• THREATS
• COERCION
• HARASSMENT
• ABUSE
• UNFAIR OR UNCONSCIONABLE MEANS
• FRAUDULENT, DECEPTIVE, OR MISLEADING REPRESENTATIONS

TEXAS FINANCE CODE
TITLE 5. PROTECTION OF CONSUMERS OF FINANCIAL SERVICES
CHAPTER 392. DEBT COLLECTION
SUBCHAPTER D. PROHIBITED DEBT COLLECTION METHODS

[Source Link to Texas Statutes and Constitution]

Sec. 392.301.  THREATS OR COERCION.  (a)  In debt collection, a debt collector may not use threats, coercion, or attempts to coerce that employ any of the following practices:

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

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

(3)  representing or threatening to represent to any person other than the consumer that a consumer is wilfully refusing to pay a nondisputed consumer debt when the debt is in dispute and the consumer has notified in writing the debt collector of the dispute;

(4)  threatening to sell or assign to another the obligation of the consumer and falsely representing that the result of the sale or assignment would be that the consumer would lose a defense to the consumer debt or would be subject to illegal collection attempts;

(5)  threatening that the debtor will be arrested for nonpayment of a consumer debt without proper court proceedings;

(6)  threatening to file a charge, complaint, or criminal action against a debtor when the debtor has not violated a criminal law;

(7)  threatening that nonpayment of a consumer debt will result in the seizure, repossession, or sale of the person’s property without proper court proceedings; or

(8)  threatening to take an action prohibited by law.

(b)  Subsection (a) does not prevent a debt collector from:

(1)  informing a debtor that the debtor may be arrested after proper court proceedings if the debtor has violated a criminal law of this state;

(2)  threatening to institute civil lawsuits or other judicial proceedings to collect a consumer debt; or

(3)  exercising or threatening to exercise a statutory or contractual right of seizure, repossession, or sale that does not require court proceedings.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.302.  HARASSMENT; ABUSE.  In debt collection, a debt collector may not oppress, harass, or abuse a person by:

(1)  using profane or obscene language or language intended to abuse unreasonably the hearer or reader;

(2)  placing telephone calls without disclosing the name of the individual making the call and with the intent to annoy, harass, or threaten a person at the called number;

(3)  causing a person to incur a long distance telephone toll, telegram fee, or other charge by a medium of communication without first disclosing the name of the person making the communication; or

(4)  causing a telephone to ring repeatedly or continuously, or making repeated or continuous telephone calls, with the intent to harass a person at the called number.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.303.  UNFAIR OR UNCONSCIONABLE MEANS.  (a)  In debt collection, a debt collector may not use unfair or unconscionable means that employ the following practices:

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

(2)  collecting or attempting to collect interest or a charge, fee, or expense incidental to the obligation unless the interest or incidental charge, fee, or expense is expressly authorized by the agreement creating the obligation or legally chargeable to the consumer; or

(3)  collecting or attempting to collect an obligation under a check, draft, debit payment, or credit card payment, if:

(A)  the check or draft was dishonored or the debit payment or credit card payment was refused because the check or draft was not drawn or the payment was not made by a person authorized to use the applicable account;

(B)  the debt collector has received written notice from a person authorized to use the account that the check, draft, or payment was unauthorized; and

(C)  the person authorized to use the account has filed a report concerning the unauthorized check, draft, or payment with a law enforcement agency, as defined by Article 59.01, Code of Criminal Procedure, and has provided the debt collector with a copy of the report.

(b)  Notwithstanding Subsection (a)(2), a creditor may charge a reasonable reinstatement fee as consideration for renewal of a real property loan or contract of sale, after default, if the additional fee is included in a written contract executed at the time of renewal.

(c)  Subsection (a)(3) does not prohibit a debt collector from collecting or attempting to collect an obligation under a check, draft, debit payment, or credit card payment if the debt collector has credible evidence, including a document, video recording, or witness statement, that the report filed with a law enforcement agency, as required by Subsection (a)(3)(C), is fraudulent and that the check, draft, or payment was authorized.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2005, 79th Leg., Ch. 505, Sec. 1, eff. September 1, 2005.

Sec. 392.304.  FRAUDULENT, DECEPTIVE, OR MISLEADING REPRESENTATIONS.  (a)  Except as otherwise provided by this section, in debt collection or obtaining information concerning a consumer, a debt collector may not use a fraudulent, deceptive, or misleading representation that employs the following practices:

(1)  using a name other than the:

(A)  true business or professional name or the true personal or legal name of the debt collector while engaged in debt collection; or

(B)  name appearing on the face of the credit card while engaged in the collection of a credit card debt;

(2)  failing to maintain a list of all business or professional names known to be used or formerly used by persons collecting consumer debts or attempting to collect consumer debts for the debt collector;

(3)  representing falsely that the debt collector has information or something of value for the consumer in order to solicit or discover information about the consumer;

(4)  failing to disclose clearly in any communication with the debtor the name of the person to whom the debt has been assigned or is owed when making a demand for money;

(5)  in the case of a third-party debt collector, failing to disclose, except in a formal pleading made in connection with a legal action:

(A)  that the communication is an attempt to collect a debt and that any information obtained will be used for that purpose, if the communication is the initial written or oral communication between the third-party debt collector and the debtor; or

(B)  that the communication is from a debt collector, if the communication is a subsequent written or oral communication between the third-party debt collector and the debtor;

(6)  using a written communication that fails to indicate clearly the name of the debt collector and the debt collector’s street address or post office box and telephone number if the written notice refers to a delinquent consumer debt;

(7)  using a written communication that demands a response to a place other than the debt collector’s or creditor’s street address or post office box;

(8)  misrepresenting the character, extent, or amount of a consumer debt, or misrepresenting the consumer debt’s status in a judicial or governmental proceeding;

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

(10)  using, distributing, or selling a written communication that simulates or is represented falsely to be a document authorized, issued, or approved by a court, an official, a governmental agency, or any other governmental authority or that creates a false impression about the communication’s source, authorization, or approval;

(11)  using a seal, insignia, or design that simulates that of a governmental agency;

(12)  representing that a consumer debt may be increased by the addition of attorney’s fees, investigation fees, service fees, or other charges if a written contract or statute does not authorize the additional fees or charges;

(13)  representing that a consumer debt will definitely be increased by the addition of attorney’s fees, investigation fees, service fees, or other charges if the award of the fees or charges is subject to judicial discretion;

(14)  representing falsely the status or nature of the services rendered by the debt collector or the debt collector’s business;

(15)  using a written communication that violates the United States postal laws and regulations;

(16)  using a communication that purports to be from an attorney or law firm if it is not;

(17)  representing that a consumer debt is being collected by an attorney if it is not;

(18)  representing that a consumer 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 who is owed the debt; or

(19)  using any other false representation or deceptive means to collect a debt or obtain information concerning a consumer.

(b)  Subsection (a)(4) does not apply to a person servicing or collecting real property first lien mortgage loans or credit card debts.

(c)  Subsection (a)(6) does not require a debt collector to disclose the names and addresses of employees of the debt collector.

(d)  Subsection (a)(7) does not require a response to the address of an employee of a debt collector.

(e)  Subsection (a)(18) does not prohibit a creditor from owning or operating a bona fide debt collection agency.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997. Amended by Acts 2003, 78th Leg., ch. 851, Sec. 2, eff. Sept. 1, 2003; Acts 2003, 78th Leg., 3rd C.S., ch. 3, Sec. 28.01, eff. Jan. 11, 2004.

Sec. 392.305.  DECEPTIVE USE OF CREDIT BUREAU NAME.  A person may not use “credit bureau,” “retail merchants,” or “retail merchants association” in the person’s business or trade name unless:

(1)  the person is engaged in gathering, recording, and disseminating information, both favorable and unfavorable, relating to the creditworthiness, financial responsibility, and paying habits of, and similar information regarding, persons being considered for credit extension so that a prospective creditor can make a sound decision in the extension of credit; or

(2)  the person is a nonprofit retail trade association that:

(A)  consists of individual members;

(B)  qualifies as a bona fide business league as defined by the United States Internal Revenue Service; and

(C)  does not engage in the business of debt collection or credit reporting.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

What types of protections for consumers are outlined by Credit Reporting Agency laws?

Among other things, Texas law provides the following protections and guidelines:

• Credit reporting agencies must furnish a copy of all records in the personal file to the consumer at their request.
• Credit bureaus must follow specific dispute and correction procedures when a consumer disputes the accuracy of a debt, tradeline, or other item on the credit report.
• Credit reporting agencies must give the consumer the ability to request a security alert or security freeze on their account at any time.
• Credit reporting agencies must restrict dissemination of personal information and are allowed to furnish such information only if the organization requesting it falls within the scope of the law. Credit agencies may only furnish information in response to a court order, in accordance with written instructions from the consumer, or to an authorized person or agency for the purposes of employment, extending credit, providing insurance, a legitimate business need, to determine governmental licensing, or for use authorized by the Fair Credit Reporting Act.
• Credit reporting agencies have a civil liability in the event that they violate the law and may be subject to monetary damages.

Where can i read more about the regulation of consumer reporting agencies in the State of Texas?

Regulation of credit reporting agencies is outlined in the Texas Business & Commerce Code, Chapter 20. Regulation of Consumer Credit Reporting Agencies.

What is the statute of limitations on debts in the State of Texas?

The statute of limitations on debt for residents of the State of Texas is four (4) years. In Texas, this refers to oral agreements, written contracts (car loans, installment loans), promissory notes and open accounts (such as credit card credit lines).

When does the clock start on the four year statute of limitations?

Texas state laws are more consumer friendly than most states where the statute of limitations starts after the account has been charged off.

In Texas, the Statute of Limitations clock starts on the day the last payment on the account was made. This is often referred to as the ‘date of last activity’ or DLA.

Example: If the last payment on a credit card was made on January 1, 2005, then the statute of limitations for legal action on the account would expire on January 1, 2009. On January 2, 2009, the debt no longer carries a legal obligation to pay.

Why is the date of last activity important?

Many unscrupulous collection agencies inaccurately report the date of last activity on consumer credit reports or debt validations. In some cases, debt collection agencies have gone so far as to file suit against an alleged debtor after the statute of limitations has expired.

As a result, uninformed consumers may take a default judgement in a legal proceedings and are then required by law to pay the debt owed.

How can I verify the date of last activity for a specific debt?

There are several ways to verify the date of last activity, including:

• Checking your consumer credit report
• Contacting the debt collection agency and requesting this information, preferably via a certified letter or recorded phone call
• Verifying your past payment records via archived bank information

Are there instances in which the statute of limitations can be reset?

Yes. If a debtor makes a payment on an account to the debt collection agency and brings the account back to ‘current’ status, the statute of limitations resets and a new 4 year time frame begins. This gives the debt collection agency the ability to file suit against the debtor for the remainder of the balance due.

What do I do if a debt collector has threatened legal action or filed suit and my account is past the 4 year statute of limitations?

If a debt collector has threatened legal action, they may be violating Texas Law. Consult an attorney.

If a debt collector has filed suit, you must respond to the suit or a default judgement may be granted by the court, meaning you would be required, by law, to pay the debt. It is highly recommended that you consult a consumer law attorney to deal with the courts and debt collector.

If you can prove, by way of your credit report, correspondence from the debt collector, or through bank records, that the debt is outside of the 4 year statute of limitations, you are not liable for the debt.

What Texas law outlines the 4 year Statute of Limitations?

Four year statute of limitations is outlined in Civil Practice & Remedies Code – Chapter 16, Section 004.

How does Texas Deceptive Trade Practices law provide protection?

A debt collector or debt collection company that violates any statutes in the Texas Finance Code can be sued for deceptive trade practices.

• A consumer may maintain an action against a debt collector if the debt collector has engaged in false, misleading or deceptive acts in debt collection or credit reporting that is detrimental to the consumer.
• A debt collector can be sued if they have commited unconsionable action to a consumer’s detriment that takes advantage of the consumer’s lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.
• If the court finds that the debt collector knowingly committed these acts by violating Texas Finance Code, the consumer may recover damages for mental anguish in the amount of up to three times (trebling) the economic damages suffered.
• The Deceptive Trade Practices statutes provide specific guidelines for filing civil action against a debt collector.

Where can I read the Deceptive Trade Practices law?

Deceptive Trade Practices laws pertaining to Texas Finance Code violations are outlined in Texas Business & Commerce Code, Chapter 17, Section 46 – 63.

What are the benefits of using Texas Debt Collection protections as opposed to Federal protections?

Some key protections for Texas consumers are listed below and include but are not limited to:

• Clear definitions for who can and cannot collect debts in the State of Texas, including specific guidelines for so called ‘debt collection attorneys’.
• Bonding requirements for debt collectors to legally collect debts in Texas, even if the debt collector’s business resides in another state. A debt collector must have an active Surety Bond in the State of Texas to legally collect debt.
• The right to sue a debt collector and file a claim against their surety bond in the event that they engage in various deceptive trade practices.
• Strict guidelines for the correction and/or removal of inaccurate debt information with credit bureaus.
• Strict guidelines and definitions for what constitutes threats, coercion, harrassment, abuse, unfair and unconscionable means in the practice of debt collecting.
• Guidelines for debt collectors that require express authorization for the collection of interest and fees in addition to the original balance.
• Guidelines for identifying if a debt collector is engaging in fraudulent, deceptive or misleading representations when collecting debt.
• Criminal Penalties for debt collectors who violate provisions of the Debt Collection statutes.
• Civili Remedies, including injunctive relief and damages sustained by a Texas resident as a result of debt collector violations of the Debt Collection Statutes.

Where can I read Debt Collection Laws and Protections?

Laws governing debt collection in the State of Texas can be found in the Texas Finance Code, Title 5,  Chapter 392.

What is a surety bond?

A surety bond is like an insurance policy that the debt collector takes out. Usually, a Texas approved bonding company will issue a surety bond to a collection agent as a form of insurance in case a debt collector violates Texas law. Debt collectors must have a surety bond valued at $10,000 or more.

Because most debt collectors attempting to collect debts from a Texas resident are located outside of the State, a resident would have no recourse to take civil action if the debt collector violated the law by making harrassing, threatening, false or misleading statements.

In the event that a third-party debt collector violates Texas statue, the consumer has a right to file a civil claim against the surety bond company and the surety bond in place.

This provides a civil level of protection for the consumer against unethical and law breaking collection agencies.

How can I verify if a debt collector is legally allowed to collect debt in Texas?

To check a surety bond for a third-party debt collector, visit the following link:

http://direct.sos.state.tx.us/debtcollectors/DCSearch.asp

This web site, provided by the Texas Secretary of State, will allow you to verify the name of the company, their address, the date of the surety bond, and whether or not the surety bond is still active.

What do I do if the debt collector does not have an active surety bond?

There are several steps that should be taken if the debt collector is illegally attempting to collect a debt in Texas.

• A debt validation or cease and desist letter should be sent to the debt collector, requesting that debt collection efforts cease and all information pertaining to the debt be removed from any credit reporting agencies. (It is possible that the search did not turn up an active surety bond due to a variety of errors, so a debt validation letter would normally be the first course of action.)
• A letter may be sent to the Credit Reporting Agency requesting immediate removal of the information pertaining to the debt due to a violation of Texas Law
• If the debt collector refuses to comply with your requests, you can file a complaint with the Texas Attorney General.

What law outlines the surety bond requirements for the State of Texas?

Surety Bond requirements are outlined in Texas Finance Code, Title 5, Chapter 392, Section 101.

Phone Contact vs. Contact via a Letter

In most cases, it is recommended that you deal strictly via the mail when working with a debt collector. This leaves a paper trail of letters, certified article numbers, dates, and signatures that may be needed if the issue were to ever go to court.

At times, though, it may be necessary to contact the debt collector via the telephone to get additional information like their current address, the balance of the debt or other information pertaining to the debt collection account. Just as a certified article number and signature can track a physical letter, a recording can provide evidence of what was discussed on the telephone.

Therefore, in the event that a phone call to the debt collector is necessary, be sure to record the call! If you are not recording the phone call, do not make it!

If you need to make contact with a debt collection agency, more often than not you should make contact using a certified letter sent via the US Post Office.

The Importance of Recording a Phone Call to a Debt Collector or Collection Agency

It is no secret that debt collection agencies will do just about anything to collect what they believe is owed to them. It is not out of the ordinary for a debt collector to provide false or misleading information to an alleged debtor in order to get a payment. In some extreme, but not uncommon cases, debt collectors have been known to harrass and threaten their victims with the desire to humiliate or scare them into paying. Unsuspecting victims of debt collector harrassment usually believe they have no choice but to pay or they may face civil and criminal actions.

Often times, the techniques used by debt collectors are in violation of Texas Law. A number of violations that debt collectors commit include, but are not limited to:

• Providing false or inaccurate balance information
• Providing false or inaccurate information about the dates surrounding the debt, such as date of default or date of transfer from the original creditor to the third-party debt collector.
• Providing false information about the third-party debt collector’s ownership of the debt

Whenever possible, if dealing with a debt collector, it is recommended that you record the phone call. This will provide evidence of harrassment or threats in the event that a debt collector becomes aggressive. In addition, whenever you contact a debt collection agency, under Texas Law, you have the right to record the phone call to ensure the debt collector is providing you with truthful information.

Is is legel to record a phone call in the State of Texas?

While there is no specific provision allowing the recording of phone calls, Texas Penal Code protects a resident from criminal prosecution in the event they choose to record a phone call.

In Texas, if a person engaged in the phone call chooses to record the call without the consent of the other party, it is not a crime to do so.

This protection is detailed in Texas Penal Code, Title 4, Chapter 16., Section 02.

This provision allows the recording of a phone call, without criminal prosecution, if one party to the call is aware of the recording. In effect, if you have chosen to record a phone call, you have not broken the law by doing so.

Should I advise the debt collector that the call is being recorded?

It is recommended that you advise the debt collection agency that the phone call is being recorded if you initiated the call. This way, there can be no question in a court of law if the recording will eventually need to be used as evidence in the case.

Can the debt collector take legal action if I record the phone call?

The debt collector cannot take legal action simply because you have chosen to record a phone call.

However, if you make the phone call public whether inadvertently or on purpose, the debt collection agency may take legal action under Texas Civil Practice and Remedies Code Chapter 123, Section 002:

A person whose wire, oral, or electronic communication is intercepted or disclosed has a civil cause of action against the interceptor or discloser.

Therefore, if you choose to record a phone conversation, keep it private and use it only during legal proceedings.