ Staff has investigated whether, in 
connection with the collection of decedents' debts, debt collectors 
have contacted persons other than those they are permitted to contact 
under Section 805(b) of the FDCPA, 15 U.S.C. 1692c(b). Section 805(b) 
prohibits collectors, with certain exceptions, from communicating with 
any person other than the consumer in connection with the collection of 
the consumer's debt. Section 805(d) provides that the term 
``consumer,'' for purposes of third-party contacts, includes ``the 
consumer's spouse, parent (if the consumer is a minor), guardian, 
executor, or administrator.'' \3\
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    \2\ See, e.g., You're Dead? That Won't Stop the Debt Collector, 
N.Y. Times, Mar. 4, 2009; Dana Dratch, What Happens to Credit Card 
Debt after Death, CreditCards.com, Apr. 16, 2010, http://www.creditcards.com/credit-card-news/credit-card-debt-death-1282.php.
    \3\ Neither the language of the FDCPA nor its legislative 
history address what is meant by the terms ``executor'' and 
``administrator'' in Section 805(d). Broadly, an ``executor'' is a 
person named by the maker of a will to carry out the directions and 
requests stated in the will, and an ``administrator'' is a person 
appointed by a court to handle the administration of an estate for 
someone who has died without a will, when there is no executor named 
in the will, or the person named cannot or will not serve as 
executor.
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    Staff also has investigated whether collectors have engaged in 
unfair or deceptive acts and practices in violation of Section 5 of the 
FTC Act or Sections 807 or 808 of the FDCPA, 15 U.S.C. 1692e and 1692f, 
in collecting or attempting to collect on decedents' debts. In 
particular, staff has evaluated whether collectors may have deceived 
relatives of decedents or others about their obligation to pay the 
decedent's debts.
    Although these investigations have been closed, they revealed that, 
because of the interaction of the FDCPA and state probate laws, there 
is a great deal of uncertainty among collectors regarding who the 
proper persons are with whom they lawfully may discuss a decedent's 
debt. In their efforts to identify the person who is responsible for 
paying the decedent's debts, collectors in many cases have contacted 
persons other than those who fall within the definition of ``consumer'' 
set forth in Section 805(d) of the FDCPA.
    Section 805(b) of the FDCPA was enacted in 1977 to specify, among 
other things, the persons whom collectors may contact to seek payment 
for the debts of decedents. Since that time, however, probate law and 
practice have evolved. Many states have streamlined their probate law 
and practice by, among other things, recognizing informal probate 
processes and independent estate administration with little or no court 
supervision. In addition, a sizable portion of decedents' assets often 
now are transferred to others outside of the probate process through 
techniques such as placing assets in trust or naming an individual 
(rather than the decedent's estate) as the beneficiary of the 
decedent's life insurance policies.\4\
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    \4\ See Grayson M.P. McCouch, Probate Reform and Nonprobate 
Transfers, 62 U. Miami L. Rev. 757 (Apr. 2008).
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    In response to these developments, the Commission is publishing 
this proposed enforcement policy statement (``Statement'') to clarify 
how it intends to enforce the FDCPA and Section 5 of the FTC Act in 
connection with the collection of decedents' debts.

II. The Resolution of Estates

A. The Decedent's Estate

    When a consumer dies, his or her assets are transferred to others. 
These transfers take place either as part of the distribution of the 
decedent's estate or outside of the estate. Assets that pass outside of 
the estate include: (1) those that are jointly owned by the decedent 
and another person; \5\ and (2) those that, for public policy reasons, 
pass directly to individuals named as beneficiaries. Some common 
examples of assets that do not become part of the estate are the 
proceeds of joint bank accounts, real property held by joint tenancy, 
life insurance policies,\6\ union or pension benefits, Social Security 
benefits, veterans benefits, and various types of retirement accounts. 
Assets that never become part of the decedent's estate generally are 
beyond the reach of creditors and debt collectors. All other assets, 
including cash and real and personal property that are not jointly 
owned, become part of the decedent's gross estate. Funeral and 
administrative expenses, homestead and exempt property allowances, and 
family allowances \7\ are paid out of the probate estate first, leaving 
the net estate. Creditors and debt collectors can seek to collect 
amounts the decedent owes them from the net estate,\8\ after which the 
remaining assets in the estate are transferred to the decedent's heirs 
(if the decedent died without a will) or beneficiaries (if the decedent 
had a will).
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    \5\ In the ten community property states, assets accumulated 
during a marriage generally are considered joint property, but the 
state laws vary as to which assets of the community can be reached 
by creditors of one of the spouses. The ten community property 
states are Alaska, Arizona, California, Idaho, Louisiana, Nevada, 
New Mexico, Texas, Washington, and Wisconsin.
    \6\ If the decedent's estate is named as the beneficiary under 
the life insurance policy, however, the proceeds of the policy 
become part of the decedent's estate.
    \7\ A ``family allowance'' is an amount of money payable out of 
the probate estate to support, typically, the spouse and minor 
children during the pendency of the estate administration.
    \8\ In some circumstances, another person may be personally 
liable for the decedent's debts. Examples include a person who 
shared a joint credit card account with the decedent or who co-
signed or guaranteed repayment of credit extended to the decedent. 
In such cases, both the other person and the decedent's estate are 
liable for the account balance at the time of the decedent's death. 
This Statement does not apply if a creditor or a collector is 
collecting from a person who is personally liable for the decedent's 
debt, because in those circumstances the person is a debtor rather 
than a third party for purposes of Section 805(b) of the FDCPA.
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B. Probate Law and Estate Distribution

    Probate practices are administered under state laws and procedures 
that vary significantly. Nineteen states \9\ have adopted the Uniform 
Probate Code (``UPC''), which was intended to make probating a will and 
administering an estate simpler and less expensive, and to give more 
flexibility to executors.\10\ Each state that has adopted the UPC, 
however, has modified it, in some cases extensively.\11\ Consequently, 
although

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the UPC creates some commonality among state probate laws, there is no 
single set of laws that applies in all or even most states.\12\
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    \9\ Alaska, Arizona, Colorado, Hawaii, Idaho, Maine, 
Massachusetts, Michigan, Minnesota, Montana, Nebraska, New Jersey, 
New Mexico, North Dakota, Pennsylvania, South Carolina, South 
Dakota, Utah, and Wisconsin.
    \10\ UPC, Article III, Part 12, General Comment (2006).
    \11\ See, e.g., Alaska--Adopted 1990 Revision of Article II and 
1989 Revision of Article VI--Alaska Stat. Sec. Sec.  13.6.5-
13.36.100; Arizona--Adopted 1990 Revision of Article II and 1989 
Revision of Article VI--Ariz. Rev. Stat. Ann. Sec. Sec.  14-1101 to 
14-7308; Colorado--Adopted 1990 Revision of Article II and 1989 
Revision of Article VI--Colo. Rev. Stat.--Sec. Sec.  15-10-101 to 
15-17-102; Florida--Adopted 1989 Revision of Article VI--Fla. 
Stat.-- Sec. Sec.  655.82, 711.50-711.512, 731.005-731.302, 735. 
101-735.302, and 737.101-737.512; Hawaii--Adopted 1990 Revision of 
Article II and Part 3 of 1989 Revision of Article VI--Haw. Rev. 
Stat. Sec. Sec.  539-1 to 539-12, and 560:1-101 to 560:8-101; 
Idaho--Adopted Part 3 of 1989 Revision of Article VI--Idaho Code 
Ann. Sec. Sec.  15-1-101 to 15-7-307; Maine--Adopted Part 3 of 1989 
Revision of Article VI--Me. Rev. Stat. Ann. tit.18A Sec.  1-101 to 
Sec.  8-401; Michigan--Adopted Part 3 of 1989 Revision of Article 
VI--Mich. Comp. Laws Sec. Sec.  700.1101-700.8102, and 701.1-713.6; 
Minnesota--Adopted 1990 Revision of Article II--Minn. Stat. Sec.  
524.1-101 to Sec.  524.8-103; Montana--Adopted 1990 revision of 
Article II and 1989 Revision of Article VI--Mont. Code Ann. Sec.  
72-1-101 to Sec.  72-6-311; Nebraska--Adopted 1989 Revision of 
Article VI--Neb. Rev. Stat. Sec.  30-2201 to Sec.  30-2902; New 
Mexico--Adopted 1990 Revision of Article II and 1989 Revision of 
Article VI--N.M. Stat. Sec.  45-1-101 to Sec.  45-7-522; North 
Dakota--Adopted 1990 Revision of Article II and 1989 Revision of 
Article VI--N.D. Cent. Code Sec.  30.1-01-01 to 30.1-35-01; South 
Carolina--Adopted Part 3 of 1989 Revision of Article VI--S.C. Code 
Ann. Sec. Sec.  35-6-10 to 35-6-100, and 62-1-100 to 62-7-604; South 
Dakota--Adopted 1990 Revision of Article II and Part 3 of 1989 
Revision of Article VI--S.D. Codified Laws Sec.  29A-1-101 to Sec.  
29A-8-101; Utah--Original 1969 version still in effect--Utah Code 
Ann. Sec.  75-1-101 to Sec.  75-8-101.
    \12\ Indeed, even individual counties in some states have their 
own requirements.
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    Probate law seeks to provide finality to those with a purported 
interest in estate assets by first distributing those assets to pay the 
funeral and estate administration expenses and family allowances, 
decedent's taxes, and creditors' allowed claims, and then distributing 
the remaining assets to beneficiaries as specified by a will, or heirs 
as specified by state intestacy laws. The Uniform Probate Code and 
similar state laws have created a ``flexible system of administration'' 
designed to provide persons interested in decedents' estates with the 
level of procedural and adjudicative safeguards as desired and 
appropriate for their circumstances.\13\ Although there are variations 
among the states, there are generally three ways of administering the 
distribution of any estate's assets: formal probate and administration; 
informal probate and administration; and universal succession or 
succession without administration. In addition, the Uniform Probate 
Code and state laws generally exempt certain ``small estates'' with no 
real property from probate and administration.\14\ The laws provide two 
additional ways of implementing the distribution of the small estate's 
assets: collection of personal property using an out-of-court affidavit 
process and a process known as ``summary administration.'' 
Extrajudicial disposition of decedents' assets also occurs, whereby 
heirs distribute the assets without any procedural or adjudicative 
safeguards provided by the state probate codes.
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    \13\ See, e.g., UPC, Article III, General Comment.
    \14\ For example, in California, probate and administration is 
required if the amount of the estate is greater than $100,000. Cal. 
Prob. Code Sec.  13100 (2009). In Alabama, however, probate and 
administration is required if the value of the estate exceeds 
$25,000. Ala. Code Sec.  43-2-692 (2010). As noted above, the 
probate estate does not include assets held in joint tenancy or 
certain other types of assets, such as life insurance policies or 
retirement plans, unless the estate is named as the beneficiary.
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1. Formal Probate and Administration
    Formal probate and administration requires a court-appointed 
executor (a person designated in the will by the decedent) or 
administrator (if no executor has been designated) to assume the 
responsibility of managing, distributing, and closing the estate, 
including collecting the decedent's assets and notifying creditors of 
the pending probate proceeding. Formal probate entails court 
supervision and approval of all or part of the probate proceeding and 
imposes significant reporting requirements on the executor or 
administrator. Most state probate laws require that formal probate and 
administration be used if either the ability of the executor named in 
the will to administer the estate is uncertain or there is concern that 
the beneficiaries (such as minors) cannot look after their own 
interests. In addition, most state laws require that formal probate and 
administration be used if someone (such as a beneficiary or a creditor) 
asserts the right to invoke probate procedures to protect his or her 
interest in the estate.
    Formal probate and administration is designed to provide notice, 
opportunity to participate, and finality to all who assert a claim to 
the estate's assets. To this end, the executor or administrator must 
attempt to notify creditors of the decedent's death and the deadline 
for submitting any claims against the estate. In addition to mailing 
notice to all known creditors, many states require that notice be 
published multiple times in a newspaper having general circulation in 
the city where the decedent lived or in the county where the probate 
proceedings are being held.
    Creditors have a fixed period of time to file a claim, after which 
all claims are barred. If the claim is approved, the bill is paid out 
of the estate; if it is rejected, the creditor may sue for payment. If 
there are not enough liquid assets to pay all debts, property in the 
estate may have to be sold to pay approved creditor claims. State laws 
vary as to the order in which debts are paid.\15\
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    \15\ See Mary Randolph, The Executor's Guide 185-186 (3d ed. 
2008).
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    Although formal probate and administration has advantages in terms 
of ensuring that all persons with an interest in the estate have an 
opportunity to assert their interests, it also can be time-consuming 
and expensive.\16\ To address these concerns, especially with respect 
to smaller estates, many jurisdictions have adopted alternative methods 
to settle and close certain types of estates that reduce or obviate the 
need for intervention by the probate courts. These methods are 
described further below. A substantial number of estates no longer go 
through the formal probate and administration process.
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    \16\ The delay and expense are mostly attributable to the 
greater detail and accountability the court requires of the estate's 
executor or administrator. Formal probate and administration may 
take from one to three years to be completed. See, e.g., id. at 319-
20.
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2. Informal Probate and Administration
    States that have adopted the UPC also have what is described as an 
``informal probate and administration'' process, which is available 
regardless of the size of the estate.\17\ According to the drafters of 
the UPC, informal probate and administration is designed to keep simple 
wills and intestacies that generate no controversy from becoming 
involved in ``truly judicial proceedings.'' \18\ Thus, no court 
hearings are required in this process.
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    \17\ See, e.g., UPC Sec. Sec.  3-301--3-311.
    \18\ UPC Sec.  3-302 Comment (italics in original). Accordingly, 
informal probate and administration is not available if there is a 
known series of testamentary instruments, such as multiple wills 
signed by the decedent. UPC Sec.  3-304.
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    To begin the informal probate and administration process, a person 
must apply to the probate registrar for an informal appointment as 
executor or administrator. Thereafter, many states refer to this person 
as the ``personal representative.'' Once appointed, the personal 
representative has official authority to act on behalf of the estate. 
Among other things, the personal representative must arrange for 
publication of notice of the appointment as well as notice to 
creditors.
    Under the UPC, creditors have four months from the date of first 
publication of the notice of appointment in which to file any claims 
against the estate, after which they become time-barred.\19\ After the 
personal representative has resolved any claims and the four months 
have elapsed, the personal representative must file with the court the 
``final account'' of the decedent's assets and provide a copy to all 
appropriate parties. The personal representative may then distribute 
the assets to the beneficiaries and heirs.
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    \19\ UPC Sec.  3-801.
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3. Universal Succession or Succession Without Administration
    The UPC and similar state laws provide an alternative to formal or

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informal probate, a process referred to in the UPC as ``universal 
succession'' or ``succession without administration.'' \20\ Under this 
approach, the heirs of an intestate estate or the residual devisees 
\21\ under a will may apply to the probate registrar to become 
universal successors. Upon the registrar's granting of the application, 
the universal successor assumes full ownership of all the assets and 
full, personal responsibility for the liabilities of the estate, even 
if the decedent was insolvent, up to the universal successor's 
proportional share of the estate.\22\ Under the UPC, all claims of the 
decedent's creditors against the universal successor are barred one 
year after the decedent's death.\23\
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    \20\ UPC Sec. Sec.  3-312--3-322.
    \21\ A ``residual devisee'' is the person named in a will who 
takes any property that remains after distributions specified in the 
will.
    \22\ See, e.g., UPC Sec.  3-321.
    \23\ UPC Sec.  3-1006.
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4. Small Estate Resolution
    Many states offer two alternatives to the procedures described 
above for distributing the assets of small estates: (a) an out-of-court 
affidavit procedure, which lets beneficiaries claim assets from 
whomever has possession of them by presenting a sworn statement 
explaining why they are entitled to the property; and (b) summary 
administration, which is similar to informal probate and 
administration. These procedures are designed to make it easier and 
less expensive for consumers to resolve small estates--in most cases, 
they take only a month or two, have minimal court involvement, require 
few filings, and do not entail attorneys' fees--and also reduce the 
administrative and financial burdens on states and counties. According 
to the UPC commenters, most people are able to use the ``small estate'' 
procedures to resolve estates.\24\
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    \24\ UPC, Article III, Part 12, General Comment.
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a. Out-of-Court Affidavit
    Many states allow for small estate assets to be distributed through 
an affidavit process, eliminating altogether the need for appointment 
of an executor or administrator or for probate court 
administration.\25\ State laws vary as to who qualifies to sign an 
affidavit (``affiant''). For example, in California, only a beneficiary 
of or heir (i.e., a ``successor of the decedent'') to the property 
sought is authorized to file an affidavit.\26\ In Alaska, however, any 
person claiming to be the successor of the decedent entitled to the 
property may submit an affidavit, and the person paying for or 
delivering the property to the affiant is not required to inquire into 
the truth of any statement in the affidavit.\27\
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    \25\ See, e.g. Cal. Prob. Code Sec.  13109 (2009); 755 Ill. 
Comp. Stat. 5/25-1 (2010); Alaska Stat. Sec.  13.16.680 (2010); 
Ariz. Rev. Stat. Sec.  14-3971 (2010); Colo. Rev. Stat. Sec.  15-12-
1201 (2009); Ark. Code Ann. Sec.  28-41-101 (2009).
    \26\ See Cal. Prob. Code Sec. Sec.  13101(a)(8) and 13006.
    \27\ Alaska Stat. Sec. Sec.  13.16.680(a) and 13.16.685.
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    The transfer affidavit typically must state that: (1) The claimant 
is legally entitled to inherit the decedent's assets; (2) the value of 
the entire estate, less liens, does not exceed the maximum amount 
permitted by state law; (3) a minimum number of days (often 30 to 45) 
has elapsed since the death; and (4) no petition for the appointment of 
an executor or administrator is pending or has been granted by a 
probate court.\28\ Frequently, the affiant also must declare that the 
debts of the decedent have been satisfied.\29\ These same laws often 
hold either the affiant, or the beneficiaries to whom assets are 
distributed, personally liable for the decedent's debts, up to the 
value of the asset they received, for a period of time after title is 
transferred.\30\
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    \28\ See, e.g., Cal. Prob. Code Sec.  13101 (2009); Colo. Rev. 
Stat., Sec.  15-12-1201 (2009), Ariz. Rev. Stat. Sec.  14-3971 
(2010); Ark. Code Ann. Sec.  28-41-1101 (2009); 755 Ill. Comp. Stat. 
5/25-1 (2010).
    \29\ See, e.g., Ark. Code Ann. Sec.  28-41-101 (2009); 755 Ill. 
Comp. Stat. 5/25-1 (2010).
    \30\ See, e.g. Cal. Prob. Code Sec.  13109 (2009) (3 years); 755 
Ill. Comp. Stat. 5/25-1 (2010) (2 years); Ark. Code Ann. Sec.  28-
41-102 (2009) (same as decedent); Ariz. Rev. Stat. Sec.  14-3972 
(2010) (1 year); Alaska Stat. Sec.  13.16.685 (2010) (3 years); 
Colo. Rev. Stat. Sec.  15-12-1201 (2009) (1 year).
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b. Summary Administration
    Summary administration procedures generally are very similar to 
informal probate and administration procedures--they require little 
court involvement or supervision and can be used whether or not the 
decedent left a will. Summary administration, however, is limited to 
small estates, as defined by state law, and requires less notice to 
creditors than informal probate.\31\
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    \31\ See, e.g., Mark T. Johnson, Comment, A ``Simple'' Probate 
Should Not Be this Complicated: Principles and Proposals for 
Revising Wisconsin's Statutes for Probate Summary Procedures, Table 
1: Comparison of Informal Probate, Summary Settlement, Summary 
Assignment, and Transfer by Affidavit, 2008 Wis. L. Rev. 575, 585 
(2008).
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    Summary administration procedures are usually available if: (1) 
Assets do not exceed a specified value; (2) no interested party (such 
as a creditor) objects to the use of those procedures; and (3) a will 
does not mandate a different procedure. In Florida, for example, 
summary administration is available when the decedent's will does not 
direct otherwise, and either the value of assets subject to probate 
does not exceed $75,000 or the decedent has been dead for more than two 
years.\32\ Surviving family members may petition the probate court for 
a distribution of the estate assets. The petitioners must make a 
diligent search and reasonable inquiry to identify any creditors who 
have a claim against the estate, serve a copy of the petition on those 
creditors, and provide for payment to those creditors to the extent 
that assets are available. At that point, the court may enter an order 
of summary administration allowing immediate distribution of the 
remaining assets to the persons entitled to them.\33\
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    \32\ Fla. Stat. Sec.  735.201 (2009).
    \33\ Id. Sec.  735.206. The recipients of the decedent's 
property remain personally liable for lawful claims against the 
estate to the extent of the value of the property each actually 
received, but no claim may be filed against the estate or the 
recipients of the estate assets more than two years after the 
decedent's death.
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5. Extra-Judicial Resolution of Estates
    If an estate has only minimal assets, many survivors choose to 
forgo the use of any legal process to distribute a decedent's assets. 
An individual (usually a family member) may pay the decedent's debts 
out of the assets of the estate. It appears that a significant number 
of very small estates are resolved in this manner.
    This method forgoes some of the benefits of the probate process, 
such as obtaining a final legal resolution and the barring, after a 
specified period of time, of claims of creditors against the assets of 
the estate. Thus, if a creditor or collector sues the individual who 
distributes the assets or the recipients of those assets, they are 
potentially liable to pay an unpaid debt of the decedent up to the 
amount of the estate's assets.

III. FTC Policy Statement on Collection of Decedent's Debts

    When Congress passed the FDCPA, it sought to protect consumers from 
abusive, deceptive, and unfair debt collection practices, as well as 
unwarranted invasions of privacy.\34\ At the same time, Congress also 
recognized that the collection of legitimate debts, so long as it is 
done in a fair and honest manner, by requiring people to honor their 
obligations and decreasing the cost of credit, is thus beneficial to 
consumers.
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    \34\ See S. Rep. No. 95-3821, at 4 (1977), as reprinted in 1977 
U.S.C.C.A.N. 1695. (``This legislation * * * prohibits disclosing 
the consumer's personal affairs to third persons. Other than to 
obtain location information, [ ] such contacts are not legitimate 
collection practices and result in serious invasions of privacy.'').
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    Section 805(b) of the FDCPA, with certain exceptions, prohibits 
debt collectors from communicating with

[[Page 62393]]

anyone other than the ``consumer'' whose debt is being collected. This 
prohibition prevents debt collectors from unnecessarily revealing debts 
to others and thereby inflicting harm to the privacy and reputation of 
the debtor.\35\ It also prevents collectors from communicating with 
those who have no legal responsibility for paying the debt.
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    \35\ Other FDCPA provisions similarly are intended to protect 
the privacy of consumers. Section 806(3) prohibits publishing a 
debtor's list, Section 808(7) prohibits communicating with a 
consumer regarding a debt by post card, and Section 808(8) prohibits 
using any language or symbol on an envelope that reveals that the 
sender is a debt collector. 15 U.S.C. 1692d, 1692f(7), 1692f(8).
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    Section 805(d) expands the definition of a ``consumer'' whom a 
collector can contact, but, for purposes of collecting on a deceased 
debtor's debts, only to those who are likely to be responsible for 
paying a decedent's debts out of the assets of the estate. Thus, 
Section 805(d) includes the debtor's ``spouse, parent (if the consumer 
is a minor), guardian, executor, or administrator'' as persons the 
collector can contact about a debt. As discussed above, however, 
probate law and practice have evolved since Congress passed the FDCPA, 
and there are now additional categories of persons who have the 
authority to pay the decedent's debts from the assets of the estate. 
These include personal representatives under the informal probate and 
summary administration procedures of many states, persons appointed as 
universal successors, persons who sign declarations or affidavits to 
effectuate the transfer of estate assets, and persons who dispose of 
the decedent's assets extrajudicially.
    The Commission believes that it is consistent with the purposes of 
the FDCPA, and in the public interest, to allow debt collectors to 
communicate with the person who has authority to pay a decedent's debts 
from the assets of the estate, even if that person does not fall within 
the specific categories listed in Section 805(d). Such communications 
do not reveal the decedent's debts unnecessarily because they are made 
to an individual who has authority to pay those debts from the assets 
of the estate. Moreover, permitting such communications often would 
make it faster, simpler, and less expensive for consumers, creditors, 
and collectors to resolve the decedent's debts without unduly burdening 
the decedent's representative or beneficiaries. Such communication 
benefits both creditors and consumers by facilitating appropriate 
payments without the need for creditors to initiate formal probate 
administration or file actions in court to recover from individuals who 
have distributed the estate's assets, or received the assets that were 
distributed, without proper notice to creditors. But, when seeking 
payment for a decedent's debt from an individual not personally liable 
for the debt, in order to avoid creating the misimpression that the 
individual is personally liable for the decedent's debt, it may be 
necessary for the collector to disclose clearly and prominently that 
the collector is seeking payment from the estate and not the 
individual.
    Accordingly, the Commission proposes a policy not to initiate 
enforcement actions against debt collectors who communicate about a 
decedent's debt with: (1) The executor or administrator of the 
decedent's estate; (2) the decedent's spouse; (3) a minor decedent's 
parent; (4) the decedent's guardian; or (5) a person who otherwise has 
authority to pay the debts of the decedent out of the decedent's 
assets, such as a personal representative under an informal or summary 
administration procedure, a person appointed as a universal successor, 
a person who signs a declaration or affidavit to effectuate the 
transfer of estate assets, or a person who assumes the responsibility 
of disposing of the decedent's assets extrajudicially.
    Before communicating with any individual in connection with the 
collection of a decedent's debt, a collector must assess whether the 
potential recipient of any such communication has authority to pay the 
decedent's debts from the estate's assets (i.e., falls within one of 
the categories listed above). In many cases, the collector will know 
that it is contacting the decedent's spouse, parent, or guardian, or a 
person appointed by the probate court or the registrar to administer 
the decedent's estate. For example, the collector's review of the 
probate registrar's filings would identify persons who have been 
appointed as executor, administrator, personal representative under 
informal or summary administration, or universal successor. If the 
collector has identified the person with such authority, it may direct 
communications seeking collection of the debt to that person. In 
seeking to have these individuals pay the decedent's debts out of the 
decedent's estate, the collector must comply with all of the 
requirements of the FDCPA and Section 5 of the FTC Act with respect to 
collector communications with debtors. For instance, the collector is 
prohibited from threatening to use violence against these individuals 
in violation of Section 806 of the FDCPA, and from falsely representing 
to them the amount of the debt owed--or the assets that must be used to 
pay the debt--in violation of Section 807(2)(A) of the FDCPA and 
Section 5 of the FTC Act.
    In some cases, even if a collector has reviewed probate court 
filings and records, the collector may not know who has the authority 
to pay the decedent's debts from the estate's assets. To locate the 
person with such authority, the collector may initiate a written or 
oral communication to the decedent's estate. The collector should state 
clearly and prominently at the outset that the communication is 
directed to the executor or administrator of the decedent's estate, or 
to the estate itself. But until a named individual with authority to 
pay the decedent's debts is identified and located, collectors 
generally should treat these communications as location communications 
under Section 804 of the FDCPA. The communication should state that the 
collector is seeking to identify and locate the person who has the 
authority to pay any outstanding bills of the decedent out of the 
decedent's estate,\36\ but cannot make any other references to the 
debts of the decedent, including providing any information about the 
specific debts at issue.\37\
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    \36\ For example, if a collector is seeking to identify and 
locate the person who has the authority to pay the decedent's debts 
out of the assets of the estate, the collector may send a letter in 
an envelope addressed to either ``The Estate of * * * '' or ``The 
executor or administrator of the estate of * * *.'' The body of the 
enclosed letter, however, cannot include information relating to the 
decedent's debt. As discussed elsewhere in this statement, some 
individuals who do not have the authority to pay the debts of the 
decedent out of the assets of his estate often undertake various 
activities concerning the decedent, including opening his mail. To 
avoid thereby revealing the decedent's debts to such individuals, 
collectors should not include information relating to these debts in 
the body of the letter.
    \37\ Section 804 of the FDCPA governs the process by which a 
collector can obtain location information for a debtor. That section 
prohibits collectors, in seeking location information, from 
revealing that the debtor owes a debt. The application of this 
provision is relatively straightforward in the typical situation 
involving a living debtor--the collector knows who the debtor is but 
simply lacks contact information, such as the debtor's home address 
and telephone number or place of employment. In this situation, the 
collector may contact a third party for location information for the 
debtor and has no need to ascertain who the debtor is or mention the 
debt.
    When the debtor is deceased, however, the procedure becomes more 
complicated. The collector must first identify the person who has 
authority to pay the decedent's debts out of the estate's assets. In 
some cases, collectors will know who that person is, for example, if 
a court has named an executor or administrator; in these cases, the 
collector, if it needs contact information, can follow the normal 
process of seeking such information from a third party without 
revealing the debt.
    If the collector does not know the identity of the person with 
authority to pay the decedent's debts from the estate, it may wish 
to contact third parties who may themselves have the requisite 
authority or know who does, and then seek location information for 
the person they identify. But, in asking a third party for 
identification and location information for a person with the 
requisite authority, the collector almost inevitably will have to 
state or imply that the decedent owed a debt, for example ``I am 
trying to find the person who has the authority to pay John Smith's 
outstanding bills out of assets in John's estate.'' The Commission 
is interested in comments on: (1) Whether such a limited and general 
reference to debt in these specific circumstances would result in 
harm to the decedent's privacy or reputation, especially given that 
even consumers who remained current on their debts while alive often 
have bills their estate must resolve after they pass away; (2) other 
appropriate ways of identifying the person with authority while 
minimizing any reference to the decedent's debts, consistent with 
Section 804(2); and (3) the relative costs and benefits of 
facilitating communications between collectors and individuals who 
have the authority to pay the decedent's debts, including, for 
example, the possible harm to the decedent's privacy interests from 
revealing the debt versus the possible benefits to consumers in 
fostering the efficient payment of debts without the costs and 
inconvenience of a formal probate process or litigation.

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[[Page 62394]]

    If the recipient of the location communication states with 
certainty that he or she has the requisite authority--and that 
assertion is not inconsistent with information reasonably available 
from another source (e.g., a probate registrar identifying the 
appointment of someone else as administrator)--collectors may commence 
seeking payment from the estate through that recipient. On the other 
hand, if the recipient expresses any uncertainty about whether he or 
she has the authority to pay the decedent's debts from the estate's 
assets (e.g., ``I think it is me'' or ``it could be me''), the 
collector may ask the recipient clarifying questions. The collector, 
however, should not use leading questions or otherwise attempt to 
persuade the person to assert that he or she has the requisite 
authority, or engage in any deceptive, unfair, or abusive acts or 
practices. For example, asking if the person contacted is ``handling 
the decedent's final affairs'' is so vague that the person may 
interpret it as signifying authority when it does not. Similarly, 
asking whether a person ``paid for the decedent's funeral,'' or is 
``opening the decedent's mail'' also would not provide sufficient 
evidence of authority, because relatives often undertake these types of 
activities to help out without assuming the general authority to pay 
the decedent's debts out of the estate's assets.\38\ Furthermore, in 
seeking to have those who assert they have the requisite authority 
(including those who make such an assertion in response to clarifying 
questions) pay the decedent's debts from the estate, the collector must 
comply with all other requirements of the FDCPA and Section 5 of the 
FTC Act regarding collector communications with debtors.\39\
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    \38\ In addition, simply asking if the person ``has paid any of 
the decedent's bills'' is not conclusive evidence that the person 
has the authority. See UPC ' Sec.  3-701 (``A personal 
representative may ratify and accept acts on behalf of the estate 
done by others where the acts would have been proper for a personal 
representative.''). But until a named individual with authority to 
pay the decedent's debts is identified and located, all 
communication may only be for the purpose of seeking location 
information for that person and must comply with Section 804 of the 
FDCPA.
    \39\ If a recipient of a communication denies having the 
authority, or is not certain if he or she has the authority, to pay 
the decedent's debts out of the assets of the estate, and if in the 
future the collector reasonably believes that the response was 
erroneous or incomplete and that the recipient now has correct or 
complete information as to who has the requisite authority, then the 
collector can contact the recipient again for location information. 
FDCPA Sec.  804(3), 15 U.S.C. 1692b(3). For example, assume that a 
decedent died intestate and was survived by a brother and sister. A 
collector calls the brother shortly after the decedent's death, and 
the brother states he does not know whether he or his sister will 
have the authority to distribute the decedent's assets. A court 
subsequently appoints the sister as the administrator of the 
decedent's estate, and the collector learns of the appointment, but 
the sister's location information provided in the appointment is no 
longer accurate. The collector would be allowed to contact the 
brother for more accurate information concerning how to reach his 
sister.
    In addition, if the initial communication recipient subsequently 
is appointed as the administrator or personal representative through 
formal or informal probate or files an affidavit under the ``small 
estate'' administration provisions, the collector then may contact 
that person in connection with the collection of the debt.
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    Finally, in communicating with persons who have the authority to 
pay the decedent's debts out of the estate's assets, the Commission 
emphasizes that it would violate Section 5 of the FTC Act and Section 
807 of the FDCPA to mislead those persons about whether they are 
personally liable for those debts, or about which assets a creditor 
could legally seek to satisfy those debts.\40\ Even in the absence of 
any specific representations,\41\ depending on the circumstances, a 
collector's communication with an individual might convey the 
misimpression that the individual is personally liable for the 
decedent's debts, or that the creditor could seek certain assets to 
satisfy the debt.\42\ To avoid creating such a misimpression, it may be 
necessary for the collector to disclose clearly and prominently that: 
(1) It is seeking payment from the assets in the decedent's estate; and 
(2) the individual could not be required to use the individual's assets 
or assets the individual owned jointly with the decedent to pay the 
decedent's debt. In determining whether individuals are taking away the 
misimpression that they are personally liable for the decedent's debts, 
the Commission will consider, among other things, whether the collector 
has clearly and prominently made this disclosure. The Commission will 
also consider whether the collector has obtained an acknowledgment at 
the time of the first payment that the person understands that he or 
she is obligated to pay debts only out of the decedent's assets and is 
not legally obligated to use his or her own assets--including those 
jointly owned with the decedent--to pay the debts.
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    \40\ There are times when a collector attempts to collect a 
decedent's debt from the person with the requisite authority, but 
learns that the decedent's estate has insufficient assets to pay the 
debt. In some instances, collectors in this situation attempt to 
persuade the person to pay the debt out of her own assets. In doing 
so, the collector must avoid (1) stating or implying that the person 
has a legal obligation to use her own assets to pay the debt, in 
violation of Section 807 of the FDCPA and/or Section 5 of the FTC 
Act; and (2) engaging in harassing, oppressive, or abusive conduct 
to collect the debt in violation of Section 806 of the FDCPA and/or 
Section 5 of the FTC Act. With respect to the latter, the Commission 
notes that using high pressure tactics, which could include appeals 
to the person's purported moral obligation to pay the debt, could 
violate Section 806 of the FDCPA and/or Section 5 of the FTC Act, 
depending on the specific facts of the case.
    \41\ Simply by virtue of the fact that the communication is 
coming from a debt collector, an individual might believe that the 
collector is seeking payment from the individual's assets.
    \42\ For example, asking whether the recipient received any 
money as the beneficiary of a life insurance policy or retirement 
account, absent an effective disclaimer, could create a false or 
misleading impression to a consumer acting reasonably under the 
circumstances that the consumer may have to pay some or all of the 
received money to satisfy the decedent's debts, notwithstanding that 
the money is not part of the net probate estate from which creditors 
can seek payment. Similarly, asking about jointly-held assets, such 
as a jointly-titled car or a joint banking account, could also 
create the false or misleading impression that the consumer may have 
to use that asset to pay the decedent's debt, notwithstanding that 
the asset is not part of the net probate estate from which creditors 
can seek payment.
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III. Conclusion

    The Commission proposes to adopt a policy under which it would not 
take enforcement action against collectors who comply with the 
principles set forth in this Statement in collecting on a decedent's 
debts, as well as comply with all applicable laws and regulations, 
including Section 5 of the FTC Act and the FDCPA.

Invitation To Comment

    Interested persons are invited to submit written comments 
electronically or in paper form. Comments should state ``Deceased Debt 
Collection Policy Statement'' in the text and, if applicable, on the 
envelope.
    The FTC will place your comment--including your name and your 
state--on

[[Page 62395]]

the public record of this proceeding, and to the extent practicable, 
will make it available to the public on the FTC Web site at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the 
Commission endeavors to remove individuals' home contact information 
from the comments before placing them on its website. Because comments 
will be made public, they should not include: (1) Any sensitive 
personal information, such as any individual's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number; (2) any sensitive 
health information, such as medical records or other individually 
identifiable health information; or (3) any trade secret or any 
commercial or financial information which is privileged or 
confidential, as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing 
material for which confidential treatment is requested must be filed in 
paper form, must be clearly labeled ``Confidential,'' and must comply 
with FTC Rule 4.9(c), 16 CFR 4.9(c).\43\
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    \43\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The FTC's General Counsel 
will grant or deny the request consistent with applicable law and 
the public interest. See FTC Rule 4.9(c), 16 CFR 4.9(c).
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    Because postal mail addressed to the FTC is subject to delay due to 
heightened security screening, if possible, please submit your comments 
in electronic form or send them by courier or overnight service. To 
ensure that the Commission considers an electronic comment, you must 
file it at https://ftcpublic.commentworks.com//ftc/deceaseddebtcollection by following the instructions on the web-based 
form. If this Notice appears at http://www.regulations.gov/search/Regs/home.html#home, you may also file a comment through that Web site. The 
Commission will consider all comments that regulations.gov forwards to 
it. You may also visit the FTC Web site at http://www.ftc.gov to read 
the Notice and the news release describing it.
    A comment filed in paper form should include the reference 
``Deceased Debt Collection Policy Statement'' in the text of the 
comment and, if applicable, on the envelope, and should be mailed or 
delivered to the following address: Federal Trade Commission, Office of 
the Secretary, Room H-135 (Annex W), 600 Pennsylvania Avenue, NW., 
Washington, DC 20580.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. The Commission will consider all timely and responsive 
comments it receives. More information, including routine uses 
permitted by the Privacy Act, may be found in the FTC's privacy policy 
at http://www.ftc.gov/ftc/privacy.shtm.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2010-25346 Filed 10-7-10; 8:45 am]
BILLING CODE 6750-01-P