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E. Kirschner Declaration of Trust and Corp., all of Rancho Santa Fe, may instead cause some debt collectors David E. Kirschner as trustee, the California; to acquire voting shares of to seek to recover by invoking the Margaret Kirschner Declaration of Trust First NBC Bank Holding Company, and probate process, imposing substantial and Margaret Kirschner as trustee, The thereby indirectly acquire voting shares costs on the estate and delaying the Noble Foundation, Philip and Cheryl of First NBC Bank, both of New Orleans, distribution of assets to heirs and Kirschner, Khajha Kirschner, Pamela Louisiana. beneficiaries. To balance these interests Kirschner Bolduc, the Mary C. Board of Governors of the Federal Reserve and protect consumers from unfair, Kirschner 2007 Trust, and David E. System, July 22, 2011. deceptive, and abusive practices, this Kirschner as trustee of the Mary C. Robert deV. Frierson, Statement announces that the FTC will Kirschner 2007 Trust; to retain, as a Deputy Secretary of the Board. forebear from enforcing Section 805(b) group acting in concert, voting shares of of the FDCPA, 15 U.S.C. 1692c(b), [FR Doc. 2011–18956 Filed 7–26–11; 8:45 am] Town and Country Financial against a debt collector for BILLING CODE 6210–01–P Corporation, Springfield, Illinois, and communicating about a decedent’s debts thereby indirectly retain control of with persons specifically identified as Town and Country Bank, Springfield, appropriate to contact under Section FEDERAL TRADE COMMISSION Illinois, and Logan County Bank, 805 of the FDCPA (e.g., spouse, parent, Lincoln, Illinois. Statement of Policy Regarding guardian, executor, or administrator) or In connection with the above Communications in Connection With any other person who has the authority application, Margaret Kirschner, the Collection of Decedents’ Debts to pay the decedent’s debts from the individually and as trustee and co- assets of the decedent’s estate. The trustee of various trusts, has applied to AGENCY: Federal Trade Commission Statement also clarifies how a debt retain voting shares of Town and (‘‘FTC’’ or ‘‘Commission’’). collector can comply with the law in Country Financial Corporation, ACTION: Policy statement. locating the person who has the Springfield, Illinois, and thereby requisite authority with whom to SUMMARY: indirectly retain control of Town and Pursuant to the FTC’s discuss the decedent’s debts. Finally, Country Bank, Springfield, Illinois, and authority to enforce the Fair Debt the Statement explains how a debt Logan County Bank, Lincoln, Illinois. Collection Practices Act (‘‘FDCPA’’), 15 collector can avoid engaging in U.S.C. 1692l(a), and Section 5 of the In addition, David E. Kirschner, deceptive practices in communicating Federal Trade Commission Act (‘‘FTC individually and as trustee and co- with a third party about a decedent’s Act’’), 15 U.S.C. 45, the Commission trustee of various trusts, has applied to debts. retain voting shares of Town and issues this final Statement of Policy DATES: This final statement of policy is Country Financial Corporation, Regarding Communications in effective on August 29, 2011. Springfield, Illinois, and thereby Connection with the Collection of indirectly retain control of Town and Decedents’ Debts (‘‘Statement’’).1 When ADDRESSES: Requests for copies of this Country Bank, Springfield, Illinois, and a person dies, creditors and the debt Statement should be sent to: Public Logan County Bank, Lincoln, Illinois. collectors they hire usually have the Reference Branch, Federal Trade C. Federal Reserve Bank of right to collect on the person’s debts Commission, 600 Pennsylvania Avenue, Minneapolis (Jacqueline G. King, from the assets of his or her estate. NW., Room 130, Washington, DC 20580. Community Affairs Officer) 90 Sections 805(b) and (d) of the FDCPA The complete record of this proceeding Hennepin Avenue, Minneapolis, prohibit debt collectors from contacting is also available at that address. Minnesota 55480–0291: individuals other than the debtor to Relevant portions of the proceeding, 1. Stephen L. Grobel, Tabb, Virginia; collect a debt, unless the individual is including the final Statement, are to individually acquire voting shares of the debtor’s spouse, parent (if the debtor available at (http://www.ftc.gov). First Community Bancorp, Inc., is a minor), guardian, executor, or FOR FURTHER INFORMATION CONTACT: Glasgow, Montana, and thereby administrator. The Commission has Christopher Koegel or Quisaira indirectly acquire voting shares of First learned that, to recover on a decedent’s Whitney, Attorneys, Division of Community Bank, Glasgow, Montana. debts, some debt collectors contact the Financial Practices, Federal Trade In addition, Stephen L. Grobel and decedent’s relatives, although these Commission, 600 Pennsylvania Avenue, Peter J. Grobel, Helena, Montana, as relatives may have no authority to pay NW., Washington, DC 20580, (202) 326– members of the Grobel Family Group, to the debts from the decedent’s estate and 3224. acquire voting shares of First no legal obligation to pay the debts from SUPPLEMENTARY INFORMATION: Community Bancorp, Inc., and thereby their own assets. By contacting persons I. The Proposed Policy Statement and indirectly acquire voting shares of First who are not specified in Section 805 of Public Comments Received Community Bank, Glasgow, Montana. the FDCPA, and by engaging in D. Federal Reserve Bank of San practices that may deceive those On October 8, 2010, the Commission Francisco (Kenneth Binning, Vice persons about their obligations, these published in the Federal Register a President, Applications and debt collectors may be violating the notice of proposed statement of Enforcement) 101 Market Street, San FDCPA. The Commission recognizes, enforcement policy regarding Francisco, California 94105–1579: however, that imposing unnecessary communications in connection with the 1. Castle Creek Capital Partners IV, restrictions on a debt collector’s ability collection of decedents’ debts L.P., and persons that are acting with, or to collect a decedent’s debt from the (‘‘proposed Statement’’).2 The proposed control Castle Creek Capital Partners IV, person authorized to pay those debts Statement addressed three issues under L.P. (Castle Creek Advisors IV, LLC; the FDCPA pertaining to debt collectors Castle Creek Capital IV, LLC; John T. 1 An enforcement policy statement describes the who attempt to collect on the debts of Pietrzak; Pietrzak Advisory Corp.; John Commission’s future enforcement plans, goals, and deceased persons: (1) With whom a debt M. Eggemeyer, III; JME Advisory Corp.; objectives with respect to a particular industry or collector may lawfully discuss a practice. Enforcement policy statements do not William J. Ruh; Ruh Advisory Corp.; have the force or effect of law, but they may reflect decedent’s debt consistent with the Mark G. Merlo; Legions IV Corp.; Joseph the Commission’s interpretation of a legal Mikesell Thomas and Thomas Advisory requirement. 2 75 FR 62,389 (Oct. 8, 2010).

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limitations in Sections 805(b) and (d) of several revisions to the proposed named as beneficiaries.8 Assets that the FDCPA; (2) how a debt collector Statement in this final Statement. never become part of the decedent’s may locate the appropriate person with estate generally are beyond the reach of II. Background whom to discuss the debt and seek creditors and third-party debt collectors. payment; and (3) how a debt collector A. Probate Law and Estate Resolution All other assets, including cash and real can avoid misleading consumers about and personal property owned solely by Most debts incurred in life do not their personal obligation to pay the debt. the decedent, become part of the simply vanish upon death.5 Instead, the The proposed Statement noted that decedent’s ‘‘gross estate.’’ Funeral and decedent’s estate (comprised of the Sections 805(b) and (d) of the FDCPA administrative expenses, homestead and assets held by the decedent at the time limit the persons whom a collector can exempt property allowances, and family of death) is responsible for paying them. contact about a debt (including a allowances 9 are paid out of the estate Some debts arise from accounts on decedent’s debt) to the debtor’s spouse, first, leaving the ‘‘net estate.’’ Creditors which the decedent was current at the parent (if the debtor is a minor), and third-party debt collectors can seek time of death (e.g., the amount owing for guardian, executor, or administrator. to collect amounts the decedent owes the decedent’s last electric bill, even if The proposed Statement then described them from the net estate,10 after which he or she was current on the account at the evolution of state probate laws and the remaining assets in the estate are estate resolution procedures that, in the time of death). Other debts may be transferred to the decedent’s heirs (if the recent years, have expanded the class of on bills for which the decedent was decedent died without a will) or persons who have the authority to pay delinquent in making payments at the beneficiaries (if the decedent had a a decedent’s debts from the assets of the time of death (e.g., the amount owing for will). decedent’s estate beyond those listed in the last six months on the decedent’s Sections 805(b) and (d). In light of these electric bill). Regardless of whether the 2. Distribution of Estate Assets developments, the Commission decedent was current or delinquent on How a decedent’s assets are proposed that it would forebear from a bill at the time of death, creditors and distributed also depends on the probate taking enforcement action against collectors, for a period of time, generally practices that are administered under collectors who contacted persons other are permitted under state law to seek to state laws and procedures, which vary than those listed in Sections 805(b) and recover from the decedent’s estate. significantly. All of the various (d), if those persons had the authority to To understand consumer protection procedures, however, are designed to pay the decedent’s debts from the concerns related to collecting on ensure that creditors are provided with estate’s assets. The proposed Statement decedents’ debts requires knowledge not notice of the decedent’s passing, and further described permissible means by only of the FDCPA but of state probate that some finality is achieved with which a collector could identify and and estate law as well. As detailed in regard to the decedent’s financial affairs. locate a person with such authority, and the proposed Statement,6 there is no At the time Congress enacted the admonished collectors not to deceive single set of laws and procedures that FDCPA, most estates were resolved such persons into believing they were governs the resolution of a decedent’s through a process known as formal obligated personally to pay the debt, estate in all or even most states. Indeed, probate and administration. In that recommending that collectors disclose even individual counties in some states process, the probate court appoints a affirmatively that the person was not so have their own requirements. Generally, person with the title of ‘‘executor’’ or obligated. however, there are two main questions ‘‘administrator’’ to handle the estate’s The notice requested public comment that probate and estate laws answer: (1) affairs. Section 805 of the FDCPA allows on the overall costs, benefits, necessity, What assets are part of the estate, and collectors to contact persons with those and regulatory and economic impact of thus at least potentially subject to titles about the decedent’s debts. the proposed Statement and designated creditors’ claims; and (2) what Formal probate, however, has proven November 8, 2010, as the deadline for procedures will the estate use to to be time-consuming and expensive for filing public comments. On November distribute its assets. consumers.11 For example, many estates 8, 2010, the Commission extended the 1. Assets in the Decedent’s Estate deadline for submission of public 8 Such assets include the proceeds from life comments until December 1, 2010.3 Not all of a decedent’s assets become insurance policies (where the beneficiary is not the estate), union or pension benefits, Social Security In response to the proposed part of his or her estate. Assets that pass benefits, veterans’ benefits, and various types of Statement, the Commission received outside of the estate generally include: retirement accounts. 145 total comments 4 from stakeholders, (1) Those that are jointly owned by the 9 A ‘‘family allowance’’ is an amount of money including consumer and community decedent and another person; 7 and (2) payable out of the estate to support, typically, the groups, state law enforcers, attorneys those that pass directly to individuals spouse and minor children during the pendency of who represent debt collectors, debt the estate administration. 10 In some circumstances, another person, collectors who specialize in the 5 See, e.g., Portillo (‘‘as debt doesn’t disappear including a surviving relative, may be personally collection of deceased accounts, and when a person dies * * *’’). Comments are liable for the decedent’s debts. Examples include a individual consumers. As discussed identified by the name of the organization or the person who shared a joint credit card account with further below, the comments provided a last name of the individual who submitted the the decedent or who co-signed or guaranteed comment. repayment of credit extended to the decedent. In diverse array of opinions and 6 75 FR 62,389 at 62,390–62,392 (Oct. 8, 2010). such cases, both the other person and the suggestions on the proposed Statement. 7 Common examples of joint assets that do not decedent’s estate are liable for the account balance Based on the comments and other become part of the estate are the proceeds of joint at the time of the decedent’s death. This Statement information obtained by the bank accounts, and real property held by joint does not apply if a creditor or a collector is Commission, the Commission has made tenancy. In addition, in the ten states with collecting from a person who is personally liable for community property laws, assets accumulated the decedent’s debt, because in those circumstances during a marriage generally are considered joint the person is a ‘‘consumer’’ rather than a third party 3 75 FR 70,262 (Nov. 17, 2010). property, but the state laws vary as to which assets for purposes of Section 805(b) of the FDCPA. 4 One comment was submitted twice (nos. 89 and of the community can be reached by creditors of 11 See, e.g., Nat’l Consumer Law Ctr. at 4 90, by the National Consumer Law Center); thus, one of the spouses. The community property states (‘‘Survivors often feel the costs of probate are the Commission received 144 distinct comments, are Alaska, Arizona, California, Idaho, Louisiana, prohibitive.’’); Steven Seidenberg, Plotting Against which are available at http://www.ftc.gov/os/ Nevada, New Mexico, Texas, Washington, and Probate: Efforts by estate planners, courts and comments/decedentdebtcollection/index.shtm. Wisconsin. legislatures to minimize probate haven’t killed it

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that go through formal probate remain these various alternatives to formal permits collectors to contact certain open for 18 months, and, in some cases, probate, the person who is authorized to individuals other than the debtor, such even longer. This delay is due, in part, deal with the estate’s creditors often as the executor or administrator of the to mandatory periods during which the does not receive the title of ‘‘executor’’ decedent’s estate. Thus, if the probate estate must publish notice of the probate or ‘‘administrator,’’ but is called a court has named an executor or proceeding to potential creditors, as ‘‘personal representative,’’ ‘‘universal administrator, collectors can contact well as months-long periods in which successor,’’ or some other title. Finally, that person to seek payment from the creditors have a right to file claims extrajudicial disposition of decedents’ estate’s assets. At present, however, few against the estate.12 In instances where estates also occurs, whereby heirs estates have a person with the official the estate includes significant assets, distribute the assets without state title of ‘‘executor’’ or ‘‘administrator.’’ states generally have determined that probate codes providing any procedural As a result, some collectors attempt to the benefits of such rigorous notice or adjudicative safeguards. recover by cold-calling relatives, asking requirements outweigh the costs to In sum, there are multiple ways of whether they are the ‘‘person handling estates, heirs, and beneficiaries. distributing an estate’s assets other than the final affairs’’ of the decedent or are Most states, however, permit less through the traditional formal probate the decedent’s ‘‘personal formal procedures for resolving smaller process. Because of this evolution of representative.’’ In some cases, estates. These procedures are quicker, probate law, most estates today do not collectors ask whether the family easier, and less expensive for go through formal probate, and thus no member with whom they are speaking consumers. For example, nineteen states executor or administrator is has been opening the decedent’s mail or have adopted the Uniform Probate Code appointed.18 Instead, far more estates paid for the funeral. Some collectors (‘‘UPC’’),13 which makes probating a are administered through one of the less treat an affirmative response to such will and administering an estate simpler formal options. But even when the questions as sufficient proof that these and less expensive and gives more estate is administered outside of the relatives are responsible for resolving flexibility to executors than formal probate process, a creditor or collector the decedent’s estate. 14 probate. The UPC and similar state always has the option of initiating a Alternatively, some collectors send laws have created a ‘‘flexible system of formal probate of the estate in order to letters and other written administration’’ designed to provide collect on a debt, thereby preventing the communications addressed to either persons interested in decedents’ estates estate’s survivors from taking advantage ‘‘The Estate of’’ or ‘‘The Executor or with the level of procedural and of the benefits of the less formal probate Administrator of the Estate of’’ the adjudicative safeguards appropriate for alternatives.19 In most cases, filing these decedent. These letters often disclose 15 the circumstances. actions ‘‘impose[s] legal, accounting and the details of the decedent’s debt, In addition, the UPC and state laws other professional expenses and fees on including the original creditor and the generally exempt entirely certain ‘‘small those families, unnecessarily draining amount due. The letters cause many of estates’’ 16 with no real property from off assets that could otherwise go to the those who read them—who may or may probate and administration. These laws 20 family.’’ not be the executor or administrator—to provide two additional ways of call collectors to discuss decedent’s distributing the small estate’s assets: (1) B. Current Industry Practice in debts.21 Collection of personal property using an Collecting Decedents’ Debt Once collectors have determined that out-of-court affidavit process; and (2) A number of debt collectors now they are speaking with someone whom ‘‘summary administration.’’ 17 Under specialize in the collection of debts they have decided to treat as responsible owed by deceased debtors. The FTC has for resolving the decedent’s estate, they yet, 94 A.B.A.J. 56 (May, 2008) (‘‘Probate can be conducted investigations of several of expensive * * *. Probate can tie up an estate * * * often proceed to discuss the decedent’s even a short delay in distributing assets can hurt these collectors and, in doing so, has debt and inquire about assets and beneficiaries.’’). reviewed recordings of thousands of liabilities. This frequently includes a 12 See, e.g., P. Mark Accettura, The Michigan collection calls. From this law series of questions about assets the Estate Planning Guide, at Ch. 7 (2d ed. 2002), enforcement experience and the decedent may have left behind, such as available at http:www.elderlawmi.com/the- comments received in response to the michigan-estate-planning-guide/chapter-7/chapter- whether the decedent owned a car, a 7-probate. proposed Statement, the Commission house, a bank account, a life insurance 13 Alaska, Arizona, Colorado, Hawaii, Idaho, has gained insight into the current policy, or a retirement account. These Maine, Massachusetts, Michigan, Minnesota, practices of collectors who seek to Montana, Nebraska, New Jersey, New Mexico, assets may or may not be legally recover on decedents’ debts. collectible to pay the decedent’s debts, North Dakota, Pennsylvania, South Carolina, South In collecting on deceased accounts, Dakota, Utah, and Wisconsin. Each state that has depending on how the assets were collectors must first identify the adopted the UPC, however, has modified it, in some titled,22 whether the decedent was cases extensively. appropriate person(s) with whom they married at the time of death and lived 14 UPC, Article III, Part 12, General Comment can discuss the decedent’s debt. As in a community property state, who was (2006). noted earlier, Section 805 of the FDCPA 15 See, e.g., UPC, Article III, General Comment the designated beneficiary of the asset, (2006). and other considerations.23 16 decedent’s debts have been satisfied. ‘‘Summary The amount considered to be a ‘‘small estate’’ Finally, in some cases, collectors ask varies by jurisdiction. For example, in California, administration’’ is a streamlined probate process probate and administration is required if the available for smaller, uncontested estates. Summary relatives to make a ‘‘voluntary’’ or amount of the estate is greater than $100,000. Cal. administration typically requires far less ‘‘family’’ payment. For example, some Prob. Code 13100 (2009). In Alabama, however, involvement from attorneys and probate courts, collectors state or imply that the family allowing beneficiaries to save time and money. probate and administration is required if the value has a moral obligation to pay the of the estate exceeds $25,000. Ala. Code 43–2–692 18 See Nat’l Consumer Law Ctr. at 4 (‘‘Probably (2010). the majority of estates are not probated.’’). 17 As detailed further in the proposed Statement, 19 See id. (‘‘Decedent’s creditors are permitted by 21 See Phillips & Cohen Assocs., Ltd. at 5; West 75 FR 62,392, many states allow certain qualified state law to initiate administration of the estate if Asset Mgmt., Inc. at 4. individuals to acquire title to certain kinds of they believe it will be worthwhile and the survivors 22 For example, as described above, assets held property (like a financial account) by signing an do not.’’). jointly often are outside the estate and cannot be affidavit attesting, among other things, that they are 20 Barron, Newburger & Sinsley, PLLC (Dec. 1, reached by collectors to pay the decedent’s debts. entitled to the property and that all of the 2010) at 3. 23 See Section II.A.1, supra.

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decedent’s debt, or that the decedent already prohibits such activities and the enforcement action under Section would have wanted the debt to be paid. proposed Policy Statement specifically 805(b) of the FDCPA against a debt prohibits misleading relatives into thinking collector for communicating, for the C. The Applicability of the FDCPA that they have an obligation to pay the purpose of collecting a decedent’s debt, decedent’s debts.28 The FDCPA covers the conduct of with any of the individuals specified in third-party debt collectors who seek to Moreover, Sections 804 and 805 limit Section 805(d)—the decedent’s spouse, recover on deceased accounts. Several how collectors may communicate in parent (if the decedent was a minor at commenters interpreted the proposed connection with collecting on deceased the time of death), guardian, executor, Statement as conveying that the FTC accounts.29 or administrator—or another person would not enforce the FDCPA in the who has authority to pay the decedent’s 24 III. Discussion of the Final Policy context of decedents’ debts, or that, Statement debts from the assets of the decedent’s once a collector was speaking to an estate. The Commission has determined authorized representative of the estate, This final Statement of Policy to retain this policy in the final the collector would be free to use Regarding Communications in Statement. deceptive, unfair, or abusive practices to Connection with the Collection of A broad spectrum of comments induce the representative to pay the Decedents’ Debts provides guidance to addressed this proposal. On one end of decedent’s debt.25 These interpretations consumers, debt collectors, and the spectrum, several commenters are incorrect. creditors concerning how the FTC will asserted that collectors should be The FDCPA applies to all efforts by enforce the law in connection with the restricted to contacting only limited third-party collectors to collect on the collection of the debts of deceased types of individuals. Several obligations of a debtor—including a debtors. In particular, this Statement commenters noted that the express deceased debtor—to repay a debt that sets forth the types of individuals whom language of Section 805 of the FDCPA arose out of a transaction in which the debt collectors may contact to collect on limits the acceptable contacts to specific money, property, insurance, or services deceased accounts and what collectors classes of individuals; many of these that were the subject of the transaction may do to locate them, without being commenters recommended that the were primarily for personal, family, or subject to FTC enforcement efforts. The Commission limit the permissible household purposes.26 Accordingly, the Statement also advises collectors that contacts to those specific classes. protections and requirements of the certain practices in communicating with Several commenters, however, appeared FDCPA apply in the context of these individuals may be unfair, to suggest restrictions beyond those in collecting on the debts of a deceased deceptive, or abusive in violation of the the statute, e.g., that creditors’ and debtor.27 Most significantly, Sections FDCPA or Section 5 of the FTC Act, and collectors’ ‘‘sole remedy should be to 806, 807, and 808 protect all persons engaging in such conduct may subject file a claim against the estate for the against unfair, deceptive, and abusive them to law enforcement action.30 estate to pay’’31 or that the types of practices in debt collection. Indeed, as A. Permissible Individuals for Collection persons who could be contacted be a representative of debt collectors Communications narrower than under the express engaged in the collection of decedents’ language of Section 805.32 Another debts acknowledged: The proposed Statement enunciated commenter recommended that the that the Commission would not bring an The proposed statement of the FTC Statement permit collectors to contact enforcement policy does nothing to provide ‘‘only individuals specified by the cover for collectors who engage in deceptive 28 See Barron, Newburger & Sinsley, PLLC (Dec. FDCPA or otherwise identified in public or misleading representations. Current law 1, 2010) at 2. 29 One commenter argued that the term ‘‘spouse’’ probate court records as having 33 in Section 805(d), 15 U.S.C. 1692c(d), does not authority to pay the decedent’s debts’’. 24 See, e.g., Privacy Rights Clearinghouse at 5. cover widows or widowers because marriage At the other end of the spectrum, 25 See, e.g., MacQuarrie; Marino; and Merrick. terminates at the death of a spouse. See Nat’l other commenters contended that 26 See Section 803(3), (5), and (6) of the FDCPA. Consumer Law Ctr. at 1–2. Therefore, the collectors should be allowed to contact 15 U.S.C. 1692a(3), (5), and (6). One law firm commenter maintained that collectors should not be representing debt collectors argued in its comment permitted to discuss the decedent’s debts with a broad range of types of individuals. that the FDCPA does not apply to any debt placed surviving spouses. This is incorrect. In 1996, for collection after the debtor’s death because it Congress created an omnibus definition for 31 Andrew; see also Jerome S. Lamet, Ltd. d/b/a then becomes the debt of an estate and not of a ‘‘spouse’’ to apply ‘‘[i]n determining the meaning of Debt Counsel for Seniors and the Disabled ‘‘natural person’’ as the term is used in the any Act of Congress, or any ruling or interpretation (‘‘Current probate laws give creditors sufficient definition of ‘‘consumer’’ in Section 803(3). See of the various administrative bureaus and agencies protection in that they require notification to Barron, Newburger & Sinsley, PLLC (Nov. 4, 2010) of the United States.’’ 1 U.S.C. 7. The only court to creditors that an estate was opened and that the at 2, n.1. This argument is incorrect. For purposes address whether a surviving spouse is a ‘‘spouse’’ creditors are free to submit claims. Even in small of the FDCPA, the critical time for determining the within the omnibus definition held that a surviving estate resolutions, creditors are either notified that status of a debt is when the obligation arises, and spouse remains a ‘‘spouse’’ in determining the there is an estate, or an affidavit is signed stating not when the debt is placed for collection. See, e.g., meaning of any Act of Congress. Taing v. that the creditor’s claims are satisfied.’’). These Newman v. Boehm, Pearlstein, & Bright, Ltd., 119 Napolitano, 567 F.3d 19 (1st Cir. 2009). The court commenters appear to be arguing that creditors and F.3d 477, 481 (7th Cir. 1997) (‘‘ the obligation to pay expressly rejected the government’s arguments that collectors not be permitted to contact anyone is derived from the purchase transaction itself.’’); the use of the present tense in the omnibus directly, but rather must follow probate procedures Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, definition and what the government contended was by filing a claim. As explained below, the 1168–69 (3d Cir. 1987) (the transaction that creates the common, ordinary meaning of the term Commission believes that forcing collectors to use a debt under the FDCPA occurs when ‘‘a consumer compelled the conclusion that the plaintiff ceased the probate process would, in many instances, is offered or extended the right to acquire ‘money, being a ‘‘spouse’’ upon her husband’s death. Rather, increase costs and inconvenience for the estate’s property, insurance, or services’ which are the court stated that the traditional meaning of beneficiaries or heirs. ‘primarily for household purposes’ and to defer ‘‘spouse’’ includes surviving spouse and cited 32 See, e.g., Uhlmansiek (‘‘there must first be payment.’’). In the case of a deceased account, the Black’s Law Dictionary to note that ‘‘surviving proof that the person being contacted has authority obligation is a debt as defined in the FDCPA when spouse’’ is subsumed within the dictionary over a minimum portion of the assets of the the decedent undertook the obligation. At that definition of ‘‘spouse.’’ Id. at 24–26. decedent’s estate, provided by either that person or point, the debtor was alive, and thus the debt was 30 The Commission’s views in this Statement are any of the previously authoritative parties listed in that of a ‘‘natural person.’’ The debtor’s subsequent specifically limited to the situation of the collection section 805.’’); AARP at 1 (‘‘AARP strongly opposes death does not change that fact. of a decedent’s debts. As detailed throughout the the proposed suggestion that an unobligated 27 See ACA Int’l at 4 (‘‘the personal representative Statement, these types of collections pose unique survivor may be contacted by a debt collector is afforded all the protections and rights available challenges in the enforcement and application of regarding collection of a decedent’s debt.’’). to the consumer under the Act.’’). the FDCPA. 33 Privacy Rights Clearinghouse at 3.

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One debt collector argued that the FTC Based on the information received in B. Locating Proper Individuals for should permit collectors to discuss a the comments and on the Commission’s Deceased Account Collection decedent’s debts with anyone who self- law enforcement experience, the FTC In instances in which collectors do identifies as a ‘‘person handling the has decided to retain the proposed not know the identity of those with the final affairs’’ or a ‘‘personal Statement’s approach in the final authority to pay the decedent’s debts representative’’ of the estate. This Statement: The Commission will from the estate’s assets, they may commenter asserted that those forms of forebear from taking law enforcement communicate with others to try to self-identification are synonymous with action against a debt collector for identify these individuals. The the terms ‘‘executor’’ or ‘‘administrator’’ communicating about a decedent’s debts proposed Statement emphasized that in Section 805 and are not too vague for with either the classes of individuals these efforts are location 34 a consumer to understand. The specified in Sections 805 (b) and (d) of communications to which Section 804 commenter suggested that the Statement the FDCPA or an individual who has the of the FDCPA applies. Section 803(7) of focus instead on requiring ‘‘full authority to pay the debts out of the the FDCPA defines ‘‘location disclosure and avoidance of any information’’ as ‘‘a consumer’s place of 35 assets of the decedent’s estate. misrepresentation.’’ abode and his telephone number at such Between these two ends of the Individuals with the requisite authority may include personal representatives place, or his place of employment.’’ In spectrum, many comments from addition, Section 804 requires that in government regulators as well as the under the informal probate and summary administration procedures of communications seeking location debt collection industry supported the information, a debt collector must: ‘‘(1) approach proposed by the Commission. many states, persons appointed as universal successors, persons who sign Identify himself, state that he is An association of state regulators and a confirming or correcting location declarations or affidavits to effectuate local regulator of debt collectors information concerning the consumer, the transfer of estate assets, and persons commented that the proposed Statement and, only if expressly requested, reached a reasonable accommodation who dispose of the decedent’s assets identify his employer; [and] (2) not state between protecting consumers and extrajudicially. that such consumer owes any debt’’.41 allowing legitimate debt collection The Commission believes that this 36 The comments received in response to activities to occur. Debt collection enforcement policy best ensures the the proposed Statement offered views industry representatives articulated 37 protection of consumers while allowing on what collectors must do in seeking similar views. One industry collectors to engage in legitimate to locate those with the authority to pay representative emphasized that the collection practices. If collectors are decedents’ debts, including whether FTC’s proposed approach would be unable to communicate about a strict adherence to the literal terms of consistent with other provisions of Section 804 is practical and beneficial to Federal law.38 decedent’s debts with individuals responsible for paying the estate’s bills, consumers in the context of the collection of deceased accounts. 34 West Asset Mgmt., Inc. at 3. because those individuals were not 35 Id. court-appointed ‘‘executors’’ or 1. Identifying the Person With the 36 See N. Am. Collection Agency Regulatory Ass’n ‘‘administrators,’’ collectors would have Authority To Pay the Decedent’s Debts (‘‘We believe the three basic guidelines are tailored an incentive to force many estates into Some comments advocated that to effectively collect these types of debts and at the probate process to collect on the same time protect the grieving parties from feeling collectors should check available public obligated to personally settle the financial affairs of debts. Typically, it is easy and records for the names and contact their deceased loved ones.’’); New York City Dept. inexpensive under state law for information of court-appointed of Consumer Affairs at 1 (‘‘the New York City creditors and others to petition for the Department of Consumer Affairs (DCA) supports executors and administrators before 39 and strongly encourages the adoption of the Federal probate of an estate. The actual contacting other individuals.42 Other Trade Commission’s (FTC) proposed policy probate process, on the other hand, can comments, however, pointed out that statement * * *’’). impose substantial costs and delays for 37 there are significant logistical and cost See, e.g., ACA Int’l at 4 (‘‘ACA agrees with the 40 Commission’s conclusion that collectors are heirs and beneficiaries. Policies that barriers to conducting a thorough search permitted to communicate with the person who has result in the imposition of these costs of state and local probate records.43 authority to pay a decedent’s estate, even if that are contrary to the goal of state probate Although such challenges may exist in person does not fall within the enumerated law reforms to promote simpler and categories listed in Section 805(d) of the FDCPA.’’); some jurisdictions, the FTC encourages 44 Barron, Newburger & Sinsley, PLLC (Dec. 1, 2010) faster alternatives to probate, especially collectors to make a good faith effort at 3 (‘‘instituting probate proceedings would impose for smaller estates. to do record searches before contacting legal, accounting and other professional expenses individuals other than executors and and fees on those families, unnecessarily draining off assets that could otherwise go to the family * on behalf of the estate.’’ Regulation Z Commentary, * * The FTC’s approach, unlike that suggested by 22.6.11(c)(1) (emphasis added). The Commentary 41 A collector thus cannot mention a specific debt the NCLC, avoids imposing an unwanted and costly allows debt collectors to contact such individuals during a location communication and cannot ask probate proceeding that could delay resolution of to effectuate the timely resolution of credit card for payment from the third party with whom they the estate.’’); Reich; Vargo (‘‘I agree with the FTC’s debts of decedents, a goal the comment asserted are speaking, including asking for payment out of opinion. The Personal Representative of the was consistent with the objectives the FTC any ‘‘moral’’ obligation. To do so would violate decedent is, in essence, the designated agent of the espoused in its proposed Statement. Section 804. decedent in concluding the decedent’s financial 39 The filing fee that a collector must pay to force 42 See Barron, Newburger & Sinsley, PLLC (Nov. affairs. The FDCPA specifically authorizes an estate into probate varies by jurisdiction, ranging 4, 2010) at 3–4. communication with a person designated by the from nothing to as much as several hundred dollars. 43 See Bass & Assocs., P.C. at 1–2; West Asset debtor to process the matter at issue.’’). See, e.g., Ala. Code 12–19–90 ($45 + $3 per page Mgmt., Inc. at 4 (‘‘local court records are not easily 38 Barron, Newburger & Sinsley, PLLC (Nov. 4, over five pages); Ark. Code 16–10–305 ($140); Nev. accessible and even where a formal estate will be 2010) at 7. To implement the Credit Card Rev. Stat. 19.013 (up to $20,000, no fee; $20,000– opened nothing may be filed for several months Accountability Responsibility and Disclosures Act 200,000, $99 fee; over $200,000, $352); Wyo. Stat. after the date of death. Furthermore, collectors may of 2009 ‘‘CARD Act’’), the staff of the Federal Ann. 5–3–206 (under $5,000, $50 fee; $5,000– not know the county or even the state where an Reserve Board recently modified its commentary on 10,000, $55; for each $10,000 over $10,000, another estate would be properly opened.’’). Regulation Z under the Truth in Lending Act to $5). 44 A good faith effort, for example, would include provide that ‘‘the term ‘administrator’ of an estate 40 75 FR 62,389 at 62,390–62,393 (Oct. 8, 2010). checking the records of the probate court in the means an administrator, executor, or any personal See also Barron, Newburger & Sinsley, PLLC (Dec. jurisdiction where the decedent resided, which is representative of an estate who is authorized to act 1, 2010) at 3; Phillips & Cohen Assocs., Ltd. at 3. typically the jurisdiction where probate will occur.

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administrators. In addition, once a end of the continuum, several the Commission concludes that a collector has identified an executor or commenters asserted that because letters communication addressed to the administrator, the collector thereafter addressed to either ‘‘the Estate of’’ or decedent’s estate, or an unnamed must communicate only with that ‘‘the Executor or Administrator of the executor or administrator, is a location individual (or any type of individual Estate of’’ the decedent are consistent communication and must not refer to specifically identified in Sections 805(b) with an effort to have individuals with the decedent’s debts or otherwise and (d)) about the decedent’s debts.45 the requisite authority open the letters, violate Section 804 of the FDCPA.50 Limiting communications to the collectors should be permitted to inform On the other end of the continuum, executor or administrator minimizes the persons opening such letters that the comments from two consumer advocacy unnecessary contacts with family decedent owed a debt and the details of groups noted that just using the word members and provides additional such debt.48 In effect, these commenters ‘‘debt’’ (and not even providing any protection against unfair, deceptive, and posit that a letter addressed to the estate more specific information such as the abusive collection practices. or an unnamed ‘‘executor’’ or creditor or the amount) in location ‘‘administrator’’ is sufficiently targeted communications was inconsistent with 2. Information That May Be Revealed in at a person considered to be a the express language of Section 804(2).51 Location Communications ‘‘consumer’’ under Section 805 of the One of these groups also argued that it In a location communication seeking FDCPA (e.g., a surviving spouse, is not necessary for collectors to the person with the authority to pay the administrator, or executor) to constitute mention decedents’ debts in attempting decedent’s debts from the estate, the a collection communication rather than to locate the appropriate person, FDCPA imposes limitations on what can a location communication. Because because ‘‘collectors can simply state that be conveyed to the recipient of the these letters are collection they are calling or writing to obtain the communication in order to protect the communications, the collectors should contact information of the person privacy of the debtor. Section 804 be permitted to mention, and seek representing the estate of the specifically prohibits collectors from payment on, the decedent’s debts. deceased.’’ 52 revealing that the debtor owes a debt.46 The Commission disagrees with this In between the two ends of the In addition, Section 804(2) prohibits analysis. The Commission’s law continuum, ten comments, including collectors from making statements that enforcement experience suggests that one from an association of state the debtor owes a debt, while Sections letters addressed to the estate or an regulators, had no objection to collectors 804(4) and (5) prohibit disclosing that unnamed administrator or executor mentioning outstanding obligations the debtor owes a debt when (legal terms with which many generally in a location communication, communicating by post card or through consumers are unfamiliar) often are such as referring to ‘‘any outstanding information on the outside of an opened by individuals who do so in an bills of the decedent.’’ 53 A debt envelope, respectively. effort to help out, but who lack the collection trade association, noting that The proposed Statement suggested authority to pay the decedent’s debts the purpose of the prohibition in 49 that a location communication in the from the estate’s assets. Accordingly, Section 804(2) is to protect the privacy context of a deceased debtor can state of the debtor, asserted that ‘‘the that the collector is seeking to identify be allowed to include the creditor’s name and the deceased generally have a reduced amount of the debt in the initial communication, and locate the person who has the because such information would facilitate the privacy interest as compared to the authority to pay any outstanding bills of timely resolution of debts. privacy rights during life. Any modest the decedent out of the decedent’s 48 See, e.g., Barron, Newburger & Sinsley, PLLC infringement on the privacy interest estate, but cannot make any other (Nov. 4, 2010) at 4; Weltman, Weinberg & Reis Co., after death is not an infringement on an LPA at 1. These commenters argued that the risk references to the decedent’s debts or that unauthorized third parties would open such a individual’s privacy right, but of the provide any information about the letter is small because it is, or might be, a federal estate.’’ 54 It also pointed out that there specific debts at issue. The Commission crime to open another’s mail without authorization. is a substantial benefit to permitting There is no evidence, however, that persons collectors to communicate generally has determined to retain this policy in without the requisite authority are even aware of this final Statement. this prohibition or, if they are, would refrain from with third parties to locate the person The Commission received numerous opening the mail out of a fear of criminal who has the authority to pay the debts comments addressing whether strict prosecution. In fact, many laws protect persons who of the estate, because ‘‘doing so avoids in good faith assist a person who has the authority adherence to these requirements is in to resolve a decedent’s debts. See Uniform Probate litigation that otherwise draws down on the public interest in the context of the Code 3–714. In addition, a person acting in an effort the estate’s assets.’’ 55 collection of decedents’ debts.47 On one to help likely would not have the requisite scienter to have engaged in a crime. Accordingly, the 50 Similar considerations arise when a letter with Commission finds this argument unpersuasive. 45 See, e.g., AARP at 4 (‘‘this protection should be information about a debt is addressed to a debtor 49 The Commission has not assessed whether extended to prohibit any contact after the collector who is dead. In some circumstances, debt collectors some form of communication sent with the initial becomes aware that the estate is represented by will neither know nor have reason to know that the letter (such as a validation letter in an enclosed anyone recognized by state law.’’); West Asset debtor has died; for example, a debtor could be envelope accompanied by a cover letter warning Mgmt., Inc. at 5. Note that a collector is legally alive when the letter is sent, but dead by the time that only the appropriately authorized party should permitted to contact other individuals who are in the letter arrives. In other circumstances, debt open the envelope) would effectively prevent collectors will know or should know that the debtor the categories specifically listed in Sections 805(b) unauthorized third parties from viewing details and (d) of the FDCPA. has died. Collectors with such knowledge should about the decedent’s debt. The Commission is refrain from mentioning the debt in any letter 46 Section 805(b) generally prohibits concerned, however, that merely admonishing the addressed to the deceased debtor, because of the communications with third parties unless they are recipient of, for example, a mailed letter not to open risk that an inappropriate third party will open the location communications that satisfy the it unless he or she is authorized to pay the estate’s letter. requirements of Section 804. Thus, a debts might not be effective. Well-meaning family 51 AARP at 5; Nat’l Consumer Law Ctr. at 2. communication with a third party that does not members or others, who perhaps may not be 52 Nat’l Consumer Law Ctr. at 2. meet the standards of Section 804 violates Section familiar with legal terminology, might open the 53 805(b). enclosed envelope despite such an admonishment See, e.g., N. Am. Collection Agency Regulatory 47 The Commission also received a letter, dated in an effort to be helpful. Ultimately, the question Ass’n at 1; Weltman, Weinberg & Reis Co., LPA at January 18, 2011, from Congressman Walter B. of whether any particular admonishment or other 2. Jones, representing North Carolina’s third mechanism to avoid third-party disclosure would 54 ACA Int’l at 4. Congressional district, addressing this issue. be effective is an empirical one and would depend 55 Id. Although the comment does not provide a Congressman Jones advocated that collectors should on the specific circumstances. basis for this conclusion, the commenter appears to

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Based on the comments received and others seeking location information longer after death.61 The Commission on its law enforcement experience, the concerning that person. Some comments emphasizes that such restraint is a key Commission will forebear from taking specifically suggested that the FTC business practice in allaying concerns enforcement action for violating Section impose a 30-day or longer cooling off arising from collection of deceased 804(2) of the FDCPA against a debt period.57 According to the commenters, accounts. collector who includes in location the deceased’s relatives and others are 2. Questions About Authority To Pay communications a general reference to likely to be bereaved for a period of time paying the ‘‘outstanding bills’’ of the after the death, and thus may be The proposed Statement cautioned decedent out of the estate’s assets. Such vulnerable to collectors’ debt collectors about using leading a reference balances the legitimate blandishments.58 questions when seeking to elicit needs of the collector with the privacy information as to who is the person with interests of the decedent. Such language The FTC recognizes that many family the authority to pay the decedent’s debts should provide sufficient information members may be vulnerable emotionally from the estate’s assets. The proposed for the recipient of the communication and psychologically in the aftermath of Statement identified several examples of to identify the person with authority to a relative’s death. But the record does problematic questions, such as asking pay the decedent’s debts out of the not indicate a significant incidence of whether the person contacted is estate’s assets, while minimizing the calls by collectors immediately ‘‘handling the decedent’s final affairs,’’ harm to the decedent’s reputation that following the debtor’s death. Thus, the paid for the decedent’s funeral, or is might ensue from a reference to the final Statement does not include a opening the decedent’s mail. The decedent’s debts.56 The Commission, cooling-off period. Nevertheless, the proposed Statement explained that such however, cautions collectors using the Commission stresses that Section questions are not likely to elicit term ‘‘outstanding bills’’ that stating or 805(a)(1) of the FDCPA prohibits sufficient evidence of authority, because implying in other ways that the collectors from contacting consumers at relatives often undertake these types of decedent was delinquent on those bills ‘‘any unusual time or place or at a time activities to assist without assuming the would violate Section 804 of the or place known or which should be general authority to pay the decedent’s FDCPA. known to be inconvenient to the debts from the estate’s assets. consumer.’’; 59 Depending on the C. Compliance in Communicating With One commenter, a local debt circumstances, contacting survivors Permitted Individuals collection regulator, asserted that about a debt shortly after the debtor dies complaints it receives from consumers The FDCPA and Section 5 of the FTC may be unusual, inconvenient, or show that, in addition to dealing with Act govern a collector’s both.60 The Commission’s investigations the loss of a loved one, grief-stricken communications with a person who has indicate that debt collectors typically do family members ‘‘must contend with the authority to pay the decedent’s debts not initiate communications regarding deceptive and aggressive tactics by from the estate’s assets. During such decedents’ debts for weeks or even collectors to induce consumers to pay interactions, collectors must not engage debts consumers may very well not be in unfair, deceptive, abusive, or other 57 See, e.g., Barboza; Forgie (‘‘I feel in NO obligated to pay.’’ 62 To prevent unlawful conduct in violation of the INSTANCE should a debt collector be allowed to collectors from asking ‘‘roaming FDCPA. Collectors also must not engage contact either the family or friends of deceased questions’’ that may mislead consumers, in unfair or deceptive acts or practices until at least 30 days after the date of death.’’); and Steinbach at 1 (‘‘we urge the FTC to adopt an this commenter therefore recommended in violation of Section 5 of the FTC Act. enforcement rule that communication with the that the final Statement give specific To underscore the nature and scope of family of a deceased individual within 30 days of examples of questions that may be the restrictions on collectors in this the individual’s death is a per se ‘unfair’ appropriate for a collector to ask. context, the Commission believes that it communication under 15 U.S.C. sec. 1692f. This rule would not preclude the finding that, depending Another commenter, emphasizing that is useful to discuss how the FDCPA and on the circumstances, such communication within this is an extraordinarily complicated Section 5 apply to three specific issues 60 days or even longer could be a violation.’’). area of law and that unsophisticated that arise in such interactions. 58 See, e.g., AARP at 1 (‘‘Debt collectors are surviving family members cannot be keenly aware that survivors are particularly 1. Time of Communication vulnerable after the death of their loved one.’’), 2 expected to understand the nuances of A significant issue raised in (‘‘Older people are extremely vulnerable to abuses probate law, argued that limiting by debt collectors.’’), 2 (‘‘Older people living alone comments from individual consumers collectors to asking a narrowly * * * may be socially isolated, particularly after circumscribed set of open-ended and consumer groups was whether there the death of a spouse or loved one. They are also more easily upset by an abusive telephone call; questions that may not apply to all should be a ‘‘cooling-off period’’ after 63 the debtor’s death during which indeed the stress from harassing tactics can actually situations may lead to confusion. threaten their health.’’); Corcoran (‘‘grieving collectors are prohibited from According to this commenter, collectors families are in no frame of mind to talk about debt should have the flexibility to pose commencing communications to collect that belongs to the deceased.’’); Atticus; Carter (‘‘At from the person who has the authority a time when family and friends are grieving and at to pay the decedent’s debts from the their most vulnerable it is particularly important to 61 It typically takes a significant period of time— keep debt * * * [collectors] at bay.’’); Corley (‘‘We sometimes weeks or even months—for a creditor to estate’s assets, and from contacting are at our most vulnerable when losing a family learn of the debtor’s death. Often, the creditor first member * * *’’); Hoffman; Lamet (‘‘family and learns of the passing because a family member or suggest that if collectors cannot initiate a friends of recently deceased loved ones are in a very friend contacts the creditor. It then takes time for meaningful discussion with the person who has the fragile emotional state and are thus more the creditor to close the account, transfer it to either requisite authority, many will seek relief in probate susceptible to abuse by predatory tactics of the appropriate internal department or a third-party court, or, if probate is closed, through litigation. creditors.’’); McGill; Nat’l Consumer Law Ctr. at 1 debt collector, and then usually check the account 56 Nearly all individuals leave some outstanding (‘‘* * * particular sensitivity and vulnerability of against a database to confirm the passing. Some bills at the time they die, even if they are not bereaved relatives and friends.’’), 4, and 5; Starkey; debt collectors who specialize in collecting on the delinquent on those bills. Thus, a reference in the and Steinbach at 1. debts of deceased debtors also search proprietary location communication to the decedent’s 59 15 U.S.C. 1692c(a)(1). databases to check for state probate filings before ‘‘outstanding bills’’ is not likely to imply that the 60 For example, it likely would be unusual or first attempting to collect. decedent was delinquent at time of death. The word inconvenient to call during a wake, during a 62 New York City Dept. of Consumer Affairs at 3. ‘‘debts,’’ on the other hand, is more likely to imply funeral, at a place of worship, or during a period 63 Barron, Newburger & Sinsley, PLLC (Nov. 4, that the decedent was delinquent at time of death. of religious observance at any location. 2010) at 13.

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specific questions that are more circumstances, a collector’s communication the decedent to pay the decedent’s debt. appropriate to the situation at hand. with an individual might convey the These disclosures generally will be Based on its law enforcement misimpression that the individual is sufficient to prevent deception. experience 64 and the comments personally liable for the decedent’s debts, or Nevertheless, there may be that the collector could seek certain assets to received, the Commission believes that satisfy the debt. To avoid creating such a circumstances in which these it is impractical to limit collectors to a misimpression, it may be necessary for the disclosures are not applicable or prescribed list of questions that would collector to disclose clearly and prominently sufficient to prevent deception.72 The apply to all possible situations in which that: (1) It is seeking payment from the assets collector has the responsibility of a collector may need to communicate in the decedent’s estate; and (2) the tailoring the information it discloses to with a person to obtain location individual could not be required to use the avoid misleading consumers.73 information. Thus, the Commission will individual’s assets or assets the individual A collector also should not use not prescribe the precise language that owned jointly with the decedent to pay the questions about the decedent’s assets to decedent’s debt.67 a collector must use in such situations. mislead the person who has the Instead, a collector may ask a person Commenters, including debt authority to pay the decedent’s debts clarifying questions when seeking to collectors, strongly agreed with the FTC from the estate into believing incorrectly identify and locate the person with the that debt collectors have an affirmative that those assets are subject to the authority to pay the decedent’s debts responsibility under the law not to collector’s claim.74 Although such from the estate’s assets, but a collector mislead individuals they contact about questions are not necessarily deceptive, should not use inappropriate leading their responsibility to pay for the the collector may need to take questions 65 or engage in any other decedent’s debts.68 An association of precautions to prevent the person from conduct that may cause the person state debt collection regulators, in contacted to assert mistakenly that he or particular, supported the proposed 72 Some comments claimed that the disclosures in she has the requisite authority. In most disclosure unequivocally, as a means of the proposed Statement would be inaccurate 69 because they would be used in circumstances in cases, questions about whether the preventing deception. Other comments supported the idea of which individuals, in fact, are personally liable. person contacted is ‘‘handling the Barron, Newburger & Sinsley, for example, decedent’s final affairs’’ or paid for the a disclosure, but suggested that suggested that the second clause of the disclosure collectors use different language than could be improved by modifying it to read, ‘‘the decedent’s funeral are not likely to elicit individual may not be required to use the sufficient evidence of authority on their that suggested in the proposed Statement. Some comments argued that individual’s assets * * *’’ Barron, Newburger & own and may lead the person contacted Sinsley, PLLC (Nov. 4, 2010) at 13 (emphasis the proposed disclosure is too narrow, to assert authority mistakenly. added). The Commission believes that the word asserting that consumers need more or ‘‘may’’ would not convey accurately the Questions about whether the person better information.70 On the other hand, unlikelihood that the authorized person would have contacted is opening the decedent’s some comments argued that the to use his or her own assets to pay the debt. In any mail also are unlikely to be probative of event, collectors should be able to determine in proposed disclosure is too broad, whether that person has authority to pay most cases whether the person contacted is liable emphasizing that there are to pay the debts at issue from his or own assets. For the decedent’s debts out of the estate’s circumstances in which the individual example, by reviewing underlying credit contracts, assets. Debt collectors using these contacted in fact could be personally collectors often can determine if the individual is questions must assess whether, in the jointly liable as a co-signor. By knowing the identity liable out of his or her own assets or out context of a specific communication, of original creditors, such as a hospice or hospital, of assets owned jointly with the and applicable state laws concerning medical debts, they effectively solicit useful decedent.71 collectors likewise can often ascertain if the information without misleading Based on the comments received and decedent incurred medical debts for which a spouse consumers. is liable. And, by reviewing applicable state laws, its law enforcement experience, the collectors generally can determine whether a 3. Misleading Consumers About Their Commission concludes that the spouse is liable under state community property Personal Obligation To Pay the information that must be disclosed to laws. Collectors have an obligation to resolve these Decedent’s Debt avoid deception when collectors contact issues and disclose sufficient information to the individuals with the authority to pay individuals contacted so that consumers are not The proposed Statement advised that, deceived in violation of the FDCPA and Section 5 the decedent’s debts depends on the in communicating with persons who of the FTC Act. circumstances. The proposed Statement 73 have the authority to pay the decedent’s It is not a per se violation of the law for suggested two possible disclosures: (1) collectors to attempt to persuade the person with debts out of the estate’s assets, it would That the collector is seeking payment the requisite authority to pay the debt out of her violate Section 5 of the FTC Act and own assets. It is a violation, however, for a collector from the assets in the decedent’s estate; Section 807 of the FDCPA 66 to: (1) Misrepresent that the person has a legal for a debt and (2) the individual could not be collector to mislead those persons about obligation to use his or her own assets to pay the required to use the individual’s assets or debt; or (2) engage in harassing, oppressive, or whether they are personally liable for assets the individual owned jointly with abusive conduct to collect the debt. those debts, or about which assets a 74 Many of the calls to which FTC staff listened

collector could legally seek to satisfy 67 during its investigations of collectors of deceased 75 FR at 62,394. accounts included questions about assets. For those debts. The proposed Statement 68 See, e.g., Phillips & Cohen Assocs., Ltd. at 4 example, collectors have, in the past, asked whether specifically emphasized that: (‘‘collectors have an affirmative responsibility to the decedent owned any cars, real property, bank help avoid creating the misimpression that Informal accounts, life insurance policies, etc. Often, [e]ven in the absence of any specific Administrators are responsible for paying the debts representations, depending on the depending on the applicable laws and/or how the of the decedent in instances in which they are asset was titled, some of these assets may not be not.’’); Weltman, Weinberg & Reis Co., LPA at 3; subject to creditors’ claims. Consequently, 64 During its law enforcement investigations of AARP at 1; New York City Dept. of Consumer consumers can easily be misled into believing that collectors of deceased accounts, FTC staff listened Affairs at 4. a particular asset is subject to the debt collector’s to thousands of calls between collectors and 69 N. Am. Collection Agency Regulatory Ass’n at claim when it is not, and that the consumer may relatives, including calls in which collectors sought 1. have to use the proceeds of unreachable assets to to ascertain the scope of the relatives’ authority to 70 Nat’l Consumer Law Ctr. at 3; AARP at 5; New satisfy the decedent’s debts. Collectors may still ask pay the decedent’s debts. York City Dept. of Consumer Affairs at 4–5. about these assets to ascertain whether the assets 65 An inappropriate leading question is one that 71 ACA Int’l at 4–5; Phillips & Cohen Assocs., Ltd. are reachable or not, but should make clear to the instructs the person on how to answer or puts at 4–5; West Asset Mgmt., Inc. at 4–5; Bass & consumer that those assets that are unreachable are, words in his or her mouth to be echoed back. Assocs., P.C. at 3; Barron, Newburger & Sinsley, in fact, not part of the estate or otherwise subject 66 15 U.S.C. 1692e. PLLC (Nov. 4, 2010) at 13. to the collector’s claim.

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being misled—for example, by The Policy Statement expands the personal funds, even though debt disclosing that jointly-held assets are communications in which debt collectors cannot legally ask him to do not subject to the collector’s claim and collectors may engage with a decedent’s so. that the collector is trying to determine friends and family members, so that In view of the pitfalls of allowing debt what assets are in the estate. Once the debt collectors may identify the person collectors to contact family members to collector has reason to believe that a who has ‘‘the authority to pay the identify the person who has authority to particular asset is not part of the decedent’s outstanding bills from the pay outstanding bills from the decedent’s estate, the collector should decedent’s estate.’’ The Policy decedent’s estate, the Policy Statement stop asking questions about that Statement also permits debt collectors to is crafted to limit potential abuses. First, particular asset or otherwise create the follow up with ‘‘clarifying questions’’ when contacting the family members, misimpression that the particular asset until the person with whom the debt the debt collector must include in the is subject to the debt. collector is speaking has, to the statement that he is looking for the Finally, in determining whether collector’s satisfaction, identified the person who is responsible for paying the individuals are taking away the executor, administrator, or individual outstanding bills of the decedent ‘‘from misimpression that they are personally with authority to pay the decedent’s the decedent’s estate.’’ Second, until liable for the decedent’s debts, the outstanding bills from the decedent’s such time as it is established that the Commission will consider whether the estate. The rationale for the debt collector is talking to the person collector has obtained an Commission’s action today is that with such authority, the collector acknowledgment at the time of the first Congress intended to give creditors a cannot reveal that the decedent owes a payment that, if appropriate, the person right to engage in limited debt. This should eliminate any understands that he or she is obligated communications in order to collect the opportunity by debt collectors to make to pay debts only out of the decedent’s legitimate debts of deceased debtor appeals to those without authority to assets and is not legally obligated to use through the estate. Through its action, pay bills from the estate’s assets to pay his or her own assets—including those the Commission wishes to avoid a a debt out of a sense of moral obligation. jointly owned with the decedent—to hyper-technical reading of the statute Third, the Policy Statement makes clear pay the debts. that allows contact only with statutorily the debt collector’s general required, but in reality likely non- responsibility to disclose that the person By direction of the Commission. existent administrators or executors. with authority to pay the debts from the Donald S. Clark, The Commission’s action is thus estate is not required to use his Secretary. designed to prevent us from elevating individual’s assets to pay the decedent’s 77 FDCPA Enforcement Policy Statement form over substance in a manner that debt. Finally, if the debt collector does defeats the intent of the statute. Without reach the person with authority to pay Matter No. P104806 a reasonable and narrowly defined safe the bills from the estate of the decedent, Concurrence of Commissioner Julie harbor, a debt collector’s alternative that person stands in the shoes of the Brill may be to force the appointment of an ‘‘consumer’’ and must be given notice executor or administrator, which could that he is entitled to proof of the July 20, 2011 be costly and time consuming for decedent’s debt and has the right to The Fair Debt Collection Practices Act decedent’s relatives and the estate. contest it. (‘‘FDCPA’’) describes, in no uncertain Balanced against these concerns for On balance, I concur in the issuance terms, the individuals with whom a rational administration of estates are of the Policy Statement at this time, debt collector may communicate equally legitimate concerns that the despite concerns that the Policy regarding a consumer’s debts: the Policy Statement will operate as a Statement may operate as a license for consumer, her attorney, her spouse, her license for some debt collectors to take some debt collectors to take unfair parent (if the consumer is a minor), her unfair advantage of the survivors and advantage. I take this view, in large part, guardian, and a small group of other loved ones of recently deceased debtors. because staff’s review of thousands of individuals.75 If the consumer is Most consumers, even in the best of interactions between debt collectors and deceased, the FDCPA expands this times, will likely be unable to the family members and survivors of group to allow a debt collector to understand and respond accurately to decedents indicates that, while some contact the consumer’s executor or arcane questions of law regarding the collectors were engaged in egregious administrator.76 As the FDCPA identity of ‘‘the person who has legal conduct, the vast majority were trying to Enforcement Policy Statement (‘‘Policy authority to pay outstanding bills from comply with a reasonable, although at Statement’’) issued by the Commission a decedent’s estate.’’ Allowing debt times incorrect, interpretation of the today points out, state probate laws collectors to contact the survivors and requirements of the FDCPA. have changed significantly since the loved ones of recently deceased Yet, in light of these strong policy passage of the FDCPA over three consumers will require them to respond reasons for protecting the survivors and decades ago. As a result of these to these arcane questions of law at a loved ones of recently deceased debtors, changes, when a consumer dies, her time when they find themselves in the Commission should ensure that any estate will not necessarily have an unfamiliar and unsettling territory, forbearance of enforcement will occur ‘‘executor’’ or an ‘‘administrator’’ with trying to sort through the finances and only when debt collectors strictly whom a debt collector can communicate personal affairs of the deceased, while comply with the criteria set forth in the regarding the decedent’s debt. simultaneously trying to cope with their Policy Statement, especially the four loss. A consumer in this vulnerable safeguards listed above. The debt collection industry should know that we 75 Fair Debt Collection Practices Act, 15 U.S.C. condition may mistakenly identify 1692c (b) and (d). Subsection (b) provides that a himself as the person with whom the will not refrain from aggressive debt collector may also communicate with ‘‘a debt collector should be speaking. consumer reporting agency if otherwise permitted 77 There may be circumstances where the by law, the creditor, the attorney of the creditor, or Worse still, he may end up feeling as if individual, in fact, is legally obligated to pay the the attorney of the debt collector.’’ he has an obligation—legal, moral, or debt himself. In those cases, the disclosure 76 FDCPA 15 U.S.C. 1692c (d). otherwise—to pay the debt from requirement would not apply. [End Lit]

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enforcement when debt collectors go cardinalhealthconsent, by following the not include any sensitive health beyond the very limited inquiries instructions on the Web-based form. If information, like medical records or allowed by today’s action. I urge my you prefer to file your comment on other individually identifiable health fellow Commissioners and staff to paper, mail or deliver your comment to information. In addition, do not include couple today’s action with strict the following address: Federal Trade any ‘‘[t]rade secret or any commercial or monitoring of the industry going Commission, Office of the Secretary, financial information which is obtained forward, to ensure its close adherence to Room H–113 (Annex D), 600 from any person and which is privileged the criteria set forth in the Policy Pennsylvania Avenue, NW., or confidential,’’ as provided in Section Statement. If abuse becomes Washington, DC 20580. 6(f) of the FTC Act, 15 U.S.C. 46(f), and widespread, I would recommend FOR FURTHER INFORMATION CONTACT: FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). withdrawal of the Policy Statement by William H. Efron (212–607–2827), FTC In particular, do not include the Commission. Northeast Region, 600 Pennsylvania competitively sensitive information The new Bureau of Consumer Avenue, NW., Washington, DC 20580. such as costs, sales statistics, inventories, formulas, patterns, devices, Financial Protection, created under the SUPPLEMENTARY INFORMATION: Pursuant Dodd-Frank Wall Street Reform and to section 6(f) of the Federal Trade manufacturing processes, or customer names. Consumer Protection Act, will have an Commission Act, 38 Stat. 721, 15 U.S.C. If you want the Commission to give important role in this area as well. 46(f), and § 2.34 the Commission Rules Dodd-Frank grants the new Bureau of your comment confidential treatment, of Practice, 16 CFR 2.34, notice is you must file it in paper form, with a Consumer Financial Protection the hereby given that the above-captioned authority to promulgate regulations request for confidential treatment, and consent agreement containing a consent you have to follow the procedure under the FDCPA, an authority that the order to cease and desist, having been Federal Trade Commission has not explained in FTC Rule 4.9(c), 16 CFR filed with and accepted, subject to final 4.9(c).1 Your comment will be kept possessed. In the event that the approval, by the Commission, has been Commission finds that the debt confidential only if the FTC General placed on the public record for a period Counsel, in his or her sole discretion, collection industry is not adequately of thirty (30) days. The following adhering to the limited inquiries grants your request in accordance with Analysis to Aid Public Comment the law and the public interest. allowed under this Policy Statement, I describes the terms of the consent hope my fellow Commissioners and Postal mail addressed to the agreement, and the allegations in the Commission is subject to delay due to staff will work closely with the new complaint. An electronic copy of the Bureau to further develop appropriate heightened security screening. As a full text of the consent agreement result, we encourage you to submit your rules to be applied to the collection of package can be obtained from the FTC the debts of decedents. comments online. To make sure that the Home Page (for July 21, 2011), on the Commission considers your online [FR Doc. 2011–18904 Filed 7–26–11; 8:45 am] World Wide Web, at http://www.ftc.gov/ comment, you must file it at https:// BILLING CODE 6750–01–P os/actions.shtm. A paper copy can be ftcpublic.commentworks.com/ftc/ obtained from the FTC Public Reference cardinalhealthconsent by following the Room, Room 130–H, 600 Pennsylvania instructions on the Web-based form. If FEDERAL TRADE COMMISSION Avenue, NW., Washington, DC 20580, this Notice appears at http:// [File No. 091 0136] either in person or by calling (202) 326– www.regulations.gov/#!home, you also 2222. may file a comment through that Web Cardinal Health, Inc.; Analysis of You can file a comment online or on site. Agreement Containing Consent Order paper. For the Commission to consider If you file your comment on paper, to Aid Public Comment your comment, we must receive it on or write ‘‘Cardinal Health, File No. 091 before June 10, 2011. Write ‘‘Cardinal 0136’’ on your comment and on the AGENCY: Federal Trade Commission. Health, File No. 091 0136’’ on your envelope, and mail or deliver it to the ACTION: Proposed Consent Agreement. comment. Your comment—including following address: Federal Trade your name and your state—will be SUMMARY: The consent agreement in this Commission, Office of the Secretary, placed on the public record of this matter settles alleged violations of Room H–113 (Annex D), 600 proceeding, including, to the extent federal law prohibiting unfair or Pennsylvania Avenue, NW., practicable, on the public Commission deceptive acts or practices or unfair Washington, DC 20580. If possible, Web site, at http://www.ftc.gov/os/ methods of competition. The attached submit your paper comment to the publiccomments.shtm. As a matter of Analysis to Aid Public Comment Commission by courier or overnight discretion, the Commission tries to describes both the allegations in the service. remove individuals’ home contact Visit the Commission Web site at draft complaint and the terms of the information from comments before http://www.ftc.gov to read this Notice consent order—embodied in the consent placing them on the Commission Web and the news release describing it. The agreement—that would settle these site. FTC Act and other laws that the allegations. Because your comment will be made Commission administers permit the DATES: Comments must be received on public, you are solely responsible for collection of public comments to or before August 22, 2011. making sure that your comment does consider and use in this proceeding as ADDRESSES: Interested parties may file a not include any sensitive personal appropriate. The Commission will comment online or on paper, by information, like anyone’s Social consider all timely and responsive following the instructions in the Security number, date of birth, driver’s public comments that it receives on or Request for Comment part of the license number or other state SUPPLEMENTARY INFORMATION section identification number or foreign country 1 In particular, the written request for confidential below. Write ‘‘Cardinal Health, File No. equivalent, passport number, financial treatment that accompanies the comment must include the factual and legal basis for the request, 091 0136’’ on your comment, and file account number, or credit or debit card and must identify the specific portions of the your comment online at https:// number. You are also solely responsible comment to be withheld from the public record. See ftcpublic.commentworks.com/ftc/ for making sure that your comment does FTC Rule 4.9(c), 16 CFR 4.9(c).

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