The Parameters of Vicarious Liability in Collections

Collections Training Resource
August 16, 2012 — 1,664 views  
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Any collections professional should be well aware of the contents of the
Fair Debt Collection Practices Act (FDCPA) to avoid violations that may lead to
legal action. While the process of collections may be made more difficult when
the FDCPA is taken into consideration, it is an essential component of
collections that professionals must review. One issue related to the act
involves vicarious liability in collections.

What is Vicarious Liability?

Many creditors hire attorneys that act as debt collectors to contact debtors on
their behalf. While it is assumed that these attorneys will follow fair debt
collection practices and comply with all laws related to collections, it is
possible that these professionals will make threats or otherwise violate the
FDCPA while acting on the behalf of the creditor.

Vicarious liability dictates that the creditor may be liable for any misconduct
completed by collectors while acting on the behalf of the creditor. For example,
a debt collector that makes phone calls outside of the accepted hours or makes
harassing statements to a debtor can open the creditor up to the possibility of
being sued as a vicariously liable party. 

Limits to Vicarious Liability

It should be noted that vicarious liability does not mean that the creditor
will always be held liable for the actions of a collector. Any legal action
taken against the creditor that claims vicarious liability must be based on an
ability to prove that the creditor was able to exercise control over the
actions of the collector in relation to the violation of the FDCPA. 

If the creditor was diligent in selecting a collections professional that had a
positive reputation and no prior history related to violations of the FDCPA, it
is likely that the creditor will not be held liable. However, a thorough
examination of the relationship and all communication between the creditor and
the collector will be made prior the making of a decision related to whether
the creditor can be held vicariously liable.

Collection agencies that make threats against a debtor, harass a debtor, or
otherwise violate the FDCPA while working on the behalf of a creditor will be
held solely liable if it is established that the creditor had no control over
these actions and had no indications that the collections professionals would
act in this manner. Any legal action taken against the collection agency will
not affect the original creditor in this instance.

Collections Training Resource