By Michelle L. Maynard, Senior Helpline Attorney, Legal Services for the Elderly, Augusta, Maine
An elderly woman calls a legal helpline distraught because she is struggling to keep up with payments on an old credit card debt. The woman is afraid that she will be sued on the debt and have to appear in court. An attorney calls the woman back and learns that the debt is not hers- it was her late husband’s debt. The woman has already paid the debt collector over $8,000 from her Social Security benefits, her sole source of income. The attorney explains to the woman that she is not personally liable for the debt. The attorney advises her not to make another payment and sends her a cease communication letter to use. When asked why she made payments on a debt that wasn’t hers, the woman replies that the debt collector who called her after her husband died told her that her husband would have wanted her to pay the debt and that making payments is the right thing to do.
Decedent debt collection is a rapidly growing sector in the debt collection industry and a topic of particular concern to seniors. With the amount of debt held by seniors on the rise, the business of decedent debt collection will only expand. Huge debt collection firms specializing in decedent debt recovery have been established throughout the country. Relatives of deceased debtors, especially surviving spouses, will increasingly be targeted by decedent debt collectors. Legal service providers should be cognizant of this upward trend, taking affirmative steps to identify clients who could be victimized by decedent debt collectors and providing clear advice on what their legal rights are regarding the debt. Frequently, legal service providers become aware of unscrupulous debt collection practices too late- the client’s money is already gone. Major reform to the federal debt collection laws is therefore necessary to prevent widespread manipulation and deception of survivors of deceased debtors by debt collectors.
While probate law governing creditor claims made against a debtor’s estate is largely a matter of state law, federal law is most relevant in regulating debt collection activity. The principal federal statute pertaining to debt collection is the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692(a). The FDCPA applies to third party debt collectors attempting to collect personal, family, or household debt, including such debt of a deceased individual. Sections 805(b) and (d) of the FDCPA limit the persons whom a debt collector can communicate with about a consumer’s debt to the consumer and the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.
In 2011, the Federal Trade Commission (FTC), the nation’s primary consumer protection agency responsible for enforcing the FDCPA, investigated decedent debt collection practices and issued a final policy statement on the subject, “Statement of Policy Regarding Communications in Connection With the Collection of Decedents’ Debts, 76 Fed. Reg. 144, 44915 (July 27, 2011). Contrary to the assertion of some members of the debt collection industry, the FTC clarified that the FDCPA does apply to decedent debts. Unfortunately, the FTC’s position on several other issues weakened the protections afforded to consumers under the law.
For instance, the FTC expanded the group of permissible individuals for collection communications by clarifying that it will not take enforcement action against companies who communicate with someone about a decedent’s debts with either the classes 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, including an individual who may dispose of the decedent’s assets extrajudicially.
The FTC recognized that many states have adopted various alternatives to formal probate administration resulting in fewer estates, particularly smaller estates, being submitted to the traditional, formal probate process. Allowing debt collectors to communicate with anyone who may have the authority to handle an estate, rather than restricting communications to the person with the status of “executor” or “administrator,” greatly increases the risk that debts will be paid from assets that the debt collector could not legally collect against, such as assets owned by an individual who is not liable for the debt, or assets in the debtor’s estate that would not be reachable by creditors.
State probate and debt collection laws are complex and not well understood by the majority of lay people. Many consumers do not know what the legal requirements are for someone in their jurisdiction to possess the authority to handle a decedent’s debts, or what assets in an estate are exempt from debt collection. The FTC also erroneously assumes that third party debt collectors know the applicable state probate and debt collection laws.
It is problematic that the FTC allows debt collectors to cold call relatives and friends of deceased debtors to ascertain whether a person has the requisite authority to handle the debts of the estate, and if they are satisfied that a person does have authority, to discuss in detail with that person assets that may or may not be subject to collection. The FTC further permits such communications without requiring any specific disclosure by debt collectors, merely suggesting two possible disclosures that may prevent deception. The lack of a mandatory disclosure emphasizing that the individual has no legal obligation to use their own assets or assets owned jointly with the decedent to pay the decedent’s debt only serves to allow debt collectors to continue to mislead relatives into believing that they are responsible for the debt.
The FTC acknowledged that debt collectors always have the option of petitioning for probate of the estates of deceased debtors in order to collect on the debts and that such actions are usually simple and inexpensive, but decided that resorting to the formal probate process could impose unnecessary costs and delays to the heirs and beneficiaries of the estates. The position that requiring probate to collect decedent debt is more burdensome to consumers, rather than debt collectors, ignores the reality of current debt collection practices. Debt collectors know that harassing survivors of deceased debtors is much more profitable than initiating probate proceedings and filing legitimate creditor claims, which is why chasing survivors has become the preferred tactic to collect on deceased accounts.
Decedent debt collectors are keenly aware of how vulnerable relatives of deceased debtors are, particularly surviving spouses, and are becoming more skillful in exploiting this vulnerability. A quick online search of decedent debt collection firms reveals that they frequently employ specially trained collectors who present an empathetic demeanor to survivors and gently suggest that survivors remit payments. Some firms go even further and retain so-called certified grief counselors that survivors can be immediately transferred to during calls ostensibly for help with coping with the stress caused by the death. Approximately a week later, the same debt collector contacts the bereaved again to continue the dunning.
Anecdotal reports from clients who are primarily surviving spouses reveal that debt collectors frequently make emotional appeals to elicit payments on their loved one’s debt, including claims that the decedent would have wanted the survivor to make payments on the debt; paying on the debt honors the decedent’s legacy, the survivor has a moral obligation to make payments; and failure to satisfy the debt will tarnish the decedent’s reputation. Our consumer protection laws should not permit debt collectors to emotionally blackmail grieving widows and widowers.
In conclusion, current federal law does not adequately protect survivors of deceased debtors from rampant abuse by debt collectors. Substantial changes to the FDCPA are necessary to prohibit debt collectors from harassing and misleading survivors into making payments on debts they do not owe.