How to Avoid Being Sued For Improper Debt Collection Practices

Debt collection in California is tricky. It is never worthwhile to try to harass or embarrass a debtor into paying a debt. There are a myriad of laws protecting debtors and even though your debt is legitimate it is best to consult with a business lawyer to make sure your debt collection practices will not expose you to liability so that you wind up owing your debtors money. The laws that apply to debt collection in the business world apply equally to debt collection in the horse industry. While each case may vary, it is best to avoid these types of debt collection practices:

Discussing a Debt with Third Parties. Generally speaking, it is best to discuss a debt only with the debtor or the debtor’s lawyer. Under the Federal Fair Debt Collection Practices Act, and the Rosenthal Fair Debt Collection Practices Act, communications with anyone but a debtor or a debtor’s attorney is prohibited. The publication or posting of “deadbeat lists” not only can violate the California and Federal laws listed above but they can also give rise to an action called known as “Public Disclosure of Private Facts.” (See California Civil Jury Instruction 1801). Similarly, comparing notes with other vendors, “black-listing” a client, or other public humiliation tactics expose you to the risk of suit if they result in damage to the debtor. Even mentioning the debt can be risky. Further, if the information you convey is not completely accurate you also face the possibility of being sued for defamation. You may not communicate with the debtor’s employer or trainer or any horse show or horse association regarding the debt unless you are specifically authorized to do so by law or by a written waiver from the debtor. While you are not obligated to continue providing services, you do not owe anyone an explanation and a statement such as “they owed me money” can be enough to get you sued if you then caused the debtor damage. The best answer is “it is a private business matter” and leave it at that.

Obscene Language or Unlawful Telephone Practices. It is always important to be polite and professional while discussing a debt. Obscene language is prohibited by both the California and Federal debt collection practices laws and harassing language is also prohibited. According to the Federal Trade Commission, it is improper to call someone a deadbeat or a liar or use racial or sexual slurs or epithets during collection attempts. Telephone calls may be made but if they rise to the level of harassment they violate the law. Refrain from calling too early or too late.

Improper Late Fees and Service Charges. Late fees and service charges cannot be arbitrarily assessed against a debtor. Just as the method of collection is regulated by law, the amount that may be collected is similarly regulated. In California, service charges and late fees are limited and, generally speaking, cannot be charged unless they are disclosed and agreed upon in advance.

The best way to avoid problems with collection is to establish proper contracts with your clients. Whether you are a trainer, breeder, farrier, barn manager, veterinarian or other service or supply provider, it is best to have your contracts reviewed periodically by an attorney experienced in both business and equine law. At Adina T. Stern, a Professional Law Corporation, we have assisted individuals and businesses with drafting and enforcing their contracts throughout California, including Los Angeles, San Diego, Orange, Riverside, San Bernardino, and Ventura counties.