By Joe Gargiulo
April 5, 2017

Dying with Debt: Compliance and Considerations

Nearly three quarters of Americans are dying with debt according to statistics provided to Credit.com by the Experian’s FileOne database which includes 220 million consumer contacts or about 91% of US adults. The average balance for those without mortgages was $12, 875 while those owning homes died with $61,554 in debt. Data from October to November 2016 was included in the report.

The detailed data is equally compelling:

  • 68% had credit card balances
  • 37% had mortgages
  • 25% had unpaid auto loans
  • 12% had personal loans
  • 6% had student loans

Much of the $48,679 in average mortgage debt can be recovered via home sales, but the $25,391 in unpaid student loans per individual represents over $3.4 billion in debt that will mostly go unpaid.

The Results of Dying with Debt

dying with debtDebt generally dies with an individual, but estates or surviving spouses generally pick up the tab. The situation is not necessarily black and white.

“The estate of the deceased person owes the debt,” states the Federal Trade Commission (FTC). “If there isn’t enough money in the estate to cover the debt, it typically goes unpaid. But there are exceptions to this rule. You may be responsible for the debt if you co-signed the obligation or live in a community property state such as California.”

“Executors” are individuals named in wills who are responsible for “settling a deceased person’s affairs.” Courts generally appoint administrators if decedents do not have wills and give that person the authority to settle the affairs. “In some states, other people may have that authority, even if they haven’t been formally appointed by the court.”

What Recourse Do Companies have?

If owned money, companies can “contact and discuss the deceased person’s debts with that person’s spouse, parent(s) (if the deceased was a minor child), guardian, executor, or administrator,” per the terms of the Fair Debt Collection Practices Act (FDCPA).

According to the FTC, debt collector agencies acting on behalf of companies may “contact any other person authorized to pay debts with assets from the deceased person’s estate, but they “may not discuss the debts of deceased persons with anyone else.”

For individuals not authorized to pay debts, agencies are permitted to “contact third parties (such as a relative) to get the name, address, and telephone number of the deceased person’s spouse, executor, administrator, or other person authorized to pay the deceased’s debts.”

What Can Consumers Do if They Have Complaints?

Consumers having issues with companies or debt collection agencies may contact their respective state Attorney General’s office, the Federal Trade Commission or the Consumer Financial Protection Bureau (CFPB).

How Can Debt Collection Agencies Remain Compliant?

dying with debtReputable agencies like Optio Solutions conduct a thorough scrub of all new consumer accounts prior to an initiation of collection efforts. These screenings search for records indicating bankruptcy, prior litigation involving the FDCPA, assistance provided by the Servicemembers Civil Relief Act (SCRA), and last but not least, deceased status. If any of these conditions exist, then collection efforts are cancelled immediately.

These procedures enable agencies to remain compliant with FDCPA while avoiding action from the FTC, CFPB or their state attorney general should consumers file complaints. They also add an element of consideration to the difficult scenario of dying with debt and the collections process.

Contact us to learn more about Optio’s approach to scrubbing new accounts during a free consultation.

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