CHAPTER 392. DEBT COLLECTION - Texas Statutes

FINANCE CODE

TITLE 5. PROTECTION OF CONSUMERS OF FINANCIAL SERVICES

CHAPTER 392. DEBT COLLECTION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 392.001. DEFINITIONS. In this chapter:

(1) "Consumer" means an individual who has a consumer debt.

(2) "Consumer debt" means an obligation, or an alleged

obligation, primarily for personal, family, or household purposes

and arising from a transaction or alleged transaction.

(3) "Creditor" means a party, other than a consumer, to a

transaction or alleged transaction involving one or more

consumers.

(4) "Credit bureau" means a person who, for compensation,

gathers, records, and disseminates information relating to the

creditworthiness, financial responsibility, and paying habits of,

and similar information regarding, a person for the purpose of

furnishing that information to another person.

(5) "Debt collection" means an action, conduct, or practice in

collecting, or in soliciting for collection, consumer debts that

are due or alleged to be due a creditor.

(6) "Debt collector" means a person who directly or indirectly

engages in debt collection and includes a person who sells or

offers to sell forms represented to be a collection system,

device, or scheme intended to be used to collect consumer debts.

(7) "Third-party debt collector" means a debt collector, as

defined by 15 U.S.C. Section 1692a(6), but does not include an

attorney collecting a debt as an attorney on behalf of and in the

name of a client unless the attorney has nonattorney employees

who:

(A) are regularly engaged to solicit debts for collection; or

(B) regularly make contact with debtors for the purpose of

collection or adjustment of debts.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.42, eff. Sept. 1,

1999.

SUBCHAPTER B. SURETY BOND

Sec. 392.101. BOND REQUIREMENT. (a) A third-party debt

collector or credit bureau may not engage in debt collection

unless the third-party debt collector or credit bureau has

obtained a surety bond issued by a surety company authorized to

do business in this state as prescribed by this section. A copy

of the bond must be filed with the secretary of state.

(b) The bond must be in favor of:

(1) any person who is damaged by a violation of this chapter;

and

(2) this state for the benefit of any person who is damaged by a

violation of this chapter.

(c) The bond must be in the amount of $10,000.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.102. CLAIM AGAINST BOND. A person who claims against a

bond for a violation of this chapter may maintain an action

against the third-party debt collector or credit bureau and

against the surety. The aggregate liability of the surety to all

persons damaged by a violation of this chapter may not exceed the

amount of the bond.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. INFORMATION IN FILES OF CREDIT BUREAU OR DEBT

COLLECTOR

Sec. 392.201. REPORT TO CONSUMER. Not later than the 45th day

after the date of the request, a credit bureau shall provide to a

person in its registry a copy of all information contained in its

files concerning that person.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.202. CORRECTION OF THIRD-PARTY DEBT COLLECTOR'S OR

CREDIT BUREAU'S FILES. (a) An individual who disputes the

accuracy of an item that is in a third-party debt collector's or

credit bureau's file on the individual and that relates to a debt

being collected by the third-party debt collector may notify in

writing the third-party debt collector of the inaccuracy. The

third-party debt collector shall make a written record of the

dispute. If the third-party debt collector does not report

information related to the dispute to a credit bureau, the

third-party debt collector shall cease collection efforts until

an investigation of the dispute described by Subsections (b)-(e)

determines the accurate amount of the debt, if any. If the

third-party debt collector reports information related to the

dispute to a credit bureau, the reporting third-party debt

collector shall initiate an investigation of the dispute

described by Subsections (b)-(e) and shall cease collection

efforts until the investigation determines the accurate amount of

the debt, if any. This section does not affect the application of

Chapter 20, Business & Commerce Code, to a third-party debt

collector subject to that chapter.

(b) Not later than the 30th day after the date a notice of

inaccuracy is received, a third-party debt collector who

initiates an investigation shall send a written statement to the

individual:

(1) denying the inaccuracy;

(2) admitting the inaccuracy; or

(3) stating that the third-party debt collector has not had

sufficient time to complete an investigation of the inaccuracy.

(c) If the third-party debt collector admits that the item is

inaccurate under Subsection (b), the third-party debt collector

shall:

(1) not later than the fifth business day after the date of the

admission, correct the item in the relevant file; and

(2) immediately cease collection efforts related to the portion

of the debt that was found to be inaccurate and on correction of

the item send, to each person who has previously received a

report from the third-party debt collector containing the

inaccurate information, notice of the inaccuracy and a copy of an

accurate report.

(d) If the third-party debt collector states that there has not

been sufficient time to complete an investigation, the

third-party debt collector shall immediately:

(1) change the item in the relevant file as requested by the

individual;

(2) send to each person who previously received the report

containing the information a notice that is equivalent to a

notice under Subsection (c) and a copy of the changed report; and

(3) cease collection efforts.

(e) On completion by the third-party debt collector of the

investigation, the third-party debt collector shall inform the

individual of the determination of whether the item is accurate

or inaccurate. If the third-party debt collector determines that

the information was accurate, the third-party debt collector may

again report that information and resume collection efforts.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2003, 78th Leg., ch. 851, Sec. 1, eff. Sept. 1,

2003.

SUBCHAPTER D. PROHIBITED DEBT COLLECTION METHODS

Sec. 392.301. THREATS OR COERCION. (a) In debt collection, a

debt collector may not use threats, coercion, or attempts to

coerce that employ any of the following practices:

(1) using or threatening to use violence or other criminal means

to cause harm to a person or property of a person;

(2) accusing falsely or threatening to accuse falsely a person

of fraud or any other crime;

(3) representing or threatening to represent to any person other

than the consumer that a consumer is wilfully refusing to pay a

nondisputed consumer debt when the debt is in dispute and the

consumer has notified in writing the debt collector of the

dispute;

(4) threatening to sell or assign to another the obligation of

the consumer and falsely representing that the result of the sale

or assignment would be that the consumer would lose a defense to

the consumer debt or would be subject to illegal collection

attempts;

(5) threatening that the debtor will be arrested for nonpayment

of a consumer debt without proper court proceedings;

(6) threatening to file a charge, complaint, or criminal action

against a debtor when the debtor has not violated a criminal law;

(7) threatening that nonpayment of a consumer debt will result

in the seizure, repossession, or sale of the person's property

without proper court proceedings; or

(8) threatening to take an action prohibited by law.

(b) Subsection (a) does not prevent a debt collector from:

(1) informing a debtor that the debtor may be arrested after

proper court proceedings if the debtor has violated a criminal

law of this state;

(2) threatening to institute civil lawsuits or other judicial

proceedings to collect a consumer debt; or

(3) exercising or threatening to exercise a statutory or

contractual right of seizure, repossession, or sale that does not

require court proceedings.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.302. HARASSMENT; ABUSE. In debt collection, a debt

collector may not oppress, harass, or abuse a person by:

(1) using profane or obscene language or language intended to

abuse unreasonably the hearer or reader;

(2) placing telephone calls without disclosing the name of the

individual making the call and with the intent to annoy, harass,

or threaten a person at the called number;

(3) causing a person to incur a long distance telephone toll,

telegram fee, or other charge by a medium of communication

without first disclosing the name of the person making the

communication; or

(4) causing a telephone to ring repeatedly or continuously, or

making repeated or continuous telephone calls, with the intent to

harass a person at the called number.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.303. UNFAIR OR UNCONSCIONABLE MEANS. (a) In debt

collection, a debt collector may not use unfair or unconscionable

means that employ the following practices:

(1) seeking or obtaining a written statement or acknowledgment

in any form that specifies that a consumer's obligation is one

incurred for necessaries of life if the obligation was not

incurred for those necessaries;

(2) collecting or attempting to collect interest or a charge,

fee, or expense incidental to the obligation unless the interest

or incidental charge, fee, or expense is expressly authorized by

the agreement creating the obligation or legally chargeable to

the consumer; or

(3) collecting or attempting to collect an obligation under a

check, draft, debit payment, or credit card payment, if:

(A) the check or draft was dishonored or the debit payment or

credit card payment was refused because the check or draft was

not drawn or the payment was not made by a person authorized to

use the applicable account;

(B) the debt collector has received written notice from a person

authorized to use the account that the check, draft, or payment

was unauthorized; and

(C) the person authorized to use the account has filed a report

concerning the unauthorized check, draft, or payment with a law

enforcement agency, as defined by Article 59.01, Code of Criminal

Procedure, and has provided the debt collector with a copy of the

report.

(b) Notwithstanding Subsection (a)(2), a creditor may charge a

reasonable reinstatement fee as consideration for renewal of a

real property loan or contract of sale, after default, if the

additional fee is included in a written contract executed at the

time of renewal.

(c) Subsection (a)(3) does not prohibit a debt collector from

collecting or attempting to collect an obligation under a check,

draft, debit payment, or credit card payment if the debt

collector has credible evidence, including a document, video

recording, or witness statement, that the report filed with a law

enforcement agency, as required by Subsection (a)(3)(C), is

fraudulent and that the check, draft, or payment was authorized.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by:

Acts 2005, 79th Leg., Ch.

505, Sec. 1, eff. September 1, 2005.

Sec. 392.304. FRAUDULENT, DECEPTIVE, OR MISLEADING

REPRESENTATIONS. (a) Except as otherwise provided by this

section, in debt collection or obtaining information concerning a

consumer, a debt collector may not use a fraudulent, deceptive,

or misleading representation that employs the following

practices:

(1) using a name other than the:

(A) true business or professional name or the true personal or

legal name of the debt collector while engaged in debt

collection; or

(B) name appearing on the face of the credit card while engaged

in the collection of a credit card debt;

(2) failing to maintain a list of all business or professional

names known to be used or formerly used by persons collecting

consumer debts or attempting to collect consumer debts for the

debt collector;

(3) representing falsely that the debt collector has information

or something of value for the consumer in order to solicit or

discover information about the consumer;

(4) failing to disclose clearly in any communication with the

debtor the name of the person to whom the debt has been assigned

or is owed when making a demand for money;

(5) in the case of a third-party debt collector, failing to

disclose, except in a formal pleading made in connection with a

legal action:

(A) that the communication is an attempt to collect a debt and

that any information obtained will be used for that purpose, if

the communication is the initial written or oral communication

between the third-party debt collector and the debtor; or

(B) that the communication is from a debt collector, if the

communication is a subsequent written or oral communication

between the third-party debt collector and the debtor;

(6) using a written communication that fails to indicate clearly

the name of the debt collector and the debt collector's street

address or post office box and telephone number if the written

notice refers to a delinquent consumer debt;

(7) using a written communication that demands a response to a

place other than the debt collector's or creditor's street

address or post office box;

(8) misrepresenting the character, extent, or amount of a

consumer debt, or misrepresenting the consumer debt's status in a

judicial or governmental proceeding;

(9) representing falsely that a debt collector is vouched for,

bonded by, or affiliated with, or is an instrumentality, agent,

or official of, this state or an agency of federal, state, or

local government;

(10) using, distributing, or selling a written communication

that simulates or is represented falsely to be a document

authorized, issued, or approved by a court, an official, a

governmental agency, or any other governmental authority or that

creates a false impression about the communication's source,

authorization, or approval;

(11) using a seal, insignia, or design that simulates that of a

governmental agency;

(12) representing that a consumer debt may be increased by the

addition of attorney's fees, investigation fees, service fees, or

other charges if a written contract or statute does not authorize

the additional fees or charges;

(13) representing that a consumer debt will definitely be

increased by the addition of attorney's fees, investigation fees,

service fees, or other charges if the award of the fees or

charges is subject to judicial discretion;

(14) representing falsely the status or nature of the services

rendered by the debt collector or the debt collector's business;

(15) using a written communication that violates the United

States postal laws and regulations;

(16) using a communication that purports to be from an attorney

or law firm if it is not;

(17) representing that a consumer debt is being collected by an

attorney if it is not;

(18) representing that a consumer debt is being collected by an

independent, bona fide organization engaged in the business of

collecting past due accounts when the debt is being collected by

a subterfuge organization under the control and direction of the

person who is owed the debt; or

(19) using any other false representation or deceptive means to

collect a debt or obtain information concerning a consumer.

(b) Subsection (a)(4) does not apply to a person servicing or

collecting real property first lien mortgage loans or credit card

debts.

(c) Subsection (a)(6) does not require a debt collector to

disclose the names and addresses of employees of the debt

collector.

(d) Subsection (a)(7) does not require a response to the address

of an employee of a debt collector.

(e) Subsection (a)(18) does not prohibit a creditor from owning

or operating a bona fide debt collection agency.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 2003, 78th Leg., ch. 851, Sec. 2, eff. Sept. 1,

2003; Acts 2003, 78th Leg., 3rd C.S., ch. 3, Sec. 28.01, eff.

Jan. 11, 2004.

Sec. 392.305. DECEPTIVE USE OF CREDIT BUREAU NAME. A person may

not use "credit bureau," "retail merchants," or "retail merchants

association" in the person's business or trade name unless:

(1) the person is engaged in gathering, recording, and

disseminating information, both favorable and unfavorable,

relating to the creditworthiness, financial responsibility, and

paying habits of, and similar information regarding, persons

being considered for credit extension so that a prospective

creditor can make a sound decision in the extension of credit; or

(2) the person is a nonprofit retail trade association that:

(A) consists of individual members;

(B) qualifies as a bona fide business league as defined by the

United States Internal Revenue Service; and

(C) does not engage in the business of debt collection or credit

reporting.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.306. USE OF INDEPENDENT DEBT COLLECTOR. A creditor may

not use an independent debt collector if the creditor has actual

knowledge that the independent debt collector repeatedly or

continuously engages in acts or practices that are prohibited by

this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. DEFENSE, CRIMINAL PENALTY, AND CIVIL REMEDIES

Sec. 392.401. BONA FIDE ERROR. A person does not violate this

chapter if the action complained of resulted from a bona fide

error that occurred notwithstanding the use of reasonable

procedures adopted to avoid the error.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.402. CRIMINAL PENALTY. (a) A person commits an

offense if the person violates this chapter.

(b) An offense under this section is a misdemeanor punishable by

a fine of not less than $100 or more than $500 for each

violation.

(c) A misdemeanor charge under this section must be filed not

later than the first anniversary of the date of the alleged

violation.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.403. CIVIL REMEDIES. (a) A person may sue for:

(1) injunctive relief to prevent or restrain a violation of this

chapter; and

(2) actual damages sustained as a result of a violation of this

chapter.

(b) A person who successfully maintains an action under

Subsection (a) is entitled to attorney's fees reasonably related

to the amount of work performed and costs.

(c) On a finding by a court that an action under this section

was brought in bad faith or for purposes of harassment, the court

shall award the defendant attorney's fees reasonably related to

the work performed and costs.

(d) If the attorney general reasonably believes that a person is

violating or is about to violate this chapter, the attorney

general may bring an action in the name of this state against the

person to restrain or enjoin the person from violating this

chapter.

(e) A person who successfully maintains an action under this

section for violation of Section 392.101, 392.202, or

392.301(a)(3) is entitled to not less than $100 for each

violation of this chapter.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.

Sec. 392.404. REMEDIES UNDER OTHER LAW. (a) A violation of

this chapter is a deceptive trade practice under Subchapter E,

Chapter 17, Business & Commerce Code, and is actionable under

that subchapter.

(b) This chapter does not affect or alter a remedy at law or in

equity otherwise available to a debtor, creditor, governmental

entity, or other legal entity.

Acts 1997, 75th Leg., ch. 1008, Sec. 1, eff. Sept. 1, 1997.