Federal Trade Commission Clarifies Deceased Debt Collection Practices

In October 2010, The Federal Trade Commission (FTC) issued their policy regarding collection of debts belonging to deceased individuals.  This was a clarification of the Fair Debt Collections Practices Act (FDCPA), because of changes to state probate laws since this Act was introduced in 1977.  The Fair Debt Collections Practices Act governs what collection agencies can do to collect consumer debt and is generally enforced by the Federal Trade Commission (FTC), which is a U.S. consumer protection agency. It prohibits debt collectors from using abusive, unfair or deceptive practices to collect from consumers.

The Federal Trade Commission was concerned about unfair, deceptive or abusive practices by certain debt collectors regarding debts belonging to deceased individuals.  Some debt collectors contacted relatives of the deceased using misleading, deceptive or abusive practices, such as telling the relatives that they are personally responsible for the debt. The Federal Trade Commission also wanted to allow collectors to contact family members and/or executors of the estate to determine who has authority to settle the debt.

According to the Federal Trade Commission, the debts of the deceased survive their death and a debt collector can seek payment from the deceased person’s estate.   The collector may only communicate with the deceased person’s family members, executor/administrator of the estate, or others authorized to pay debts or handle financial matters concerning the estate. No legal action under the Fair Debt Collections Practices Act will be taken against the collectors for contacting those individuals unless they harass the individuals.

Contact by the collector is limited to the following:

Can’t give impression they the family members or executors have authority to settle the debt or are personally liable for the debt

Can contact the family members to find out who is authorized to pay the debt, but not disclose the debts

Can only contact family members during normal work hours

If you are a relative but not a spouse of the deceased, you are usually not responsible for the debts.  If there isn’t enough in the estate to pay the debts, the debts go unpaid. The surviving spouse’s obligation to pay the debts is limited by state probate laws.  The law can differ if there is a will or not.  You would need to check with your state,

It is unfortunate when anyone passes away. You don’t need collectors harassing you about your deceased family member’s debt.  You need to be aware that in most cases, you aren’t personally responsible for the debt – the estate is.  In addition, collectors should not harass you.  If you are contacted by a debt collector, verify who they are before giving out personal information; scammers check obituaries and contact relatives.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Debt, Debt Management, Money & Identity

This post was written by John Ulzheimer