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Thursday, November 22, 2007
Student Loans and FDCPA
Questioner: brittany
Category: Collections Law
Private: No

Subject: FDCPA
Question: I work for a student loan lender, the in-house collections department. our borrowers are required to list 2 "contact references" on their master promissory note. there is nothing in the entire MPN terms and conditions that explains why or gives any detail about why you are listing these "contact references". our internal policy is when borrower is past due we contact the references even if we are just trying to get a message to the borrower, not necessarily trying to get updated location information. we make calls to references every 30 days until we finally talk to the borrower.

I understand, per FDCPA guidelines, that a 3rd party can only be called to get location information and then only once (unless we believe the info they gave was erroneous). however, my higher-ups are telling me "references" are not considered "3rd party" because the borrower provided their names and phone numbers, therefore we can make continued calls to them. i don't feel 100% comfortable making these calls without being sure. i have done research but can't get a definite answer.

Answer: I see what you see in FDCPA and I see nothing in it that says anything about references given by the consumer being in such a special category or somehow being anything other than a 3rd party.

I don't happen to know of any court cases which deal with that but I'm sure there are some out there. So, not having any court cases at my fingertips to go by I can only use my own opinion. So let us use some logic to arrive at a probable answer. So long as nobody files a lawsuit against you everything would be fine until somebody gets upset with you.

Let us suppose however that you just happen to repeatedly call the parents of an educated consumer such as a Creditwrench student. The parents complain to their child about this debt collector that keeps on calling repeatedly. The child prepares a full cease & desist and has the parents sign it and send it to your company. Your employer ignores that because the parents were given as references so according to his logic he has the right to do so.

Then the parents record your calls in some manner, say a written record of your calls and the child helps them prepare and submit a federal lawsuit against you and later another against your company for the offenses. Your employer won't be all that worried about it even if he loses the case. His violations make him a lot of money because only a very small number of people will sue him for it but he gets lots of collections from people that way.

They can't hurt him much. He will simply offer them a small settlement and remove their name from the list of references and go on doing things the same way as always. Naturally, he isn't going to tell his employees he was sued and had to settle to keep from going to court.

But when you get your summons to go to court what are you going to do? Of course you are going to go to your employer, hand him the summons and ask him to help you. Will he do that or not? Will he be a nice guy and pay your attorney fees and your "fines" or will he tell you to go take a hike? Of course you won't know that until it happens to someone in your office and they may just suddenly "disappear" so they don't start crying about what happened around the office.

Do you think you can force the boss to pay your costs and "fines" and huge attorney fees? The answer to that may lie if we use a similar situation as an illustration. Suppose the boss handed you the keys to the company car and a company check and told you to go get a case of paper for the office fax machine and told you to hurry because he had important faxes coming in soon. So you head to Staples doing about 75 in a 25 mph school zone. You get caught and have to pay a big fine. Its also going to cost you a hefty hike in your car insurance premiums for the next 3 or 4 years. Is he likely to pay your traffic tickets?

I'd say he would be more likely to fire you than pay, wouldn't you? So what do you think? Of course, maybe you will just think that it is highly unlikely that anybody would think to sue you personally and would only sue your employer so why risk a run-in with the boss and lose your job that way. Probably won't ever happen to you anyway and so you will probably never have to worry about it.

But let me ask you a question. If there isn't anything to worry about because it probably won't happen anyway why is it that the Oklahoma State government passed a law saying that state employees can't be sued for mistakes they might make even in the course of their employment? Well, what they said publicly as their reason for passing such a law is that if state employees could be sued for actions their employment related mistakes and errors of judgment it wouldn't be long before the state would not be able to find anyone willing to risk going to work for the state. They wouldn't be able to hire new employees.

Other states have passed similar laws for exactly the same reason. Now then, I will just have to leave the answer to your question up to your own judgment about how much risk you are willing to take in the course of your employment. In order for it to happen to you there will have to be someone finding out that you can be sued personally and send your company a full cease & desist then sit back and wait for you to violate then file a federal lawsuit against you.

All I can tell you is that it isn't a matter of whether or not it will happen but only a question of when it will happen to you. Count on the fact that your employer won't tell you about the cease & desist letter he got from some fool on somebody's list of references. He will most likely just trash it.

Of course, another aspect of your question is the fact that your employer is doing work for the Department of Education so FDCPA don't apply to government agencies but does that immunity apply to private companies who are contractors of government agencies?

I think it does but don't let that calm your fears because the Dept. of Education has it's own version of FDCPA which their contractors must obey so instead of asking me whether repeatedly calling references is legal or not why not call the DOE or write them a letter asking them your question? They will give you an answer that you can rely on because I might be wrong on this one. If you worked for a private company not connected with DOE then your risk would be much greater.
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