Both the federal and Texas debt collection statutes protect consumers from debt collection harassment, but they don’t cover all kinds of debts, only consumer debts. This means debt collectors collecting non-consumer debts are not subject to the restrictions in those statutes. I see this most commonly in 3 situations: business debt, criminal and quasi-criminal debts, and personal injury or property damage claims.
Small businesses frequently use credit cards and other consumer finance sources to run their businesses. The courts look at the actual use of the money borrowed to determine whether a debt is a business or consumer debt. A person who uses a Target Visa card to purchase office supplies for his home business has created a business debt. The protections in the debt collection statutes will not apply. This works in reverse as well. A person who uses a card issued to his business for personal purchases has created a consumer debt and is protected by the debt collection statutes even though the card issuer never intended that to be the case. When use of a card is mixed, the courts look to the primary use, so if the card was used to purchase $5000 worth of goods and $2501 of that was consumer goods, then the debt is covered by the debt collection statutes.
Criminal fines and civil claims arising out of crimes are not covered either. Most commonly this becomes an issue in shoplifting cases. Texas has a statute that allows merchants who are victims of a theft to sue the thief for damages. The statute is quite onerous and there are debt collectors who specialize in threatening to sue people under the statute unless they pay exorbitant sums of money to settle the claim. Because the claim arose out of a theft instead of a consumer transaction, the debt collection statutes don’t apply. Note: the debt collection statutes do apply to bad check collectors, even though writing a bad check can be a crime in certain circumstances. As long as the check was written for a consumer transaction, the collection agency is bound by the debt collection statutes. The difference is that a check is considered to be part of a “transaction”, the word used in the statutes, while a theft is not.
Tort claims are the third area where this gap in coverage can leave a person vulnerable to debt collection abuse. “Tort” is the word the law uses to describe claims that people have when they are injured or their property is damaged or lost as a result of an accident or other wrongful conduct. Because these claims don’t involve a transaction, they are not covered. This commonly arises under the Texas statute that allows suspension of the drivers license of a person who fails to pay a damages claim arising out of a traffic accident. Some debt collectors specialize in buying unpaid claims from insurance companies and threatening driver’s license suspension if the debtor doesn’t pay. These collectors also aren’t covered by the debt collection statutes.
There is still limited protection from debt collectors who engage in outrageous collection tactics. Texas has a common law claim for unreasonable debt collection practices, but it is little-used and not well-defined. As a practical matter, it is only helpful in cases of extreme abuse or harassment.