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Texas Collection Practices Act (the "ACT")

Tex. Rev. Civ. Stat. Ann. art. 5069-11.01 et seq.

Introduction

The Texas State law that governs debt collection practices in Texas is called the Texas Collection Practices Act (the "Act" TCPA.) It is a law passed by a legislative body and set forth in a formal document that provides statutory standards (formal regulations and established rules called statutes,) that have to do with debt collection practices in the state of Texas. The TCPA was passed in the 63rd Texas Legislative Session, and first became effective August 27th, 1973, and was codified as Vernon’s Texas Revised Civil Statutes Annotated, Article 5069-11.01, et esq. The TCPA was amended in the 68th Texas Legislative Session to add certain civil remedies in Article 5069-11.10 and other parts in Article 5069-11.11, which became effective August 29th, 1983.

The next amendment to the TCPA took place in the 73rd Texas Legislative Session and became effective September 1st, 1993. The amendments added a definition of the tern "Credit Bureau," certain bond requirements for third party debt collectors, certain dispute rule and procedures, certain civil remedies, and added a requirement for credit bureaus to send copies of credit information to consumers upon request. Now let’s have a closer look at "the Act."

The following amendment to the TCPA (HB668[Junell]) was signed by Governor George W. Bush June 8th, 1995 and became effective September 1, 1995. The Texas Legislature approved amendment to (Article 11.05(e)) allowing collectors to use a post office box and a telephone number in lieu of their street address on written communications. It amended (Article 11.05 (a)) allowing collectors collecting bank card debts to collect under the name appearing on the face of the credit card as well as under their true business name or professional name or the true personal or legal name of the debt collector. It amends ( Article 11.05(c)) by adding credit card debts to real estate first lien mortgages as a type of debt excluded from the requirement that the collector disclose to the alleged debtor the name of the person to whom the debt has been assigned or is owed. It amends (Article 11.10 (the remedies) by restricting the $100 per violation damages to violations of article 11.02 (c) (reporting or threatening to report to a credit bureau that the debtor is refusing to pay a non-disputed debt when the debt is disputed) or Article 11.07A (dispute rules and bonds) only. Subsection (c).

This is an index of different topics within the Texas Collection Practices Act.

Index
Article
5069-11.01. Definitions.
5069-11.02, Threats or coercion.
5069-11.03. Harassment; abuse
5069-11.04. Unfair or unconscionable means.
5069-11.05. Fraudulent, deceptive, or misleading representations.
5069-11.06. Deceptive use of credit bureau name.
5069-11.07. Use of independent debt collectors.
5069-11.08. Bona fide error.
5069-11.09. Penalties.
5069-11.10. Civil remedies.
5069-11.11. Other remedies.

Cross References & Case Examples

Another law you may want to look at later in this book is the Deceptive Trade Practices-Consumer Protection Act, see V.T.C.A. Bus. & C 17.41 et esq. Some violations of the TCPA also are violations of the Texas Deceptive Trade Practices Act (TDTPA.) To learn about furnishing false credit information to or by a credit reporting bureau, see art. 9016.

An example of a case where Coercive collection and exempt property in Texas was used is: Roy Ryden Anderson, 13 Houston L.Rev. 84 (1975). Procedural due process. 10 Houston L.Rev. 880 (1973). You may want to look at the Texas Debt Collection Practices Act: Relief for harassed debtor in: William R Crow, jr., 8 St. Mary’s L.J. 773 (1977). For an example of Usury implication of front-end interest in advance. see: §29 Southwestern (Tex.) L..J. 748 (1975). Tex. Prac., Consumer Rights and Remedies, chs. 2, 15.

Art. 5069-11.01. Definitions

As used in this subchapter:

(a) "Debt" Means any obligation or alleged obligation arising out of a consumer transaction.

(b) "Debt collection" means any action, conduct, or practice in soliciting debts for collection or in collecting debts owed or due, or alleged to be owed or due to a creditor by a consumer.

(c) "Debt collector" means any person engaging directly or indirectly in debt collection, as defined herein, and includes any person who sells, or offers to sell, forms represented to be a collection system, devise, or scheme, intended or calculated to be used to collect debts.

(d) "Consumer" means an individual who owes or allegedly owes a debt created primarily for personal, family, or household purposes.

(e) "Consumer transaction" means a transaction in which one or more of the parties is a consumer.

(f) "Creditor" means a party to a consumer transaction other than a consumer.

(g) "Person" means individual, corporation, trust, partnership, incorporated or unincorporated association, or any other legal entity.

(h) "Credit bureau" means any person who, for compensation, gathers, records, and disseminates information relative to the creditworthiness, financial responsibility, paying habits, and other similar information relative to the creditworthiness, financial responsibility, paying habits, and other similar information regarding any person, for the purpose of furnishing consumer reports to third parties.

Note: All areas of italics are personal comments and are in no way intended to be a legal opinions. You should check with an attorney regarding any interpretations or comments in this book to verify it’s accuracy prior to taking any action.

Comments

In subsection (c) above, the term "Debt Collector" includes credit grantors, collection agencies, credit bureaus, and attorney’s that collect debts. It is important that you note that Debt Collector is referred to as a "person" in the subsection of the Act, and "Person" is further defined in subsection (g) above, to include individuals, corporation, trusts, partnerships, associations, or any other legal entity and if broad enough to include credit granters. The Consumer must be an "individual" according to subsection (d) to fall under the TCPA. The Act has been interpreted to mean collecting from a cooperation, partnership, or trust could not be a "consumer debt," and therefore the collection of such debt is not covered by the Act.,

Cross References and Definitions

This is an Act relating to the regulation of practices used in collection of debts; providing penalties; providing certain civil remedies; and declaring an emergency. Acts 1973, 63rd Leg,. p 1513, ch. 547. Beyond truth-in-lending (another law governing consumer lending laws.) See example in: Federal regulation of debt collection. R. Glen Ayers, Jr., 16 St. Mary’s L.J. 329 (1985)

Hear are some examples of cases, notes, and decisions that may be helpful as examples you can refer to.

Notes and Decisions

1. In general

In the Debt Collection Act (this example) does not apply to controversy over ownership and/or corollary right of alleged owner to retrieve their property. See: Pergars of Longview, Inc. v. Jones (Civ. App. 1978) 573 S.W.2nd 571. The following example requires that the wrong complained of must arise out of a debt or creditor relationship but does not limit the cause of action for violation of an Act to the debtor. Any person against whom prohibited acts are committed may maintain an action for actual damages sustained as a result of violations of the Act. See: Campbell v. Beneficial C. of Dallas (Civ.App.1981) 616 S.W.2nd 373.

2. Debt

Am obligation of consumer to return credit card upon cancellation was considered a "debt" within meaning of the following example governing debt collection, and attempts of debt collection company to return such credit cards constituted integral part of debt collection process within meaning of this Chapter. See:Ledisco Financial Services, Inc. v Viracola (Civ. App. 1976) 533 S.W.2nd 951

3. Consumer

The next example of a case is where an individual used his credit card for personal purposes, owed money to issuer of such credit card, and also owed obligation to return credit card when it was canceled, such individual was a "consumer" within meaning of this example. See: Ledisco Financial Services, Inc. v. Viracola (Civ.App.1976) 533 S.W.2nd 951.

This section will help you when you are trying to find out or prove certain collection tactics are illegal

Art. 5069-11.02. Threats or coercion

No debt collector may collect or attempt to collect any debt alleged to be due and owing by any threats, coercion, or attempts to coerce which employ any of the following practices:

(a) using or threatening to use violence or other criminal means to cause harm to the person or property of any person;

(b) accusing falsely or threatening to accuse falsely any person of fraud or any other crime;

(c) representing or threatening to represent to a third party or any other person, that a consumer is willfully refusing to pay a non-disputed debt when the debt is in dispute for any reason and the consumer has notified such debt collector in writing of the dispute.

(d) threatening to sell or assign to another the obligation of a consumer with an attending false representation that the result of such sale or assignment would be that the consumer would lose any defense to the alleged debt or would be subject to illegal collection attempts;

(e) threatening that the debtor will be arrested for non-payment of an alleged debt without proper court proceedings; however, nothing herein shall prevent a debt collector from informing the debtor that the debtor may be arrested after proper court proceedings in cases where the debtor has violated the criminal laws of this state;

(f) threatening to file charges, complaints, or criminal action against a debtor when in fact the debtor has not violated any criminal laws; provided, however, nothing herein shall prevent a debt collector from threatening to institute civil lawsuits or other judicial proceedings to collect a debt;

(g) threatening that nonpayment of an alleged debt will result in the seizure, repossession, or sale of any property of that person without proper court proceedings; however, nothing herein shall prevent a debt collector from exercising or threatening to exercise a statutory or contractual right of seizure, repossession, or sale which does not require court proceedings; or

(h) threatening to take any action prohibited by law.

Cross References

Consumer Protection , Extortion and Threats, see the example in: C.J.S. Threats and Unlawful Communications §§ 2 to 9., C.J.S. Trade-Marks, Trade-Names and Unfair competition § 237.

Consumer Warning!

It is a violation of Texas State law to destroy, remove, conceal, encumber or otherwise harm or reduce the value of secured property with intent to hinder enforcement of a lien. Section 32.33 of the Texas Penal Code.

§ 32.31 Hindering Secured Creditors

(a) For Purpose of this section

"Remove" means transport, without the effective consent of the secured party, from the state in which the property was located when the security interest or lien attached.

"Security Interest" means an interest in personal property or fixtures that secures payment or performance of an obligation.

(b) A person who has signed a security agreement creating a security interest in property or a mortgage or deed of trust creating a lien on property commits an offense if, with intent to hinder enforcement of that interest or lien, he/she destroys, removes, conceals, encumbers, or otherwise harms or reduces the value of the property.

(c) For purposes of this section, a person is presumed to have intended to hinder enforcement of the security interest or lien if, when any part of the debt secured by the security interest or lien was due, he/she failed:

· To pay the part then due and

· If the secured party had made demand, to deliver possession of the secured property to the secured party.

(e) If the Actor removes the property, the offense is a Felony of the Third Degree.

The following are more examples of cases and court decisions that relate to the above listed section

Notes of Decisions

1. In general

Plaintiff could not recover damages from a creditor for wrongful debt collection under this article as a result of indictment charging plaintiff with felony theft of services, in absence of evidence that creditor made any false statements or factual misrepresentations to district attorney. Hatcher v. Budget Rent-A-Car Systems, Inc. (C.A.1980) 617 F.2nd 91.

Where collection agency employee called debtor on many occasions including during sleeping periods, contacted neighbors concerning debtor and induced their child to provide agency with debtor’s telephone number, contacted debtors employer and threaten his job, and debtor informed agency that he had become ill as a result of collection efforts, agency was liable for unreasonable collection methods. Foley Newsom Oil Co. v. Crawford (Civ.App.1974) 515 S.W.2nd 750. All collection efforts by defendant, which after its employee had been advised that hospital bill had been paid did not even contact hospital to determine whether bill was in fact paid and which made at least four collection contacts after contacts after bill was in fact paid, after date of payment by debtor’s attorney were unreasonable. Pullins v. Credit Exchange of Dallas, Inc. (Civ.App.1976) 538 S.W.2nd 681, ref. n.r.e. Contributory negligence was not defense in unreasonable collection efforts case, which is not suit for negligence but is based on intentional act. Pulins v. Credit Exchange of Dallas, Inc. (Civ.App.1976) 538 S.W2nd 681, ref. n.r.e.

2. Action prohibited by law

Vendor’s letters threatening to terminate contract for deed for delinquent payments without necessary notice required by art. 1301b (repealed; see, now, V.T.C.A. Property Code, § 5.062) was action "prohibited by law" within Debt Collection Act (this chapter), which prohibits any debt collector from threatening to take any action "prohibited by law." See example in: Dixon v. Brooks (Civ.App.1980) 604 S.W.2nd 330, ref. n.r.e., appeal after remand 678 S.W.2nd 728, ref. n.r.e.

3. Standing (Skip-tracing with neighbors and relatives)

Parent of debtors had standing to maintain an action against credit company under this chapter for alleged harassment and abusive debt collection practices where alleged abuses were committed directly against her when the credit company attempted to discover the whereabouts of the debtors. Campbell v. Beneficial Finance Co. of Dallas (Civ.App.1981) 616 S.W.2nd 373. Persons other than the debtor may maintain an action for violations of this chapter. Id. This chapter requires that the wrong complained of must arise out of a debtor/creditor relationship but does not limit the cause of action for violations of an

Act to the debtor; any person against whom prohibited acts are committed may maintain an action for actual damages sustained as a result of violations of the Act. Id.

4. Pleading

Plea in debtor’s petition alleged unreasonable collection efforts and seeking "reasonable attorney’s fees" was sufficient to authorize award of such fees in higher courts." See: Ledisco Financial Services, Inc. v. Viracola (Civ.App.1976) 533 S.W.2nd 951 Debtor’s petition seeking recovery for unreasonable collection efforts of debt collection company’s employee, which simply stated that debt collection company perpetrated improper act, was sufficient. Id. An action for unreasonable debt collection efforts may be maintained absent a plea of physical illness or injury. See: Campbell v. Beneficial Finance Co. of Dallas (Civ.App. 1981) 616 S.W.2nd. 373.

5. Evidence

In action for civil penalties against credit bureau for alleged violation of injunction prohibiting distribution to debtors of forms which had the appearance of being official documents, evidence that, following injunction order, credit bureau employed attorney, knowledgeable in style of law relating to creditors, to revise such forms and that attorney consulted with Assistant Attorney General regarding the revisions was admissible to show credit bureau’s good faith. See example: Credit Bureau of Laredo, Inc. v. State (Civ.App.1974) 515 S.W.2nd 706, affirmed 530 S.W.2nd 288 In absence of offer by debt collection company to prove that debtor’ alleged felony conviction involved moral turpitude and was not too remote, trial court did not err in excluding such evidence in action by debtor against collection company for unreasonable collection efforts. See: Ledisco Financial Services, Inc. v. Viracola (Civ.App.1976) 533 S.W.2nd 951. In action against debt collection company to recover damages for unreasonable collection efforts, debt collection company should have been permitted to cross-examine debtor about assaults he allegedly had made on some of his neighbors, since such evidence could raise inference that neighbors, rather than debt collection company’s employee, had made threatening phone calls to debtor.

Id. Alleged admission against interest made by debtor during recess of debtor’s action against debt collection company to recover damages for unreasonable collection efforts should have been admitted into evidence, and refusal of trial court to allow debt collection company to elicit testimony for its bill of exceptions constituted reversible error. Id. Evidence in suit by debtor’s widow alleging that unreasonable collection efforts had been made before and after hospital bill was paid by debtor’s attorney and after defendant had been advised that debtor was represented by counsel, including wife’s allegations that she became nervous, upset and vomited and had headaches, dizziness and went to doctor as result of collection efforts made upon her, was sufficient for jury as to whether unreasonable collection efforts had been made upon wife. See: Pullins v. Credit Exchange of Dallas, Inc. )Civ.App.1976) 538 S.W.2nd. 681, ref. n.r.e.

6. Damages

Jury award of actual and exemplary damages for unreasonable collection methods was supported by evidence that lender accelerated loan even before date for first payment and without explanation, and that its representative made repeated visits to home of borrower, his fiancee and apartment managers, confronted and embarrassed fiancee in front of her social guests, made 20 or more telephone calls to borrower in a ten-day period, and threatened him with criminal charges. See example: Bank of North America v. Bell (Civ.App.1973) 493 S.W.2nd 633. Jury finding that unreasonable collection efforts were actuated by malice was supported by evidence that lender accelerated entire loan even before first loan payment was due and that representative, of lender made repeated visits to borrower’s home, his fiancee and apartment managers, confronted and embarrassed fiancee in front of social guests, made 20 or more telephone calls to borrower in ten-day period, and threatened borrower with criminal charges. Id. Award of $50.000 in punitive or exemplary damages was excessive to the amount of $35,000 under evidence that, in action for unreasonable collection efforts, lender accelerated loan even before date when first loan payment was due and representatives of lender made repeated visits to borrower’s home, his fiancee and apartment managers, confronted and embarrassed fiancee in front of social guests, made 20 or more telephone calls to borrower in ten-day period, and threatened borrower with criminal charges. See: Bank of North America v. Bell (Civ.App.1973) 493 S.W.2nd 633.

Notes on the subject of "DURESS"

"Unlawful constraint exercised upon a person whereby a person is forced to do some act that they otherwise would not have done. The common law theory of duress arises when one party to a transaction employs extorted measures or when, lacking good faith, makes improper demand. Use of duress in the business context is often referred to as "economic coercion" or "business compulsion". Mere "pressure" of necessity does not reach the level of economic duress. See First Texas Savings Association v. Dicker Center, Inc., 631 S.W. 2nd 179, 185-86 (Tex. App. Tyler 1982, no writ). A tort may be claimed only when the party making the demand has or appears to have the power to injure the business or property interests of the party upon whom the demand is made, without resort to the court system to enforce the demand. Dale v. Simon, 267 S.W. 467, 470 (Tex. Comm. App. 1924).

As a matter of law, there is no duress unless (1) there is a threat to do something which the party threatening has no legal right to do; (2) there is some illegal exaction or some fraud or deception; and (3) the restraint is imminent such as to destroy free agency without present means of protection. See Simpson v. Mbank Dallas, 725 S.W. 2d 102, 109 (Tex. App.- Dallas, writ ref’d n.r.e.) ; Tower Contracting Co., Inc. of Texas v. Burden Brothers, Inc., 482 S.W. 2d 330, 335 (Tex. Civ. App. - Dallas 1972, writ ref’d n..r.e.).

Once again, the seminal case on lender duress is State National Bank v. Farah Manufacturing Co. supra. The Farah court made the following statement as to duress: There can be no duress unless [1] there is a threat to do some act which the party threatening has no legal right to do. [2] Such threat must be of such character as to destroy the free agency of the party to whom it is directed. It must overcome his will and cause him to do that which he would not otherwise do, and which he was not legally bound to do. [3] The restraint caused by such threat must be imminent.

[4] It must be such that the person to whom it is directed has no present means of protection. . . .

[5] Where a demand made is wrongful or unlawful, and it is necessary for the party making such demand to resort to the courts to enforce same, there is no duress, for the one upon whom demand is made has adequate means of protection, and there is no imminent restraint. . .

[6] But where the party making such demand has, or is supposed to have, the power to injure the business or property interests of the one upon whom such demand is made, without resort to the courts to enforce the demand, and threatens to do an act which would cause such injury, and which he has no right to do, thereby induces a compliance with his demand , [7] against the will of such party through fear of injury to his business or property interests, such threats amount to duress, [8] if it appears that the party making such demand and threat ought not in good conscience to retain the benefit received by reason thereof. Farh, supra, at 684 (citing Dale v Simon, supra at 470).

In short, there can be no duress under Texas law unless there is a threat to do an act which the threatening party has no right to do, coupled with fraud or deception, such that the free will of the threatened party is destroyed. Additionally, a threat to institute a civil suit or even the actual institution of a suit for the purpose of enforcing a legal right does not, as a matter of law, constitute duress. Executive Condominiums, Inc. v State, 764 S.W. 2d 899 (Tex. App. -Corpus Christi 1989, writ denied). Other selected opinions are (a) Sander v. Republic Nat’l Bank, 389 S.W. 2nd 551 (Tex. 1965), assertion of a legal right does not constitute duress. (b) First Texas Sav, Ass’n v Dicker Center Inc., 631 S.W. 2nd 179 (Tex. App. -Tyler 1982, no writ). Acting party must be responsible for complainants financial embarrassment. . . .

Art. 5069-11.03. Harassment; abuse

In connection with the collection of or attempt to collect any debt alleged to be due owing by a consumer, no debt collector may oppress, harass, or abuse any person by methods which employ the following practices:

(a) using profane or obscene language that is intended to unreasonably abuse the hearer or reader;

(b) placing telephone calls without disclosure of the name of the individual making the call, and with the willful intent to annoy or harass or threaten any person at the called number;

(c) causing expense to any person in the form of long distance telephone tolls, telegram fees, or other charges incurred by medium of communication, without first disclosing the name of the person making the telephone call or transmitting the communication; or

(d) causing telephone to ring repeatedly or continuously or making repeated and continuous telephone calls, with the willful intent to harass any person at the called number.

Notes of Decisions

1. In general

Alleged "wrongful acceleration of debt," which actually sought to present cause of action for unreasonable collection of the debt, required, in order for recovery to be authorized under Texas law, finding that debtor suffered some physical injury and that such injury was proximately caused by creditor’s collection efforts. See: McDonand v. Bennett (C.A.1982) 674 F.2nd 1080, on re-hearing 679 F.2nd 415.

State properly exercised its option in prosecuting defendants for conduct, in which a defendant threatened to harass victim by making repeated and continuous phone calls until he paid debt he said that he did not owe, under V.T.C.A. Penal Code, § 42.07, which proscribes making threats by telephone to take unlawful action against any person, thereby intentionally, knowingly, or recklessly annoying or alarming or intending to annoy or alarm recipient, rather than under this article prohibiting debt collector from harassing person by causing telephone to ring repeatedly or continuously in connection with collection of or attempt to collect debt. See: Collection Consultants, Inc. v. State (Cr.App.1977) 556 S.W.2nd 787, appeal dismissed 98 S.Ct. 2228, 436 U.S. 901, 56 L.Ed.2nd 399, rehearing denied 98 S.Ct. 3127, 438 U.S. 908, 57 L.Ed.2d 1150.

Art. 5069-11.04. Unfair or unconscionable means

No debt collector may collect or attempt to collect debts or obtain information concerning a consumer by any fraudulent, deceptive, or misleading representations which employ the following practices:

(a) seeking or obtaining any written statement or acknowledgment in any form that specifies that a consumer’s obligation is one incurred for necessaries of life where the obligation was not in fact incurred for such necessaries; or

(b) collecting or attempting to collect any interest or other charge, fee, or expense incidental to the obligation unless such interest or incidental fee, charge, or expenses is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer. However, creditors may charge reasonable reinstatement fees as consideration for renewal or a real estate loan or contract of sale, after default, if the additional fees are included in a written contract executed at the time of renewal.

Art. 5069-11.05. Fraudulent, deceptive, or misleading representations

No debt collector may collect or attempt to collect debts or obtain information concerning a consumer by fraudulent, deceptive, or misleading representations which employ the following practices:

(a) using any name while engaged in the collection of debts other than the true business or professional name or the true personal or legal name of the debts collector; or, if engaged in the collection of a credit card debt, the name appearing on the face of the credit card; or failing to maintain a list of all business or professional names known to be used or formerly used by individual persons collecting debts or attempting to collect debts for the debt collector;

(b) falsely representing that the debt collector has information in his possession or something of value for the consumer in order to solicit or discover information about the consumer,

(c) failing to clearly disclose, in any communication with the debtor, the name of the person to whom the debt has been assigned or is owed at the time of making any demand for money (provided, however, this subsection shall not apply to person servicing or collecting real estate first lien mortgage loans or credit card debts);

(d) failing to clearly disclose, in any communication with the debtor, that the debt collector is attempting to collect a debt, unless such communication is for the purpose of discovering the whereabouts of the debtor.

(e) using any written communication which fails to clearly indicate the name of the debt collector and the debt collector’s street address, or post office box and telephone number, when the written notice refers to an alleged delinquent debt; (the foregoing shall not require disclosure of names and addresses of employees of debt collectors);

(f) using any written communication which demands a response to a place other than the debt collector’s or creditor’s street address or post office box; (the forgoing shall not require response to the address of an employee of a debt collector);

(g) misrepresenting the character, extent, or amount of a debt against a consumer, or misrepresenting its status in any judicial or governmental proceedings;

(h) falsely representing that any debt collector is vouched for, bonded by, affiliated with, or an instrumentality, agent, or official of this state or any agency of federal, state, or local government;

(i) using, distributing, or selling any written communication which simulates or falsely represents to be a document authorized, issued, or approved by a court, an official, a governmental agency, or any other legally constituted or authorized governmental authority, or which creates a false impression about its source, authorization, or approval; or using any seal or insignia or design which simulates that of any governmental agency;

(j) representing that a debt may be increased by addition of attorney’s fees, investigation fees, service fees, or other charges when there is no written contract or statue authorizing such additional fees or charges.

(k) representing that a debt will definitely be increased by additional attorney’s fees, investigation fees, service fees, or other charges when the award of such fee or charge is discretionary by a court of law.

(l) falsely representing the status or true nature of the services rendered by the debt collector or his business.

(m) using any written communication which violates or fails to conform to the United States postal laws and regulations;

(n) using any communication which purports to from any attorney or law firm, when in fact it is not;

(o) representing that a debt is being collected by an attorney when it is not; or

(p) representing that a debt is being collected by an independent, bona fide organization engaged in the business of collecting past due accounts when the debt is being collected by a subterfuge organization under the control and direction of the person to whom the debt is owed; however, nothing herein shall prohibit a creditor from owning or operating its own bona fide debt collection agency.

Cross References

See the Deceptive Trade Practices-Consumer Protection Act, below, see V.T.C.A. Bus. & C. § 17.41 et seq. See Chapter 36 of the Business and Commerce Code (Vernon’s Annotated Texas Statutes.) Subsection (e) was amended as such: This subsection applies only to written notices which refer to a delinquent debt.

All such written communication must clearly bear the name of the Debt Collector and the Debt Collector’s Street address, or if a Post Office Box Address is used, then the Debt Collector’s Telephone number must be included in the return address. A debt collector, if collecting a credit card debt, may use the name of the credit card issuer. As do all sections of this Act, this subsection applies to both Debt Collection Agencies, Attorney’s collecting debts, and Credit Grantors. The law does not specify where such name street address, or post office box and telephone number must be place in a written communication. Therefore, such name, street address, or post office box and telephone number does not have to be placed on the envelope if such information is on a collection notice or letterhead. This section does not apply to credit card debts as there are times when these debts are transferred to other parties (TCPA 1995 Amendment effective September 1st, 1995.)

Art. 5069-11.06. Deceptive use of credit bureau name

No person shall use the term "credit bureau," "retail merchants," or "retail merchants association" in his business or trade name unless such person is in fact engaged in gathering, recording, and disseminating favorable as well as unfavorable information relative to credit worthiness, financial responsibility, paying habits and other similar information regarding individuals, firms, corporations and any other legal entity being considered for credit extension so that a prospective

creditor may be able to make a sound decision in extension of credit. This paragraph shall not apply to any nonprofit retail trade association consisting of individual members and qualify as bona fide business league as defined by the United States Internal Revenue Service, and which nonprofit retail trade association does not engage in business of debt collection or credit reporting.

Art. 5069-11.07. Use of independent debt collectors

No creditor may use any independent debt collector who repeatedly and continuously engages in acts or practices which are prohibited by this Act after the creditor has actual knowledge that an independent debt collector is in fact repeatedly and continuously engaging in such acts or practices.

Art. 5069-11.07A. Correction of third-party debt collector’s files; Bond requirement

(a) If an individual disputes the accuracy of an item in a third-party debt collector’s file on the individual, the individual may give notice of the inaccuracy in writing to the third-party debt collector. The third-party debt collector shall provide forms for the notice and shall assist an individual in preparing the notice when requested.

(b) Within 30 days after the date on which a notice of inaccuracy is received, the third-party debt collector shall send a written statement to the individual in which the third-party debt collector shall deny the inaccuracy, admit the inaccuracy, or state that it has not had sufficient time to complete its investigation.

(c) If the third-party debt collector admits that the item is inaccurate, it shall within five business days correct the item in its file and shall immediately send to each person who has previously received a report from the third-party debt collector containing the inaccurate information notice of the inaccuracy and a copy of the accurate report.

(d) If the third-party debt collector states that it has not had sufficient time to complete its investigation, it shall immediately change the item in its file as requested by the individual, shall immediately send to each person who previously received the report containing the information a notice that is equivalent to a notice under Subsection (c) of this section and a copy of the changed report and shall immediately cease collection efforts if the item involves a debt. When the third-party debt collector completes its investigation and determines whether the item is accurate or inaccurate, it shall inform the individual of its determination. If the third-party debt collector determines that the information was accurate, it may again report that information and may resume its collection efforts.

(e) A third-party debt collector may not engage in debt collection unless the third-party debt collector entity, whether a sole proprietorship, firm, partnership, or corporation, has obtained a surety bond issued by a surety company authorized to do business in this state as required by this section. A copy of the bond must be filed with the secretary of state.

(f) The surety bond must be in favor of: (1) any person who is damaged by a violation of this Act; and (2) the state, for the benefit of any person who is damaged by a violation of this Act.

(g) A person claiming against the bond for a violation of this Act may maintain an action against the third-party debt collector and against the surety. The aggregate liability of surety to all persons damaged by a violation of this Act may not exceed the amount of the surety bond.

(h) The bond must be in the amount of $10,000.00

(i) For purposes of this section, "third-party debt collector" means a debt collector, as defined by 15 U.S.C. section 1692a(6), other than an attorney at law collecting a debt as an attorney on behalf of and in the name of a client, unless the attorney has nonattorney employees who are regularly engaged to solicit debts for collection or who regularly make contact with debtors for the purpose of collection or adjustment of the debt.

(j) The provisions of this section apply to any person who for compensation gathers, records, or disseminates information relative to the creditworthiness, financial responsibility, and paying habits and similar information, regarding any person, for the purpose of furnishing such information to any other person.

Summary of Dispute Process

Disputed consumer accounts fall under the Texas Debt Collection Practices Act Art 5069-11.07a-.

If an individual disputes the accuracy of an item, the creditor, debt collector, or attorney attempting to collect a debt should give written notice to the consumer that acknowledging the dispute, and explain to the consumer that collection efforts have ceased on any disputed portion of the alleged debt, and furthermore advise the consumer that the claim is being investigated. The debt collector should provide forms for the notice and assist the consumer when requested to do so. Within thirty (30) days after the dispute is received, the collector must send the consumer a written statement:

1. Denying the accuracy of the debt or,

2. Admitting the accuracy of the debt or,

3. Stating the collector has not had enough time to complete the investigation.

If the dispute is found to accurate, within five (5) days the collector must correct the item in its file and correct the consumers credit bureau report (if applicable) and notify the creditor of such (if applicable.)

If the dispute was being investigated and the claim was latter found to be inaccurate, the collector should send a notice to the consumer "Denying the accuracy of the debt," close the account, and within five (5) days the collector must correct the item in its file and correct the consumers credit bureau report (if applicable) and notify the creditor of such (if applicable.)

Art. 5069-11.08. Bona fide error

No person shall be guilty of a violation of this Act in the action complained of resulted from a bona fide error notwithstanding the use of reasonable procedures adopted to avoid such error.

Notes of Decisions

Under this article, reasonable procedures must be adopted to avoid error before a bona fide error will be excused. See example: Central Adjustment Bureau, Inc. v. Gonzales (Civ.App.1975) 528 S.W.2nd 314.

Art. 5069-11.09. Penalties

Any person who violates a provision of the Act is guilty of a misdemeanor, and upon conviction is punishable by a fine of not less than $100.00 nor more than $500.00 for each violation. Such misdemeanor charge must be filed within one year of the date of the alleged violation.

Comments: The statute of limitations for criminal charges under this Section is one year.

Art. 5069-11.10. Civil remedies

(a) Any person may seek injunctive relief to prevent or restrain a violation of this Act and any person may maintain an action for actual damages sustained as a result of a violation of this Act. A person who successfully maintains such action shall be awarded attorney’s fees reasonable in relation to the amount of work expended and costs. On a finding by the court that an action under this section was brought in bad faith or for purposes of harassment, the court shall award to the defendant attorney’s fees reasonable in relation to the work expended and costs.

(b) When the attorney general has reason to believe that a person is violating or is about to violate a provision of this Act, the attorney general may bring an action in the name of the state against the person to restrain or enjoin the person from violating this Act.

(c) A person who successfully maintains an action under this article for violation of Article 11.02 (c) or 11.07A of this act shall be awarded at least $100. for each violation of this Act. Subsec. (c) added by Acts 1993, 73rd leg., ch. 813, § 2, eff. Sept. 1 1993.

Presumptions and burden of Proof

A party seeking to recover damages under this chapter is not required to show intent on part of wrongdoer, but merely that harm incurred was a reasonable foreseeable result of wrongdoer’s conduct. Case example: Brown v. Oaklawn Bank (Sup.1986) 718 S.W.2nd 678.

Important Comment for Alleged Debtors

Subsection (a), Any person who is damaged as a result . . . This last portion allows a Debt Collectors to recover their attorney’s fees and costs when the debt collector is a victim of a lawsuit not filed in good faith or for purposes of harassment also. This limits the application of a minimum recovery of $100.00 per violation to violation of Article 11.02(c) and 11.07A of this Act.

Notes of Decisions

1. Attorney fees

This article, authorizing award of attorney’ fees reasonable in relation to amount of work expended and cost to person who successfully maintains action for actual damages, would authorize recovery of reasonable attorney’s fees for all work expended, including that on appeal, if such should be necessary in suit under debt collection act. See: Central Adjustment Bureau, Inc. v. Gonzalez (Civ.App.1975) 528 S.W.2nd 314. In action against debt collection company to recover damages for unreasonable collection effort, in which debt collection company failed to submit definition or explanatory instruction with respect to proper elements jury could consider in awarding actual damages, omission of such instruction by court did not constitute reversible error. See example: Ledisco Financial Services, Inc. v. Viracola (Civ.App.1976) 533 S.W.2nd 951Id.

Art. 5069-11.11. Other remedies

(a) A violation of any provision of this Act by any person is a Deceptive trade practice in addition to those practices delineated in Chapter 17, Subchapter E, Business & Commerce Code (2), and is actionable pursuant to said subchapter. As such, the venue provision and all remedies available in said subchapter apply to and are cumulative of the remedies in this Act.

(b) None of the provisions of this Act shall effect or alter any remedies at law or in equity otherwise available to debtors, creditors, governmental entities, or any other legal entity.

Comment

Subsection (a) Because violations of the TCPA sound in misrepresentation or deception, a violation of the Act is considered a deceptive trade practice under the Deceptive Trade Practices Act. A person suing for a violation of the Act may also sue under the Deceptive Trade Practices Act.

Section 17.50(b) allows a successful consumer "two times the actual damages that does not exceed $1,000" and if the jury/judge finds that the Debt Collector acted knowingly, "three times the amount of actual damages in excess of $1,000." Award of $69,447.35 exemplary damages for unreasonable collection efforts by credit company employees in attempt to collect debt of $158 was not excessive where credit company acted through its employees with malice. See: Credit Plan Corp. of Houston v. Gentry (Civ.App.1974) 516 S.W.2nd 471, reversed on other grounds 528 S.W.2nd 471, Reversed on other grounds 528 S.W.2nd 571.

Award of $5,000 past and $5,000 future mental anguish for unreasonable collection efforts to wife, whose husband suffered heart attack and subsequent illness and possible permanent inability to work, was not excessive where there was jury finding of misconduct constituting willful and wanton disregard of wife’s well-being on part of credit company and its employees. Id. See: Ledisco Financial Services, Inc. v. Viracola (Civ.App.1976) 533 S.W.2nd 951. Collection agency can be liable for usury penalties, even though it was not party to original loan transaction. See: Lupo v. Equity Collection Service (App. 1 Dist. 1991) 808 S.W.2nd 122. Collection agency’s attempt to collect twice the authorized interest made agency liable to borrower for statutory penalties. See: Lupo v. Equity Collection Service (App. 1 Dist.1991) 808 S.W..2nd 122.

Art. 5069-11.12. Report to consumer

A credit bureau shall, upon request, provide to any person in its registry a copy of all information contained in its files concerning such person. This copy must be provided to the consumer within 45 days of request. Added by Acts 1993 73rd Leg., ch.813, § 3, eff. Sept. 1, 1993.

1. The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692 (6) of this title, such term also includes any person who uses any instrumentality of interstate commerce of the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include:

(a) any officer or employee of a creditor while, in the name of the creditor, collection debts for such creditor;

(b) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control. if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;

(c) any officer or employee of the United States or any State to the extent that collection or attempting to collect any debt is in the performance of his official duties;

(d) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;

(e) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors, and

(f) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person or

(g) (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.

2. The 1983 amendment added subd. (a) and designated the former second paragraph as subd. (b)

Burden Of Proof

Community Property, Joint Liability.

Joint Obligation Joint Management of Household,

Under Texas law it is presumed that all acquisitions made during a marriage are community property. The burden of proof that such property is "separate property" is on the debtor. In Texas community property is subject to the husbands sole management. Sec. 5.02 of The Texas Family Code (Marital Liability) and in The Texas Constitution and Judicial decisions the party trying to prove "separate property" needs to essentially prove it is not joint property. Evidence considered helpful is a pre-marital prenuptial agreement, a court approved interlocutory agreement, segregated funds (demonstrate the separateness of funds,) and showing proof of separate control of household management. Another way to prove non-obligation is if the creditor agreed to look solely to a separate estate of the contracting party for satisfaction of the debt.

Joint Banking, Joint Income Tax Filings, Joint and Several Liability Contracts, and Joint Charge Accounts are thing that are considered. The Texas Family Code Sec 4.031 states: unless a spouse is acting as the agent for the other, the other (spouse) is not personally liable for such contact. A spouse does not act as an agent for the other spouse, solely because of the marriage relationship, [Sec 4.031 (c).]

"Non Obstante Veredicto" a judgment against a spouse of an alleged debtor who made a note with another party against the other spouse’s will and consent. Because to note was executed during a marriage judgment was sought against both parties. It was overturned by the Court of Appeals because the spouse did not impliedly assent to the establishment of the debt.


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