[Federal Register Volume 76, Number 144 (Wednesday, July 27, 2011)]
[Notices]
[Pages 44915-44924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18904]


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FEDERAL TRADE COMMISSION


Statement of Policy Regarding Communications in Connection With 
the Collection of Decedents' Debts

AGENCY: Federal Trade Commission (``FTC'' or ``Commission'').

ACTION: Policy statement.

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SUMMARY: Pursuant to the FTC's authority to enforce the Fair Debt 
Collection Practices Act (``FDCPA''), 15 U.S.C. 1692l(a), and Section 5 
of the Federal Trade Commission Act (``FTC Act''), 15 U.S.C. 45, the 
Commission issues this final Statement of Policy Regarding 
Communications in Connection with the Collection of Decedents' Debts 
(``Statement'').\1\ When a person dies, creditors and the debt 
collectors they hire usually have the right to collect on the person's 
debts from the assets of his or her estate. Sections 805(b) and (d) of 
the FDCPA prohibit debt collectors from contacting individuals other 
than the debtor to collect a debt, unless the individual is the 
debtor's spouse, parent (if the debtor is a minor), guardian, executor, 
or administrator. The Commission has learned that, to recover on a 
decedent's debts, some debt collectors contact the decedent's 
relatives, although these relatives may have no authority to pay the 
debts from the decedent's estate and no legal obligation to pay the 
debts from their own assets. By contacting persons who are not 
specified in Section 805 of the FDCPA, and by engaging in practices 
that may deceive those persons about their obligations, these debt 
collectors may be violating the FDCPA. The Commission recognizes, 
however, that imposing unnecessary restrictions on a debt collector's 
ability to collect a decedent's debt from the person authorized to pay 
those debts may instead cause some debt collectors to seek to recover 
by invoking the probate process, imposing substantial costs on the 
estate and delaying the distribution of assets to heirs and 
beneficiaries. To balance these interests and protect consumers from 
unfair, deceptive, and abusive practices, this Statement announces that 
the FTC will forebear from enforcing Section 805(b) of the FDCPA, 15 
U.S.C. 1692c(b), against a debt collector for communicating about a 
decedent's debts with persons specifically identified as appropriate to 
contact under Section 805 of the FDCPA (e.g., spouse, parent, guardian, 
executor, or administrator) or any other person who has the authority 
to pay the decedent's debts from the assets of the decedent's estate. 
The Statement also clarifies how a debt collector can comply with the 
law in locating the person who has the requisite authority with whom to 
discuss the decedent's debts. Finally, the Statement explains how a 
debt collector can avoid engaging in deceptive practices in 
communicating with a third party about a decedent's debts.
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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.

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DATES: This final statement of policy is effective on August 29, 2011.

ADDRESSES: Requests for copies of this Statement should be sent to: 
Public Reference Branch, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW., Room 130, Washington, DC 20580. The complete record of 
this proceeding is also available at that address. Relevant portions of 
the proceeding, including the final Statement, are available at (http://www.ftc.gov).

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. The Proposed Policy Statement and Public Comments Received

    On October 8, 2010, the Commission published in the Federal 
Register a notice of proposed statement of enforcement policy regarding 
communications in connection with the collection of decedents' debts 
(``proposed Statement'').\2\ The proposed Statement addressed three 
issues under the FDCPA pertaining to debt collectors who attempt to 
collect on the debts of deceased persons: (1) With whom a debt 
collector may lawfully discuss a decedent's debt consistent with the

[[Page 44916]]

limitations in Sections 805(b) and (d) of the FDCPA; (2) how a debt 
collector may locate the appropriate person with whom to discuss the 
debt and seek payment; and (3) how a debt collector can avoid 
misleading consumers about their personal obligation to pay the debt.
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    \2\ 75 FR 62,389 (Oct. 8, 2010).
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    The proposed Statement noted that Sections 805(b) and (d) of the 
FDCPA limit the persons whom a collector can contact about a debt 
(including a decedent's debt) to the debtor's spouse, parent (if the 
debtor is a minor), guardian, executor, or administrator. The proposed 
Statement then described the evolution of state probate laws and estate 
resolution procedures that, in recent years, have expanded the class of 
persons who have the authority to pay a decedent's debts from the 
assets of the decedent's estate beyond those listed in Sections 805(b) 
and (d). In light of these developments, the Commission proposed that 
it would forebear from taking enforcement action against collectors who 
contacted persons other than those listed in Sections 805(b) and (d), 
if those persons had the authority to pay the decedent's debts from the 
estate's assets. The proposed Statement further described permissible 
means by which a collector could identify and locate a person with such 
authority, and admonished collectors not to deceive such persons into 
believing they were obligated personally to pay the debt, recommending 
that collectors disclose affirmatively that the person was not so 
obligated.
    The notice requested public comment on the overall costs, benefits, 
necessity, and regulatory and economic impact of the proposed Statement 
and designated November 8, 2010, as the deadline for filing public 
comments. On November 8, 2010, the Commission extended the deadline for 
submission of public comments until December 1, 2010.\3\
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    \3\ 75 FR 70,262 (Nov. 17, 2010).
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    In response to the proposed Statement, the Commission received 145 
total comments \4\ from stakeholders, including consumer and community 
groups, state law enforcers, attorneys who represent debt collectors, 
debt collectors who specialize in the collection of deceased accounts, 
and individual consumers. As discussed further below, the comments 
provided a diverse array of opinions and suggestions on the proposed 
Statement. Based on the comments and other information obtained by the 
Commission, the Commission has made several revisions to the proposed 
Statement in this final Statement.
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    \4\ One comment was submitted twice (nos. 89 and 90, by the 
National Consumer Law Center); thus, the Commission received 144 
distinct comments, which are available at http://www.ftc.gov/os/comments/decedentdebtcollection/index.shtm.
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II. Background

A. Probate Law and Estate Resolution

    Most debts incurred in life do not simply vanish upon death.\5\ 
Instead, the decedent's estate (comprised of the assets held by the 
decedent at the time of death) is responsible for paying them. Some 
debts arise from accounts on which the decedent was current at the time 
of death (e.g., the amount owing for the decedent's last electric bill, 
even if he or she was current on the account at the time of death). 
Other debts may be on bills for which the decedent was delinquent in 
making payments at the time of death (e.g., the amount owing for the 
last six months on the decedent's electric bill). Regardless of whether 
the decedent was current or delinquent on a bill at the time of death, 
creditors and collectors, for a period of time, generally are permitted 
under state law to seek to recover from the decedent's estate.
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    \5\ See, e.g., Portillo (``as debt doesn't disappear when a 
person dies * * *''). Comments are identified by the name of the 
organization or the last name of the individual who submitted the 
comment.
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    To understand consumer protection concerns related to collecting on 
decedents' debts requires knowledge not only of the FDCPA but of state 
probate and estate law as well. As detailed in the proposed 
Statement,\6\ there is no single set of laws and procedures that 
governs the resolution of a decedent's estate in all or even most 
states. Indeed, even individual counties in some states have their own 
requirements. Generally, however, there are two main questions that 
probate and estate laws answer: (1) What assets are part of the estate, 
and thus at least potentially subject to creditors' claims; and (2) 
what procedures will the estate use to distribute its assets.
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    \6\ 75 FR 62,389 at 62,390-62,392 (Oct. 8, 2010).
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1. Assets in the Decedent's Estate
    Not all of a decedent's assets become part of his or her estate. 
Assets that pass outside of the estate generally include: (1) Those 
that are jointly owned by the decedent and another person; \7\ and (2) 
those that pass directly to individuals named as beneficiaries.\8\ 
Assets that never become part of the decedent's estate generally are 
beyond the reach of creditors and third-party debt collectors. All 
other assets, including cash and real and personal property owned 
solely by the decedent, become part of the decedent's ``gross estate.'' 
Funeral and administrative expenses, homestead and exempt property 
allowances, and family allowances \9\ are paid out of the estate first, 
leaving the ``net estate.'' Creditors and third-party debt collectors 
can seek to collect amounts the decedent owes them from the net 
estate,\10\ 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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    \7\ Common examples of joint assets that do not become part of 
the estate are the proceeds of joint bank accounts, and real 
property held by joint tenancy. In addition, in the ten states with 
community property laws, 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 community property states are Alaska, Arizona, 
California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, 
and Wisconsin.
    \8\ Such assets include the proceeds from life insurance 
policies (where the beneficiary is not the estate), union or pension 
benefits, Social Security benefits, veterans' benefits, and various 
types of retirement accounts.
    \9\ A ``family allowance'' is an amount of money payable out of 
the estate to support, typically, the spouse and minor children 
during the pendency of the estate administration.
    \10\ In some circumstances, another person, including a 
surviving relative, 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 ``consumer'' rather than a third party 
for purposes of Section 805(b) of the FDCPA.
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2. Distribution of Estate Assets
    How a decedent's assets are distributed also depends on the probate 
practices that are administered under state laws and procedures, which 
vary significantly. All of the various procedures, however, are 
designed to ensure that creditors are provided with notice of the 
decedent's passing, and that some finality is achieved with regard to 
the decedent's financial affairs.
    At the time Congress enacted the FDCPA, most estates were resolved 
through a process known as formal probate and administration. In that 
process, the probate court appoints a person with the title of 
``executor'' or ``administrator'' to handle the estate's affairs. 
Section 805 of the FDCPA allows collectors to contact persons with 
those titles about the decedent's debts.
    Formal probate, however, has proven to be time-consuming and 
expensive for consumers.\11\ For example, many estates

[[Page 44917]]

that go through formal probate remain open for 18 months, and, in some 
cases, even longer. This delay is due, in part, to mandatory periods 
during which the estate must publish notice of the probate proceeding 
to potential creditors, as well as months-long periods in which 
creditors have a right to file claims against the estate.\12\ In 
instances where the estate includes significant assets, states 
generally have determined that the benefits of such rigorous notice 
requirements outweigh the costs to estates, heirs, and beneficiaries.
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    \11\ See, e.g., Nat'l Consumer Law Ctr. at 4 (``Survivors often 
feel the costs of probate are prohibitive.''); Steven Seidenberg, 
Plotting Against Probate: Efforts by estate planners, courts and 
legislatures to minimize probate haven't killed it yet, 94 A.B.A.J. 
56 (May, 2008) (``Probate can be expensive * * *. Probate can tie up 
an estate * * * even a short delay in distributing assets can hurt 
beneficiaries.'').
    \12\ See, e.g., P. Mark Accettura, The Michigan Estate Planning 
Guide, at Ch. 7 (2d ed. 2002), available at http:www.elderlawmi.com/the-michigan-estate-planning-guide/chapter-7/chapter-7-probate.
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    Most states, however, permit less formal procedures for resolving 
smaller estates. These procedures are quicker, easier, and less 
expensive for consumers. For example, nineteen states have adopted the 
Uniform Probate Code (``UPC''),\13\ which makes probating a will and 
administering an estate simpler and less expensive and gives more 
flexibility to executors than formal probate.\14\ The UPC 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 appropriate for the 
circumstances.\15\
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    \13\ 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. Each state that has adopted the UPC, 
however, has modified it, in some cases extensively.
    \14\ UPC, Article III, Part 12, General Comment (2006).
    \15\ See, e.g., UPC, Article III, General Comment (2006).
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    In addition, the UPC and state laws generally exempt entirely 
certain ``small estates'' \16\ with no real property from probate and 
administration. These laws provide two additional ways of distributing 
the small estate's assets: (1) Collection of personal property using an 
out-of-court affidavit process; and (2) ``summary administration.'' 
\17\ Under these various alternatives to formal probate, the person who 
is authorized to deal with the estate's creditors often does not 
receive the title of ``executor'' or ``administrator,'' but is called a 
``personal representative,'' ``universal successor,'' or some other 
title. Finally, extrajudicial disposition of decedents' estates also 
occurs, whereby heirs distribute the assets without state probate codes 
providing any procedural or adjudicative safeguards.
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    \16\ The amount considered to be a ``small estate'' varies by 
jurisdiction. For example, in California, probate and administration 
is required if the amount of the estate is greater than $100,000. 
Cal. Prob. Code 13100 (2009). In Alabama, however, probate and 
administration is required if the value of the estate exceeds 
$25,000. Ala. Code 43-2-692 (2010).
    \17\ As detailed further in the proposed Statement, 75 FR 
62,392, many states allow certain qualified individuals to acquire 
title to certain kinds of property (like a financial account) by 
signing an affidavit attesting, among other things, that they are 
entitled to the property and that all of the decedent's debts have 
been satisfied. ``Summary administration'' is a streamlined probate 
process available for smaller, uncontested estates. Summary 
administration typically requires far less involvement from 
attorneys and probate courts, allowing beneficiaries to save time 
and money.
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    In sum, there are multiple ways of distributing an estate's assets 
other than through the traditional formal probate process. Because of 
this evolution of probate law, most estates today do not go through 
formal probate, and thus no executor or administrator is appointed.\18\ 
Instead, far more estates are administered through one of the less 
formal options. But even when the estate is administered outside of the 
probate process, a creditor or collector always has the option of 
initiating a formal probate of the estate in order to collect on a 
debt, thereby preventing the estate's survivors from taking advantage 
of the benefits of the less formal probate alternatives.\19\ In most 
cases, filing these actions ``impose[s] legal, accounting and other 
professional expenses and fees on those families, unnecessarily 
draining off assets that could otherwise go to the family.'' \20\
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    \18\ See Nat'l Consumer Law Ctr. at 4 (``Probably the majority 
of estates are not probated.'').
    \19\ See id. (``Decedent's creditors are permitted by state law 
to initiate administration of the estate if they believe it will be 
worthwhile and the survivors do not.'').
    \20\ Barron, Newburger & Sinsley, PLLC (Dec. 1, 2010) at 3.
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B. Current Industry Practice in Collecting Decedents' Debt

    A number of debt collectors now specialize in the collection of 
debts owed by deceased debtors. The FTC has conducted investigations of 
several of these collectors and, in doing so, has reviewed recordings 
of thousands of collection calls. From this law enforcement experience 
and the comments received in response to the proposed Statement, the 
Commission has gained insight into the current practices of collectors 
who seek to recover on decedents' debts.
    In collecting on deceased accounts, collectors must first identify 
the appropriate person(s) with whom they can discuss the decedent's 
debt. As noted earlier, Section 805 of the FDCPA permits collectors to 
contact certain individuals other than the debtor, such as the executor 
or administrator of the decedent's estate. Thus, if the probate court 
has named an executor or administrator, collectors can contact that 
person to seek payment from the estate's assets. At present, however, 
few estates have a person with the official title of ``executor'' or 
``administrator.'' As a result, some collectors attempt to recover by 
cold-calling relatives, asking whether they are the ``person handling 
the final affairs'' of the decedent or are the decedent's ``personal 
representative.'' In some cases, collectors ask whether the family 
member with whom they are speaking has been opening the decedent's mail 
or paid for the funeral. Some collectors treat an affirmative response 
to such questions as sufficient proof that these relatives are 
responsible for resolving the decedent's estate.
    Alternatively, some collectors send letters and other written 
communications addressed to either ``The Estate of'' or ``The Executor 
or Administrator of the Estate of'' the decedent. These letters often 
disclose the details of the decedent's debt, including the original 
creditor and the amount due. The letters cause many of those who read 
them--who may or may not be the executor or administrator--to call 
collectors to discuss decedent's debts.\21\
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    \21\ See Phillips & Cohen Assocs., Ltd. at 5; West Asset Mgmt., 
Inc. at 4.
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    Once collectors have determined that they are speaking with someone 
whom they have decided to treat as responsible for resolving the 
decedent's estate, they often proceed to discuss the decedent's debt 
and inquire about assets and liabilities. This frequently includes a 
series of questions about assets the decedent may have left behind, 
such as whether the decedent owned a car, a house, a bank account, a 
life insurance policy, or a retirement account. These assets may or may 
not be legally collectible to pay the decedent's debts, depending on 
how the assets were titled,\22\ whether the decedent was married at the 
time of death and lived in a community property state, who was the 
designated beneficiary of the asset, and other considerations.\23\
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    \22\ For example, as described above, assets held jointly often 
are outside the estate and cannot be reached by collectors to pay 
the decedent's debts.
    \23\ See Section II.A.1, supra.
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    Finally, in some cases, collectors ask relatives to make a 
``voluntary'' or ``family'' payment. For example, some collectors state 
or imply that the family has a moral obligation to pay the

[[Page 44918]]

decedent's debt, or that the decedent would have wanted the debt to be 
paid.

C. The Applicability of the FDCPA

    The FDCPA covers the conduct of third-party debt collectors who 
seek to recover on deceased accounts. Several commenters interpreted 
the proposed Statement as conveying that the FTC would not enforce the 
FDCPA in the context of decedents' debts,\24\ or that, once a collector 
was speaking to an authorized representative of the estate, the 
collector would be free to use deceptive, unfair, or abusive practices 
to induce the representative to pay the decedent's debt.\25\ These 
interpretations are incorrect.
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    \24\ See, e.g., Privacy Rights Clearinghouse at 5.
    \25\ See, e.g., MacQuarrie; Marino; and Merrick.
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    The FDCPA applies to all efforts by third-party collectors to 
collect on the obligations of a debtor--including a deceased debtor--to 
repay a debt that arose out of a transaction in which the money, 
property, insurance, or services that were the subject of the 
transaction were primarily for personal, family, or household 
purposes.\26\ Accordingly, the protections and requirements of the 
FDCPA apply in the context of collecting on the debts of a deceased 
debtor.\27\ Most significantly, Sections 806, 807, and 808 protect all 
persons against unfair, deceptive, and abusive practices in debt 
collection. Indeed, as a representative of debt collectors engaged in 
the collection of decedents' debts acknowledged:
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    \26\ See Section 803(3), (5), and (6) of the FDCPA. 15 U.S.C. 
1692a(3), (5), and (6). One law firm representing debt collectors 
argued in its comment that the FDCPA does not apply to any debt 
placed for collection after the debtor's death because it then 
becomes the debt of an estate and not of a ``natural person'' as the 
term is used in the definition of ``consumer'' in Section 803(3). 
See Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) at 2, n.1. This 
argument is incorrect. For purposes of the FDCPA, the critical time 
for determining the status of a debt is when the obligation arises, 
and not when the debt is placed for collection. See, e.g., Newman v. 
Boehm, Pearlstein, & Bright, Ltd., 119 F.3d 477, 481 (7th Cir. 1997) 
(`` the obligation to pay is derived from the purchase transaction 
itself.''); Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168-69 
(3d Cir. 1987) (the transaction that creates a debt under the FDCPA 
occurs when ``a consumer is offered or extended the right to acquire 
`money, property, insurance, or services' which are `primarily for 
household purposes' and to defer payment.''). In the case of a 
deceased account, the obligation is a debt as defined in the FDCPA 
when the decedent undertook the obligation. At that point, the 
debtor was alive, and thus the debt was that of a ``natural 
person.'' The debtor's subsequent death does not change that fact.
    \27\ See ACA Int'l at 4 (``the personal representative is 
afforded all the protections and rights available to the consumer 
under the Act.'').

    The proposed statement of the FTC enforcement policy does 
nothing to provide cover for collectors who engage in deceptive or 
misleading representations. Current law already prohibits such 
activities and the proposed Policy Statement specifically prohibits 
misleading relatives into thinking that they have an obligation to 
pay the decedent's debts.\28\
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    \28\ See Barron, Newburger & Sinsley, PLLC (Dec. 1, 2010) at 2.

    Moreover, Sections 804 and 805 limit how collectors may communicate 
in connection with collecting on deceased accounts.\29\
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    \29\ One commenter argued that the term ``spouse'' in Section 
805(d), 15 U.S.C. 1692c(d), does not cover widows or widowers 
because marriage terminates at the death of a spouse. See Nat'l 
Consumer Law Ctr. at 1-2. Therefore, the commenter maintained that 
collectors should not be permitted to discuss the decedent's debts 
with surviving spouses. This is incorrect. In 1996, Congress created 
an omnibus definition for ``spouse'' to apply ``[i]n determining the 
meaning of any Act of Congress, or any ruling or interpretation of 
the various administrative bureaus and agencies of the United 
States.'' 1 U.S.C. 7. The only court to address whether a surviving 
spouse is a ``spouse'' within the omnibus definition held that a 
surviving spouse remains a ``spouse'' in determining the meaning of 
any Act of Congress. Taing v. Napolitano, 567 F.3d 19 (1st Cir. 
2009). The court expressly rejected the government's arguments that 
the use of the present tense in the omnibus definition and what the 
government contended was the common, ordinary meaning of the term 
compelled the conclusion that the plaintiff ceased being a 
``spouse'' upon her husband's death. Rather, the court stated that 
the traditional meaning of ``spouse'' includes surviving spouse and 
cited Black's Law Dictionary to note that ``surviving spouse'' is 
subsumed within the dictionary definition of ``spouse.'' Id. at 24-
26.
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III. Discussion of the Final Policy Statement

    This final Statement of Policy Regarding Communications in 
Connection with the Collection of Decedents' Debts provides guidance to 
consumers, debt collectors, and creditors concerning how the FTC will 
enforce the law in connection with the collection of the debts of 
deceased debtors. In particular, this Statement sets forth the types of 
individuals whom debt collectors may contact to collect on deceased 
accounts and what collectors may do to locate them, without being 
subject to FTC enforcement efforts. The Statement also advises 
collectors that certain practices in communicating with these 
individuals may be unfair, deceptive, or abusive in violation of the 
FDCPA or Section 5 of the FTC Act, and engaging in such conduct may 
subject them to law enforcement action.\30\
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    \30\ The Commission's views in this Statement are specifically 
limited to the situation of the collection of a decedent's debts. As 
detailed throughout the Statement, these types of collections pose 
unique challenges in the enforcement and application of the FDCPA.
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A. Permissible Individuals for Collection Communications

    The proposed Statement enunciated that the Commission would not 
bring an enforcement action under Section 805(b) of the FDCPA against a 
debt collector for communicating, for the purpose of collecting a 
decedent's debt, with any of the individuals specified in Section 
805(d)--the decedent's spouse, parent (if the decedent was a minor at 
the time of death), guardian, executor, or administrator--or another 
person who has authority to pay the decedent's debts from the assets of 
the decedent's estate. The Commission has determined to retain this 
policy in the final Statement.
    A broad spectrum of comments addressed this proposal. On one end of 
the spectrum, several commenters asserted that collectors should be 
restricted to contacting only limited types of individuals. Several 
commenters noted that the express language of Section 805 of the FDCPA 
limits the acceptable contacts to specific classes of individuals; many 
of these commenters recommended that the Commission limit the 
permissible contacts to those specific classes. Several commenters, 
however, appeared to suggest restrictions beyond those in the statute, 
e.g., that creditors' and collectors' ``sole remedy should be to file a 
claim against the estate for the estate to pay[rdquo,]\31\ or that the 
types of persons who could be contacted be narrower than under the 
express language of Section 805.\32\ Another commenter recommended that 
the Statement permit collectors to contact ``only individuals specified 
by the FDCPA or otherwise identified in public probate court records as 
having authority to pay the decedent's debts''.\33\
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    \31\ Andrew; see also Jerome S. Lamet, Ltd. d/b/a Debt Counsel 
for Seniors and the Disabled (``Current probate laws give creditors 
sufficient protection in that they require notification to creditors 
that an estate was opened and that the creditors are free to submit 
claims. Even in small estate resolutions, creditors are either 
notified that there is an estate, or an affidavit is signed stating 
that the creditor's claims are satisfied.''). These commenters 
appear to be arguing that creditors and collectors not be permitted 
to contact anyone directly, but rather must follow probate 
procedures by filing a claim. As explained below, the Commission 
believes that forcing collectors to use the probate process would, 
in many instances, increase costs and inconvenience for the estate's 
beneficiaries or heirs.
    \32\ See, e.g., Uhlmansiek (``there must first be proof that the 
person being contacted has authority over a minimum portion of the 
assets of the decedent's estate, provided by either that person or 
any of the previously authoritative parties listed in section 
805.''); AARP at 1 (``AARP strongly opposes the proposed suggestion 
that an unobligated survivor may be contacted by a debt collector 
regarding collection of a decedent's debt.'').
    \33\ Privacy Rights Clearinghouse at 3.
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    At the other end of the spectrum, other commenters contended that 
collectors should be allowed to contact a broad range of types of 
individuals.

[[Page 44919]]

One debt collector argued that the FTC should permit collectors to 
discuss a decedent's debts with anyone who self-identifies as a 
``person handling the final affairs'' or a ``personal representative'' 
of the estate. This commenter asserted that those forms of self-
identification are synonymous with the terms ``executor'' or 
``administrator'' in Section 805 and are not too vague for a consumer 
to understand.\34\ The commenter suggested that the Statement focus 
instead on requiring ``full disclosure and avoidance of any 
misrepresentation.''\35\
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    \34\ West Asset Mgmt., Inc. at 3.
    \35\ Id.
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    Between these two ends of the spectrum, many comments from 
government regulators as well as the debt collection industry supported 
the approach proposed by the Commission. An association of state 
regulators and a local regulator of debt collectors commented that the 
proposed Statement reached a reasonable accommodation between 
protecting consumers and allowing legitimate debt collection activities 
to occur.\36\ Debt collection industry representatives articulated 
similar views.\37\ One industry representative emphasized that the 
FTC's proposed approach would be consistent with other provisions of 
Federal law.\38\
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    \36\ See N. Am. Collection Agency Regulatory Ass'n (``We believe 
the three basic guidelines are tailored to effectively collect these 
types of debts and at same time protect the grieving parties from 
feeling obligated to personally settle the financial affairs of 
their deceased loved ones.''); New York City Dept. of Consumer 
Affairs at 1 (``the New York City Department of Consumer Affairs 
(DCA) supports and strongly encourages the adoption of the Federal 
Trade Commission's (FTC) proposed policy statement * * *'').
    \37\ See, e.g., ACA Int'l at 4 (``ACA agrees with the 
Commission's conclusion that collectors are permitted to communicate 
with the person who has authority to pay a decedent's estate, even 
if that person does not fall within the enumerated categories listed 
in Section 805(d) of the FDCPA.''); Barron, Newburger & Sinsley, 
PLLC (Dec. 1, 2010) at 3 (``instituting probate proceedings would 
impose legal, accounting and other professional expenses and fees on 
those families, unnecessarily draining off assets that could 
otherwise go to the family * * * The FTC's approach, unlike that 
suggested by the NCLC, avoids imposing an unwanted and costly 
probate proceeding that could delay resolution of the estate.''); 
Reich; Vargo (``I agree with the FTC's opinion. The Personal 
Representative of the decedent is, in essence, the designated agent 
of the decedent in concluding the decedent's financial affairs. The 
FDCPA specifically authorizes communication with a person designated 
by the debtor to process the matter at issue.'').
    \38\ Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) at 7. To 
implement the Credit Card Accountability Responsibility and 
Disclosures Act of 2009 ``CARD Act''), the staff of the Federal 
Reserve Board recently modified its commentary on Regulation Z under 
the Truth in Lending Act to provide that ``the term `administrator' 
of an estate means an administrator, executor, or any personal 
representative of an estate who is authorized to act on behalf of 
the estate.'' Regulation Z Commentary, 22.6.11(c)(1) (emphasis 
added). The Commentary allows debt collectors to contact such 
individuals to effectuate the timely resolution of credit card debts 
of decedents, a goal the comment asserted was consistent with the 
objectives the FTC espoused in its proposed Statement.
---------------------------------------------------------------------------

    Based on the information received in the comments and on the 
Commission's law enforcement experience, the FTC has decided to retain 
the proposed Statement's approach in the final Statement: The 
Commission will forebear from taking law enforcement action against a 
debt collector for communicating about a decedent's debts with either 
the classes of individuals specified in Sections 805 (b) and (d) of the 
FDCPA or an individual who has the authority to pay the debts out of 
the assets of the decedent's estate. Individuals with the requisite 
authority may 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 this enforcement policy best ensures 
the protection of consumers while allowing collectors to engage in 
legitimate collection practices. If collectors are unable to 
communicate about a decedent's debts with individuals responsible for 
paying the estate's bills, because those individuals were not court-
appointed ``executors'' or ``administrators,'' collectors would have an 
incentive to force many estates into the probate process to collect on 
the debts. Typically, it is easy and inexpensive under state law for 
creditors and others to petition for the probate of an estate.\39\ The 
actual probate process, on the other hand, can impose substantial costs 
and delays for heirs and beneficiaries.\40\ Policies that result in the 
imposition of these costs are contrary to the goal of state probate law 
reforms to promote simpler and faster alternatives to probate, 
especially for smaller estates.
---------------------------------------------------------------------------

    \39\ The filing fee that a collector must pay to force an estate 
into probate varies by jurisdiction, ranging from nothing to as much 
as several hundred dollars. See, e.g., Ala. Code 12-19-90 ($45 + $3 
per page over five pages); Ark. Code 16-10-305 ($140); Nev. Rev. 
Stat. 19.013 (up to $20,000, no fee; $20,000-200,000, $99 fee; over 
$200,000, $352); Wyo. Stat. Ann. 5-3-206 (under $5,000, $50 fee; 
$5,000-10,000, $55; for each $10,000 over $10,000, another $5).
    \40\ 75 FR 62,389 at 62,390-62,393 (Oct. 8, 2010). See also 
Barron, Newburger & Sinsley, PLLC (Dec. 1, 2010) at 3; Phillips & 
Cohen Assocs., Ltd. at 3.
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B. Locating Proper Individuals for Deceased Account Collection

    In instances in which collectors do not know the identity of those 
with the authority to pay the decedent's debts from the estate's 
assets, they may communicate with others to try to identify these 
individuals. The proposed Statement emphasized that these efforts are 
location communications to which Section 804 of the FDCPA applies. 
Section 803(7) of the FDCPA defines ``location information'' as ``a 
consumer's place of abode and his telephone number at such place, or 
his place of employment.'' In addition, Section 804 requires that in 
communications seeking location information, a debt collector must: 
``(1) Identify himself, state that he is confirming or correcting 
location information concerning the consumer, and, only if expressly 
requested, identify his employer; [and] (2) not state that such 
consumer owes any debt''.\41\ The comments received in response to the 
proposed Statement offered views on what collectors must do in seeking 
to locate those with the authority to pay decedents' debts, including 
whether strict adherence to the literal terms of Section 804 is 
practical and beneficial to consumers in the context of the collection 
of deceased accounts.
---------------------------------------------------------------------------

    \41\ A collector thus cannot mention a specific debt during a 
location communication and cannot ask for payment from the third 
party with whom they are speaking, including asking for payment out 
of any ``moral'' obligation. To do so would violate Section 804.
---------------------------------------------------------------------------

1. Identifying the Person With the Authority To Pay the Decedent's 
Debts
    Some comments advocated that collectors should check available 
public records for the names and contact information of court-appointed 
executors and administrators before contacting other individuals.\42\ 
Other comments, however, pointed out that there are significant 
logistical and cost barriers to conducting a thorough search of state 
and local probate records.\43\ Although such challenges may exist in 
some jurisdictions, the FTC encourages collectors to make a good faith 
effort \44\ to do record searches before contacting individuals other 
than executors and

[[Page 44920]]

administrators. In addition, once a collector has identified an 
executor or administrator, the collector thereafter must communicate 
only with that individual (or any type of individual specifically 
identified in Sections 805(b) and (d)) about the decedent's debts.\45\ 
Limiting communications to the executor or administrator minimizes 
unnecessary contacts with family members and provides additional 
protection against unfair, deceptive, and abusive collection practices.
---------------------------------------------------------------------------

    \42\ See Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) at 3-
4.
    \43\ See Bass & Assocs., P.C. at 1-2; West Asset Mgmt., Inc. at 
4 (``local court records are not easily accessible and even where a 
formal estate will be opened nothing may be filed for several months 
after the date of death. Furthermore, collectors may not know the 
county or even the state where an estate would be properly 
opened.'').
    \44\ A good faith effort, for example, would include checking 
the records of the probate court in the jurisdiction where the 
decedent resided, which is typically the jurisdiction where probate 
will occur.
    \45\ See, e.g., AARP at 4 (``this protection should be extended 
to prohibit any contact after the collector becomes aware that the 
estate is represented by anyone recognized by state law.''); West 
Asset Mgmt., Inc. at 5. Note that a collector is legally permitted 
to contact other individuals who are in the categories specifically 
listed in Sections 805(b) and (d) of the FDCPA.
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2. Information That May Be Revealed in Location Communications
    In a location communication seeking the person with the authority 
to pay the decedent's debts from the estate, the FDCPA imposes 
limitations on what can be conveyed to the recipient of the 
communication in order to protect the privacy of the debtor. Section 
804 specifically prohibits collectors from revealing that the debtor 
owes a debt.\46\ In addition, Section 804(2) prohibits collectors from 
making statements that the debtor owes a debt, while Sections 804(4) 
and (5) prohibit disclosing that the debtor owes a debt when 
communicating by post card or through information on the outside of an 
envelope, respectively.
---------------------------------------------------------------------------

    \46\ Section 805(b) generally prohibits communications with 
third parties unless they are location communications that satisfy 
the requirements of Section 804. Thus, a communication with a third 
party that does not meet the standards of Section 804 violates 
Section 805(b).
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    The proposed Statement suggested that a location communication in 
the context of a deceased debtor can 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, but 
cannot make any other references to the decedent's debts or provide any 
information about the specific debts at issue. The Commission has 
determined to retain this policy in this final Statement.
    The Commission received numerous comments addressing whether strict 
adherence to these requirements is in the public interest in the 
context of the collection of decedents' debts.\47\ On one end of the 
continuum, several commenters asserted that because letters addressed 
to either ``the Estate of'' or ``the Executor or Administrator of the 
Estate of'' the decedent are consistent with an effort to have 
individuals with the requisite authority open the letters, collectors 
should be permitted to inform the persons opening such letters that the 
decedent owed a debt and the details of such debt.\48\ In effect, these 
commenters posit that a letter addressed to the estate or an unnamed 
``executor'' or ``administrator'' is sufficiently targeted at a person 
considered to be a ``consumer'' under Section 805 of the FDCPA (e.g., a 
surviving spouse, administrator, or executor) to constitute a 
collection communication rather than a location communication. Because 
these letters are collection communications, the collectors should be 
permitted to mention, and seek payment on, the decedent's debts.
---------------------------------------------------------------------------

    \47\ The Commission also received a letter, dated January 18, 
2011, from Congressman Walter B. Jones, representing North 
Carolina's third Congressional district, addressing this issue. 
Congressman Jones advocated that collectors should be allowed to 
include the creditor's name and the amount of the debt in the 
initial communication, because such information would facilitate the 
timely resolution of debts.
    \48\ See, e.g., Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) 
at 4; Weltman, Weinberg & Reis Co., LPA at 1. These commenters 
argued that the risk that unauthorized third parties would open such 
a letter is small because it is, or might be, a federal crime to 
open another's mail without authorization. There is no evidence, 
however, that persons without the requisite authority are even aware 
of this prohibition or, if they are, would refrain from opening the 
mail out of a fear of criminal prosecution. In fact, many laws 
protect persons who in good faith assist a person who has the 
authority to resolve a decedent's debts. See Uniform Probate Code 3-
714. In addition, a person acting in an effort to help likely would 
not have the requisite scienter to have engaged in a crime. 
Accordingly, the Commission finds this argument unpersuasive.
---------------------------------------------------------------------------

    The Commission disagrees with this analysis. The Commission's law 
enforcement experience suggests that letters addressed to the estate or 
an unnamed administrator or executor (legal terms with which many 
consumers are unfamiliar) often are opened by individuals who do so in 
an effort to help out, but who lack the authority to pay the decedent's 
debts from the estate's assets.\49\ Accordingly, the Commission 
concludes that a communication addressed to the decedent's estate, or 
an unnamed executor or administrator, is a location communication and 
must not refer to the decedent's debts or otherwise violate Section 804 
of the FDCPA.\50\
---------------------------------------------------------------------------

    \49\ The Commission has not assessed whether some form of 
communication sent with the initial letter (such as a validation 
letter in an enclosed envelope accompanied by a cover letter warning 
that only the appropriately authorized party should open the 
envelope) would effectively prevent unauthorized third parties from 
viewing details about the decedent's debt. The Commission is 
concerned, however, that merely admonishing the recipient of, for 
example, a mailed letter not to open it unless he or she is 
authorized to pay the estate's debts might not be effective. Well-
meaning family members or others, who perhaps may not be familiar 
with legal terminology, might open the enclosed envelope despite 
such an admonishment in an effort to be helpful. Ultimately, the 
question of whether any particular admonishment or other mechanism 
to avoid third-party disclosure would be effective is an empirical 
one and would depend on the specific circumstances.
    \50\ Similar considerations arise when a letter with information 
about a debt is addressed to a debtor who is dead. In some 
circumstances, debt collectors will neither know nor have reason to 
know that the debtor has died; for example, a debtor could be alive 
when the letter is sent, but dead by the time the letter arrives. In 
other circumstances, debt collectors will know or should know that 
the debtor has died. Collectors with such knowledge should refrain 
from mentioning the debt in any letter addressed to the deceased 
debtor, because of the risk that an inappropriate third party will 
open the letter.
---------------------------------------------------------------------------

    On the other end of the continuum, comments from two consumer 
advocacy groups noted that just using the word ``debt'' (and not even 
providing any more specific information such as the creditor or the 
amount) in location communications was inconsistent with the express 
language of Section 804(2).\51\ One of these groups also argued that it 
is not necessary for collectors to mention decedents' debts in 
attempting to locate the appropriate person, because ``collectors can 
simply state that they are calling or writing to obtain the contact 
information of the person representing the estate of the deceased.'' 
\52\
---------------------------------------------------------------------------

    \51\ AARP at 5; Nat'l Consumer Law Ctr. at 2.
    \52\ Nat'l Consumer Law Ctr. at 2.
---------------------------------------------------------------------------

    In between the two ends of the continuum, ten comments, including 
one from an association of state regulators, had no objection to 
collectors mentioning outstanding obligations generally in a location 
communication, such as referring to ``any outstanding bills of the 
decedent.'' \53\ A debt collection trade association, noting that the 
purpose of the prohibition in Section 804(2) is to protect the privacy 
of the debtor, asserted that ``the deceased generally have a reduced 
privacy interest as compared to the privacy rights during life. Any 
modest infringement on the privacy interest after death is not an 
infringement on an individual's privacy right, but of the estate.'' 
\54\ It also pointed out that there is a substantial benefit to 
permitting collectors to communicate generally with third parties to 
locate the person who has the authority to pay the debts of the estate, 
because ``doing so avoids litigation that otherwise draws down on the 
estate's assets.'' \55\
---------------------------------------------------------------------------

    \53\ See, e.g., N. Am. Collection Agency Regulatory Ass'n at 1; 
Weltman, Weinberg & Reis Co., LPA at 2.
    \54\ ACA Int'l at 4.
    \55\ Id. Although the comment does not provide a basis for this 
conclusion, the commenter appears to suggest that if collectors 
cannot initiate a meaningful discussion with the person who has the 
requisite authority, many will seek relief in probate court, or, if 
probate is closed, through litigation.

---------------------------------------------------------------------------

[[Page 44921]]

    Based on the comments received and on its law enforcement 
experience, the Commission will forebear from taking enforcement action 
for violating Section 804(2) of the FDCPA against a debt collector who 
includes in location communications a general reference to paying the 
``outstanding bills'' of the decedent out of the estate's assets. Such 
a reference balances the legitimate needs of the collector with the 
privacy interests of the decedent. Such language should provide 
sufficient information for the recipient of the communication to 
identify the person with authority to pay the decedent's debts out of 
the estate's assets, while minimizing the harm to the decedent's 
reputation that might ensue from a reference to the decedent's 
debts.\56\ The Commission, however, cautions collectors using the term 
``outstanding bills'' that stating or implying in other ways that the 
decedent was delinquent on those bills would violate Section 804 of the 
FDCPA.
---------------------------------------------------------------------------

    \56\ Nearly all individuals leave some outstanding bills at the 
time they die, even if they are not delinquent on those bills. Thus, 
a reference in the location communication to the decedent's 
``outstanding bills'' is not likely to imply that the decedent was 
delinquent at time of death. The word ``debts,'' on the other hand, 
is more likely to imply that the decedent was delinquent at time of 
death.
---------------------------------------------------------------------------

C. Compliance in Communicating With Permitted Individuals

    The FDCPA and Section 5 of the FTC Act govern a collector's 
communications with a person who has the authority to pay the 
decedent's debts from the estate's assets. During such interactions, 
collectors must not engage in unfair, deceptive, abusive, or other 
unlawful conduct in violation of the FDCPA. Collectors also must not 
engage in unfair or deceptive acts or practices in violation of Section 
5 of the FTC Act. To underscore the nature and scope of the 
restrictions on collectors in this context, the Commission believes 
that it is useful to discuss how the FDCPA and Section 5 apply to three 
specific issues that arise in such interactions.
1. Time of Communication
    A significant issue raised in comments from individual consumers 
and consumer groups was whether there should be a ``cooling-off 
period'' after the debtor's death during which collectors are 
prohibited from commencing communications to collect from the person 
who has the authority to pay the decedent's debts from the estate's 
assets, and from contacting others seeking location information 
concerning that person. Some comments specifically suggested that the 
FTC impose a 30-day or longer cooling off period.\57\ According to the 
commenters, the deceased's relatives and others are likely to be 
bereaved for a period of time after the death, and thus may be 
vulnerable to collectors' blandishments.\58\
---------------------------------------------------------------------------

    \57\ See, e.g., Barboza; Forgie (``I feel in NO INSTANCE should 
a debt collector be allowed to contact either the family or friends 
of deceased until at least 30 days after the date of death.''); and 
Steinbach at 1 (``we urge the FTC to adopt an enforcement rule that 
communication with the family of a deceased individual within 30 
days of the individual's death is a per se `unfair' communication 
under 15 U.S.C. sec. 1692f. This rule would not preclude the finding 
that, depending on the circumstances, such communication within 60 
days or even longer could be a violation.'').
    \58\ See, e.g., AARP at 1 (``Debt collectors are keenly aware 
that survivors are particularly vulnerable after the death of their 
loved one.''), 2 (``Older people are extremely vulnerable to abuses 
by debt collectors.''), 2 (``Older people living alone * * * may be 
socially isolated, particularly after the death of a spouse or loved 
one. They are also more easily upset by an abusive telephone call; 
indeed the stress from harassing tactics can actually threaten their 
health.''); Corcoran (``grieving families are in no frame of mind to 
talk about debt that belongs to the deceased.''); Atticus; Carter 
(``At a time when family and friends are grieving and at their most 
vulnerable it is particularly important to keep debt * * * 
[collectors] at bay.''); Corley (``We are at our most vulnerable 
when losing a family member * * *''); Hoffman; Lamet (``family and 
friends of recently deceased loved ones are in a very fragile 
emotional state and are thus more susceptible to abuse by predatory 
tactics of creditors.''); McGill; Nat'l Consumer Law Ctr. at 1 (``* 
* * particular sensitivity and vulnerability of bereaved relatives 
and friends.''), 4, and 5; Starkey; and Steinbach at 1.
---------------------------------------------------------------------------

    The FTC recognizes that many family members may be vulnerable 
emotionally and psychologically in the aftermath of a relative's death. 
But the record does not indicate a significant incidence of calls by 
collectors immediately following the debtor's death. Thus, the final 
Statement does not include a cooling-off period. Nevertheless, the 
Commission stresses that Section 805(a)(1) of the FDCPA prohibits 
collectors from contacting consumers at ``any unusual time or place or 
at a time or place known or which should be known to be inconvenient to 
the consumer.''; \59\ Depending on the circumstances, contacting 
survivors about a debt shortly after the debtor dies may be unusual, 
inconvenient, or both.\60\ The Commission's investigations indicate 
that debt collectors typically do not initiate communications regarding 
decedents' debts for weeks or even longer after death.\61\ The 
Commission emphasizes that such restraint is a key business practice in 
allaying concerns arising from collection of deceased accounts.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 1692c(a)(1).
    \60\ For example, it likely would be unusual or inconvenient to 
call during a wake, during a funeral, at a place of worship, or 
during a period of religious observance at any location.
    \61\ It typically takes a significant period of time--sometimes 
weeks or even months--for a creditor to learn of the debtor's death. 
Often, the creditor first learns of the passing because a family 
member or friend contacts the creditor. It then takes time for the 
creditor to close the account, transfer it to either the appropriate 
internal department or a third-party debt collector, and then 
usually check the account against a database to confirm the passing. 
Some debt collectors who specialize in collecting on the debts of 
deceased debtors also search proprietary databases to check for 
state probate filings before first attempting to collect.
---------------------------------------------------------------------------

2. Questions About Authority To Pay
    The proposed Statement cautioned debt collectors about using 
leading questions when seeking to elicit information as to who is the 
person with the authority to pay the decedent's debts from the estate's 
assets. The proposed Statement identified several examples of 
problematic questions, such as asking whether the person contacted is 
``handling the decedent's final affairs,'' paid for the decedent's 
funeral, or is opening the decedent's mail. The proposed Statement 
explained that such questions are not likely to elicit sufficient 
evidence of authority, because relatives often undertake these types of 
activities to assist without assuming the general authority to pay the 
decedent's debts from the estate's assets.
    One commenter, a local debt collection regulator, asserted that 
complaints it receives from consumers show that, in addition to dealing 
with the loss of a loved one, grief-stricken family members ``must 
contend with deceptive and aggressive tactics by collectors to induce 
consumers to pay debts consumers may very well not be obligated to 
pay.'' \62\ To prevent collectors from asking ``roaming questions'' 
that may mislead consumers, this commenter therefore recommended that 
the final Statement give specific examples of questions that may be 
appropriate for a collector to ask. Another commenter, emphasizing that 
this is an extraordinarily complicated area of law and that 
unsophisticated surviving family members cannot be expected to 
understand the nuances of probate law, argued that limiting collectors 
to asking a narrowly circumscribed set of open-ended questions that may 
not apply to all situations may lead to confusion.\63\ According to 
this commenter, collectors should have the flexibility to pose

[[Page 44922]]

specific questions that are more appropriate to the situation at hand.
---------------------------------------------------------------------------

    \62\ New York City Dept. of Consumer Affairs at 3.
    \63\ Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) at 13.
---------------------------------------------------------------------------

    Based on its law enforcement experience \64\ and the comments 
received, the Commission believes that it is impractical to limit 
collectors to a prescribed list of questions that would apply to all 
possible situations in which a collector may need to communicate with a 
person to obtain location information. Thus, the Commission will not 
prescribe the precise language that a collector must use in such 
situations. Instead, a collector may ask a person clarifying questions 
when seeking to identify and locate the person with the authority to 
pay the decedent's debts from the estate's assets, but a collector 
should not use inappropriate leading questions \65\ or engage in any 
other conduct that may cause the person contacted to assert mistakenly 
that he or she has the requisite authority. In most cases, questions 
about whether the person contacted is ``handling the decedent's final 
affairs'' or paid for the decedent's funeral are not likely to elicit 
sufficient evidence of authority on their own and may lead the person 
contacted to assert authority mistakenly. Questions about whether the 
person contacted is opening the decedent's mail also are unlikely to be 
probative of whether that person has authority to pay the decedent's 
debts out of the estate's assets. Debt collectors using these questions 
must assess whether, in the context of a specific communication, they 
effectively solicit useful information without misleading consumers.
---------------------------------------------------------------------------

    \64\ During its law enforcement investigations of collectors of 
deceased accounts, FTC staff listened to thousands of calls between 
collectors and relatives, including calls in which collectors sought 
to ascertain the scope of the relatives' authority to pay the 
decedent's debts.
    \65\ An inappropriate leading question is one that instructs the 
person on how to answer or puts words in his or her mouth to be 
echoed back.
---------------------------------------------------------------------------

3. Misleading Consumers About Their Personal Obligation To Pay the 
Decedent's Debt
    The proposed Statement advised that, in communicating with persons 
who have the authority to pay the decedent's debts out of the estate's 
assets, it would violate Section 5 of the FTC Act and Section 807 of 
the FDCPA \66\ for a debt collector to mislead those persons about 
whether they are personally liable for those debts, or about which 
assets a collector could legally seek to satisfy those debts. The 
proposed Statement specifically emphasized that:
---------------------------------------------------------------------------

    \66\ 15 U.S.C. 1692e.

    [e]ven in the absence of any specific representations, 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 collector could seek 
certain assets to satisfy the debt. 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.\67\
---------------------------------------------------------------------------

    \67\ 75 FR at 62,394.

    Commenters, including debt collectors, strongly agreed with the FTC 
that debt collectors have an affirmative responsibility under the law 
not to mislead individuals they contact about their responsibility to 
pay for the decedent's debts.\68\ An association of state debt 
collection regulators, in particular, supported the proposed disclosure 
unequivocally, as a means of preventing deception.\69\
---------------------------------------------------------------------------

    \68\ See, e.g., Phillips & Cohen Assocs., Ltd. at 4 
(``collectors have an affirmative responsibility to help avoid 
creating the misimpression that Informal Administrators are 
responsible for paying the debts of the decedent in instances in 
which they are not.''); Weltman, Weinberg & Reis Co., LPA at 3; AARP 
at 1; New York City Dept. of Consumer Affairs at 4.
    \69\ N. Am. Collection Agency Regulatory Ass'n at 1.
---------------------------------------------------------------------------

    Other comments supported the idea of a disclosure, but suggested 
that collectors use different language than that suggested in the 
proposed Statement. Some comments argued that the proposed disclosure 
is too narrow, asserting that consumers need more or better 
information.\70\ On the other hand, some comments argued that the 
proposed disclosure is too broad, emphasizing that there are 
circumstances in which the individual contacted in fact could be 
personally liable out of his or her own assets or out of assets owned 
jointly with the decedent.\71\
---------------------------------------------------------------------------

    \70\ Nat'l Consumer Law Ctr. at 3; AARP at 5; New York City 
Dept. of Consumer Affairs at 4-5.
    \71\ ACA Int'l at 4-5; Phillips & Cohen Assocs., Ltd. at 4-5; 
West Asset Mgmt., Inc. at 4-5; Bass & Assocs., P.C. at 3; Barron, 
Newburger & Sinsley, PLLC (Nov. 4, 2010) at 13.
---------------------------------------------------------------------------

    Based on the comments received and its law enforcement experience, 
the Commission concludes that the information that must be disclosed to 
avoid deception when collectors contact individuals with the authority 
to pay the decedent's debts depends on the circumstances. The proposed 
Statement suggested two possible disclosures: (1) That the collector 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. These disclosures generally will be sufficient to 
prevent deception. Nevertheless, there may be circumstances in which 
these disclosures are not applicable or sufficient to prevent 
deception.\72\ The collector has the responsibility of tailoring the 
information it discloses to avoid misleading consumers.\73\
---------------------------------------------------------------------------

    \72\ Some comments claimed that the disclosures in the proposed 
Statement would be inaccurate because they would be used in 
circumstances in which individuals, in fact, are personally liable. 
Barron, Newburger & Sinsley, for example, suggested that the second 
clause of the disclosure could be improved by modifying it to read, 
``the individual may not be required to use the individual's assets 
* * *'' Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) at 13 
(emphasis added). The Commission believes that the word ``may'' 
would not convey accurately the unlikelihood that the authorized 
person would have to use his or her own assets to pay the debt. In 
any event, collectors should be able to determine in most cases 
whether the person contacted is liable to pay the debts at issue 
from his or own assets. For example, by reviewing underlying credit 
contracts, collectors often can determine if the individual is 
jointly liable as a co-signor. By knowing the identity of original 
creditors, such as a hospice or hospital, and applicable state laws 
concerning medical debts, collectors likewise can often ascertain if 
the decedent incurred medical debts for which a spouse is liable. 
And, by reviewing applicable state laws, collectors generally can 
determine whether a spouse is liable under state community property 
laws. Collectors have an obligation to resolve these issues and 
disclose sufficient information to the individuals contacted so that 
consumers are not deceived in violation of the FDCPA and Section 5 
of the FTC Act.
    \73\ It is not a per se violation of the law for collectors to 
attempt to persuade the person with the requisite authority to pay 
the debt out of her own assets. It is a violation, however, for a 
collector to: (1) Misrepresent that the person has a legal 
obligation to use his or her own assets to pay the debt; or (2) 
engage in harassing, oppressive, or abusive conduct to collect the 
debt.
---------------------------------------------------------------------------

    A collector also should not use questions about the decedent's 
assets to mislead the person who has the authority to pay the 
decedent's debts from the estate into believing incorrectly that those 
assets are subject to the collector's claim.\74\ Although such 
questions are not necessarily deceptive, the collector may need to take 
precautions to prevent the person from

[[Page 44923]]

being misled--for example, by disclosing that jointly-held assets are 
not subject to the collector's claim and that the collector is trying 
to determine what assets are in the estate. Once the collector has 
reason to believe that a particular asset is not part of the decedent's 
estate, the collector should stop asking questions about that 
particular asset or otherwise create the misimpression that the 
particular asset is subject to the debt.
---------------------------------------------------------------------------

    \74\ Many of the calls to which FTC staff listened during its 
investigations of collectors of deceased accounts included questions 
about assets. For example, collectors have, in the past, asked 
whether the decedent owned any cars, real property, bank accounts, 
life insurance policies, etc. Often, depending on the applicable 
laws and/or how the asset was titled, some of these assets may not 
be subject to creditors' claims. Consequently, consumers can easily 
be misled into believing that a particular asset is subject to the 
debt collector's claim when it is not, and that the consumer may 
have to use the proceeds of unreachable assets to satisfy the 
decedent's debts. Collectors may still ask about these assets to 
ascertain whether the assets are reachable or not, but should make 
clear to the consumer that those assets that are unreachable are, in 
fact, not part of the estate or otherwise subject to the collector's 
claim.
---------------------------------------------------------------------------

    Finally, in determining whether individuals are taking away the 
misimpression that they are personally liable for the decedent's debts, 
the Commission will consider whether the collector has obtained an 
acknowledgment at the time of the first payment that, if appropriate, 
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.

    By direction of the Commission.
Donald S. Clark,
Secretary.

FDCPA Enforcement Policy Statement

Matter No. P104806

Concurrence of Commissioner Julie Brill

July 20, 2011
    The Fair Debt Collection Practices Act (``FDCPA'') describes, in no 
uncertain terms, the individuals with whom a debt collector may 
communicate regarding a consumer's debts: the consumer, her attorney, 
her spouse, her parent (if the consumer is a minor), her guardian, and 
a small group of other individuals.\75\ If the consumer is deceased, 
the FDCPA expands this group to allow a debt collector to contact the 
consumer's executor or administrator.\76\ As the FDCPA Enforcement 
Policy Statement (``Policy Statement'') issued by the Commission today 
points out, state probate laws have changed significantly since the 
passage of the FDCPA over three decades ago. As a result of these 
changes, when a consumer dies, her estate will not necessarily have an 
``executor'' or an ``administrator'' with whom a debt collector can 
communicate regarding the decedent's debt.
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    \75\ Fair Debt Collection Practices Act, 15 U.S.C. 1692c (b) and 
(d). Subsection (b) provides that a debt collector may also 
communicate with ``a consumer reporting agency if otherwise 
permitted by law, the creditor, the attorney of the creditor, or the 
attorney of the debt collector.''
    \76\ FDCPA 15 U.S.C. 1692c (d).
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    The Policy Statement expands the communications in which debt 
collectors may engage with a decedent's friends and family members, so 
that debt collectors may identify the person who has ``the authority to 
pay the decedent's outstanding bills from the decedent's estate.'' The 
Policy Statement also permits debt collectors to follow up with 
``clarifying questions'' until the person with whom the debt collector 
is speaking has, to the collector's satisfaction, identified the 
executor, administrator, or individual with authority to pay the 
decedent's outstanding bills from the decedent's estate. The rationale 
for the Commission's action today is that Congress intended to give 
creditors a right to engage in limited communications in order to 
collect the legitimate debts of deceased debtor through the estate. 
Through its action, the Commission wishes to avoid a hyper-technical 
reading of the statute that allows contact only with statutorily 
required, but in reality likely non-existent administrators or 
executors. The Commission's action is thus designed to prevent us from 
elevating form over substance in a manner that defeats the intent of 
the statute. Without a reasonable and narrowly defined safe harbor, a 
debt collector's alternative may be to force the appointment of an 
executor or administrator, which could be costly and time consuming for 
decedent's relatives and the estate.
    Balanced against these concerns for rational administration of 
estates are equally legitimate concerns that the Policy Statement will 
operate as a license for some debt collectors to take unfair advantage 
of the survivors and loved ones of recently deceased debtors. Most 
consumers, even in the best of times, will likely be unable to 
understand and respond accurately to arcane questions of law regarding 
the identity of ``the person who has legal authority to pay outstanding 
bills from a decedent's estate.'' Allowing debt collectors to contact 
the survivors and loved ones of recently deceased consumers will 
require them to respond to these arcane questions of law at a time when 
they find themselves in unfamiliar and unsettling territory, trying to 
sort through the finances and personal affairs of the deceased, while 
simultaneously trying to cope with their loss. A consumer in this 
vulnerable condition may mistakenly identify himself as the person with 
whom the debt collector should be speaking. Worse still, he may end up 
feeling as if he has an obligation--legal, moral, or otherwise--to pay 
the debt from personal funds, even though debt collectors cannot 
legally ask him to do so.
    In view of the pitfalls of allowing debt collectors to contact 
family members to identify the person who has authority to pay 
outstanding bills from the decedent's estate, the Policy Statement is 
crafted to limit potential abuses. First, when contacting the family 
members, the debt collector must include in the statement that he is 
looking for the person who is responsible for paying the outstanding 
bills of the decedent ``from the decedent's estate.'' Second, until 
such time as it is established that the debt collector is talking to 
the person with such authority, the collector cannot reveal that the 
decedent owes a debt. This should eliminate any opportunity by debt 
collectors to make appeals to those without authority to pay bills from 
the estate's assets to pay a debt out of a sense of moral obligation. 
Third, the Policy Statement makes clear the debt collector's general 
responsibility to disclose that the person with authority to pay the 
debts from the estate is not required to use his individual's assets to 
pay the decedent's debt.\77\ Finally, if the debt collector does reach 
the person with authority to pay the bills from the estate of the 
decedent, that person stands in the shoes of the ``consumer'' and must 
be given notice that he is entitled to proof of the decedent's debt and 
has the right to contest it.
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    \77\ There may be circumstances where the individual, in fact, 
is legally obligated to pay the debt himself. In those cases, the 
disclosure requirement would not apply. [End Lit]
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    On balance, I concur in the issuance of the Policy Statement at 
this time, despite concerns that the Policy Statement may operate as a 
license for some debt collectors to take unfair advantage. I take this 
view, in large part, because staff's review of thousands of 
interactions between debt collectors and the family members and 
survivors of decedents indicates that, while some collectors were 
engaged in egregious conduct, the vast majority were trying to comply 
with a reasonable, although at times incorrect, interpretation of the 
requirements of the FDCPA.
    Yet, in light of these strong policy reasons for protecting the 
survivors and loved ones of recently deceased debtors, the Commission 
should ensure that any forbearance of enforcement will occur only when 
debt collectors strictly comply with the criteria set forth in the 
Policy Statement, especially the four safeguards listed above. The debt 
collection industry should know that we will not refrain from 
aggressive

[[Page 44924]]

enforcement when debt collectors go beyond the very limited inquiries 
allowed by today's action. I urge my fellow Commissioners and staff to 
couple today's action with strict monitoring of the industry going 
forward, to ensure its close adherence to the criteria set forth in the 
Policy Statement. If abuse becomes widespread, I would recommend 
withdrawal of the Policy Statement by the Commission.
    The new Bureau of Consumer Financial Protection, created under the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, will have an 
important role in this area as well. Dodd-Frank grants the new Bureau 
of Consumer Financial Protection the authority to promulgate 
regulations under the FDCPA, an authority that the Federal Trade 
Commission has not possessed. In the event that the Commission finds 
that the debt collection industry is not adequately adhering to the 
limited inquiries allowed under this Policy Statement, I hope my fellow 
Commissioners and staff will work closely with the new Bureau to 
further develop appropriate rules to be applied to the collection of 
the debts of decedents.

[FR Doc. 2011-18904 Filed 7-26-11; 8:45 am]
BILLING CODE 6750-01-P