SETTLING DECENDENTS' DEBT... WHAT YOU MUST KNOW ABOUT YOUR RIGHTS... AND THOSE OF COLLECTORS

Published 2012

If your spouse or parent died recently, hopefully bill collectors will leave your family alone for a short time… but they won’t for long.  Whether an outstanding utility bill or an unpaid credit card debt, bill collectors are now more easily able to hassle the family and friends of the deceased customer, thanks to a mandate by the Federal Trade Commission in 2011.

For your convenience, I have summarized the main points of this Federal Trade Commission fact sheet below:

When a person dies, collection agents must identify someone they can speak to regarding outstanding balances on a deceased’s accounts.  If an executor or administrator exists, this is the obvious contact.  In examining current industry practice in collecting debt, the FTC found that when an official “executor” or “administrator” does not exist, some collectors resort to alternative methods of identifying the appropriate contact person.  Examples include “cold-calling” relatives and determining “proof of responsibility” by asking questions such as “Are you the person handling final affairs?” “Do you open the decedent’s mail?” or “Did you pay for the funeral?”  Some collectors send letters addressed to “The Estate of…” etc. prompting family members to call collectors to discuss debts.  Further, some collectors imply that a family has moral obligations to settle the deceased’s accounts out of their personal funds (p44917).  This statement not only describes the types of individuals whom debt collectors may contact to collect on deceased accounts, but also explains what collectors may do to locate them, without being subject to FTC enforcement efforts.

The Federal Register goes on to explain that if collectors are unable to determine who to contact to settle a decedent’s debts, they may communicate with others in a further attempt to identify the appropriate contact person (which is referred to as a "location communication") (p44919).  The FTC does encourage collectors to make “a good faith effort” to seek the information before pursuing the location communication route, and describes “a good faith effort” to be as simple as checking court probate records.  In terms of a deceased debtor, collectors making a location communication may state that they are seeking to identify and locate the person with authority to pay outstanding bills of the decedent, but may not provide any information regarding specific debts (p44920). 

Opponents of strict laws related to this type of non-disclosure communication argue that written communication addressed to the estate is sufficiently targeted towards the appropriate person handling the estate to constitute a collection communication rather than a location communication (p44920).  Therefore, they maintain that in these initial letters, collectors should be permitted to identify debt owed and request payment (p44920).   The Commission disagrees with this, and believes that such letters are “often opened by individuals who do so in an effort to help out, but who lack the authority to pay the decedent’s debts from the estate’s assets” (p44920)

The Federal Register continues on, stating that the Commission will not take enforcement action for violating Section804(2) of the FDCPA against a debt collector who includes in location communications a general reference to paying the “outstanding bills” of the decedent out of the estate’s assets, but does caution collectors from using the term “outstanding bills,” and from implying in other ways that the decedent was delinquent on bills (p44921).

In setting boundaries for these communications with family members after a decedent’s death, some consumers requested the FTC set a designated “cooling-off period” during which collectors must respect the family’s right to grieve before actively pursuing monies owed.  The Commission ultimately decided against setting such a period, as they felt current restrictions, which prohibit collectors from contacting consumers at an “unusual or inconvenient time or place,” were sufficient (p44921).  The Commission further decided against setting an approved list of questions for collectors to use, in an attempt to discourage inappropriate or leading questions (p44922).  The Commission requires that a collection agency not engage in conversations which might mislead consumers into believing that they are personally responsible for paying the decedent’s debt, but does state that there may be some instances in which an individual contacted might be responsible for paying the debts out of his own personal assets or those jointly owned with the decedent (p44922).

In a concurrence statement, Commissioner Julie Brill writes:

“In view of the pitfalls of allowing debt collectors to contact family members to identify the person who has authority to pay outstanding bills from the decedent’s estate, the Policy Statement is crafted to limit potential abuses. First, when contacting the family members, the debt collector must include in the statement that he is looking for the person who is responsible for paying the outstanding bills of the decedent “from the decedent’s estate.” Second, until such time as it is established that the debt collector is talking to the person with such authority, the collector cannot reveal that the decedent owes a debt.  This should eliminate any opportunity by debt collectors to make appeals to those without authority to pay bills from the estate’s assets to pay a debt out of a sense of moral obligation.  Third, the Policy Statement makes clear the debt collector’s general responsibility to disclose that the person with authority to pay the debts from the estate is not required to use his individual’s assets to pay the decedent’s debt.  Finally, if the debt collector does reach the person with authority to pay the bills from the estate of the decedent, that person stands in the shoes of the “consumer” and must be given notice that he is entitled to proof of the decedent’s debt and has the right to contest it” (p44923).

(For the Federal Trade Commission's entire policy statement regarding communication in the collection of decendents' debts, visit http://www.ftc.gov/os/2011/07/110720fdcpa.pdf.)

If your family has recently lost a loved one, you can be sure a representative will be in contact to settle their accounts.  There is one company that specializes and focuses exclusively on deceased debts:  DCM Services LLC of Minneapolis.  DCM says in its company fact sheet that it "manages collections on more than $1 billion in deceased accounts per year with an extremely low complaint rate" (http://www.dcmservices.com/pdf/DCM_FactSheet.pdf).   In addition to rigorous collection training built around industry best practices, DCM Services provides extensive compassion and sensitivity training for its service representatives.  DCM Services will be persistent in their attempts to collect on debt owed, but you can expect representatives to be polite and respectful. 

When the time comes to begin settling the accounts of a lost family member, the most important thing you can do for yourself, and your family, is to know your rights.  Don’t hesitate to seek the counsel of a professional who is well-versed in estate settlement to ensure your family's rights are respected by creditors during this sensitive time.