Death and Debts
Last year the Federal Trade Commission received almost 120,000 complaints about in-house and third-party debt collectors who had contacted family members and friends, looking to get money owed by a deceased person.
The Fair Debt Collection Practices Act that went into effect in 1977 under the Federal Trade Commission's regulatory umbrella was supposed to address one of the main issues regarding what collection agents can do with respect to the debts of a decedent. But, times and legal options have changed since then.
Today, a person can transfer assets into a trust or declare a specific beneficiary for a life insurance policy, joint bank accounts, Social Security, pension and veteran benefits, and other types of retirement accounts, leaving only a portion of the estate for creditors.
In addition, funeral, administrative, exempt property and family allowances are paid first from the remaining assets which normally include cash and property individually owned, leaving the net estate.
With these changes many believe that the FDCA needs to be amended both for the benefit of the decedent and for the debt collector.
Now, there are many types of people and professionals who could conceivably have the authority to oversee a client or relative's net estate. This makes finding the person in charge of the estate very difficult for the debt collector. In response to the issues affecting both sides, the estate administrator and the debt collector, the FTC has come up with a new policy statement to clarify the rights of the debt collector and the decedent.
One of the first proposed changes is to have the debt collector identify the person who is administrating the estate before establishing contact with any friends or family members of the deceased. (In the past, a debt collector would send letters to the deceased's address with a letter saying whoever opens the letter is responsible for the debt.)Continued on the next page