With probate filings on the increase, new concerns are popping up pertaining to creditors who file claims against decedent estates. This blog post attempts to give a general outline of what is permitted – and what is not – under the Fair Debt Collection Practices Act (“FDCPA”) when it comes to probate estates, outlining that debt collectors against estates are subject to the FDCPA.
First, the Federal Trade Commission (“FTC”, administrative agency in charge of ensuring compliance with FDCPA) issued a policy statement in 2011 pertaining to the FDCPA’s application in decedent estates. Although it is a dry read, it is a necessary one for most probate attorneys. The FTC decided to review the applicability of the FDCPA to decedent estates due to an evolution in probate practices since the FDCPA’s enactment. Many jurisdictions in the country had created new probate procedures – like small estates, refusal of letters, and other “summary proceedings” – in order to more expeditiously handle the probate process. The FTC was concerned that some of these new probate options might be incompatible with the current language of the FDCPA, and sought to reconcile those differences and provide guidance to both creditors and debtor estates. Here are some of the policy statement’s more salient points:
When the Collector Knows the Identity of a Person Authorized to Pay Decedent’s Debts
Sec. 805(b) of the FDCPA prohibits debt collectors for communicating, for the purpose of collecting a decedent’s debt, with any of the individuals not 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. If the collector attempts to contact heirs, beneficiaries, or relatives who do not have legally conferred authority to pay the decedent’s debts, the collector is in violation of the FDCPA. The FTC did explain, however, that “[i]ndividuals 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.”
When the Collector Does NOT Know the Identity of a Person Authorized to Pay Decedent’s Debts
When the collector does not know who the “individual with authority” is, they may contact other individuals (such as heirs, beneficiaries, and/or family members) in an attempt to identify that individual after conducting a search in a good faith effort to determine the identity of an individual with authority. This is called “location information” under Sec. 803(7). Collectors seeking location information must:
- Identify him/herself;
- State that they are attempting to confirm/correct location information pertaining to a consumer;
- Refrain from stating the consumer owes a debt; and
- May identify his/her employer if asked to reveal the same.
- The abode of the debtor
- The phone number of the debtor
- The place of employment of the debtor
It is critically important that the collector refrain from discussing the fact that the consumer has a debt during a location information call. Additionally, collectors cannot address letters or correspondence to “The Estate of [Deceased]” or an unnamed executor or administrator in reference to a debt; written correspondence must be specific in who it is addressed to if it references a debt. Otherwise, generically addressed communications are deemed as seeking location information, and cannot mention the fact that decedent has a debt. However, references to a decedent’s “bills” in a location information communication is allowed. Collectors are not supposed to ask questions such as whether the person contacted is ‘‘handling the decedent’s final affairs,’’ paid for the decedent’s funeral, or is opening the decedent’s mail because many times, the decedent’s family undertakes these tasks without court authority to do so in order to figure out how to go about handling the decedent’s affairs. While collectors may ask follow up questions, the questions need to be sufficiently tailored to obtain the necessary information.
Misrepresentations Are Expressly Prohibited
Collectors violate Section 5 of the FTC Act and Section 807 of the FDCPA if they attempt to or actually mislead an individual authorized to pay estate debts about whether such person is personally liable for those debts, or about which assets a collector could legally seek to satisfy those debts. The FTC recommended collectors inform such individuals that “(1) [i]t 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.” Questions pertaining to the decedent’s assets are typically construed as at least potentially deceptive, because such questions suggest an ability of the collector to “go after” such assets when in fact, such assets may not belong to the probate estate and may have been transferred outside the purview of probate.
Even though most debts will belong solely to a decedent, there are some debts where a collector could correctly inform someone else – such as a surviving spouse – that the person is personally liable for the obligation. Those circumstances include:
- contracts and debts that have a co-signor;
- where the decedent lived in a community property state at the time of death (such as California);
- where the person was a court-appointed fiduciary of the estate and misappropriated estate assets; or
- surviving spouse that may also be obligated to pay the healthcare expenses/medical bills of a deceased
Other Restrictions Applicable to Collectors
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.’’ This does not expressly include a “bereavement” period. However, the FTC has stated that whether a communication is “unusual” or “inconvenient” will depend on the unique circumstances of each case, leaving open the possibility that a collector’s attempt to contact family during a bereavement period might violate the FDCPA.
I’ll post a Part II to this Blog in the future laying out the necessary requirements for proving up a claim in probate court.