The Guide to Iowa Debt Collection Laws
Debt collection laws in Iowa exist to protect consumers and business owners from unfair and deceptive debt collection practices. These state laws also provide remedies for the consumer when those practices occur. These statutes are similar to the Fair Debt Collection Practices Act, although the Fair Debt Collection Practices Act applies only to those who collect debts on behalf of another. Iowa’s debt collection statutes apply to all debt collectors.
Iowa has a statute that prohibits dishonest, deceptive , or misleading conduct in the course of collecting a debt from any debtor in Iowa. Iowa Code § 537.6106 Iowa law also prohibits harassment and coercion when it comes to debt collection. Iowa Code § 537.6108. It is also a violation of state law for a debt collector to intimidate a consumer into paying a debt or even making a so-called "partial payment." As a consumer or debtor in Iowa, you should be aware that the federal Fair Debt Collection Practices Act does not apply to creditors collecting debts that they originated, or debts they purchased but where they are acting as a creditor rather than a debt collector. Iowa’s debt collection laws do apply, however, to these types of actions. Even creditors have to comply with state law prohibitions against dishonest, deceptive, or misleading conduct when attempting to collect debts.
The Rules That Govern Debt Collectors
Iowa debt collection laws are specifically designed to provide a framework for debt collectors and creditors when attempting to collect outstanding debts. There are many regulations in the state of Iowa that are mirrored under federal law, while some vary from state-to-state.
The Federal Fair Debt Collection Practices Act (FDCPA), codified at 15 U.S.C. § 1601 et. seq. regulates how debt collectors handle debts. While a debt collector is first and foremost required to follow the FDCPA when attempting to collect a debt, state laws also affect the application of Iowa debt collection laws. Iowa Fair Debt Collection Practices Act (I.F.D.C.P.A.) is codified at Iowa Code § 537.7101 et. seq., which mirrors several provisions of the FDCPA.
The main difference in the application of the I.F.D.C.P.A. as compared to the FDCPA is how phone calls are handled by debt collectors. The I.F.D.C.P.A. specifically restricts the number of calls that can be placed to consumers’ homes or workplaces, the time restrictions of when a call can be made, and the language used to engage with consumers. Collectors cannot place calls that are abusive or offensive and limit contact to only times where…"in the debt collector’s reasonable judgment, the debtor is likely to accept the collect telephone call."
Under the I.F.D.C.P.A. Section 537.7107: "A debt collector shall not use a communications facility in the collection of any debt in a manner that tends to or is likely to incite violence or physical harm, or that will abuse or harass any person."
The TCPA is another federal statute to consider when discussing Iowa debt collection laws. In fact, the I.F.D.C.P.A. builds on to the violation of the telephone regulation aspect of the TCPA, which specifically prohibits debt collectors from calling debtors’ homes at certain times for the purpose of collecting a debt, how frequently a debt collector may call, and when to apply an auto-dialer.
If you are a creditor or collector attempting to collect a debt, it is important to bear in mind that you must not only comply with the rules laid out in the Iowa Fair Debt Collection Practices Act, but also the Federal Fair Debt Collection Practices Act. It is also important that you comply with other federal regulations like the Telephone Consumer Protection Act when attempting to collect a consumer debt.
These statutes are enforced by both private individuals and the Consumer Credit Protection Bureau. This means that if a consumer is over contacted about a debt, or a debt collector threatens or engages in abusive or inappropriate conduct while attempting to collect a debt, the consumer has the right to take legal action against the creditor.
Violations of the FDCPA or I.F.D.C.P.A. allow a consumer to recover monetary damages, attorney’s fees, and "additional damages as the court may allow." Because Iowa debt collection laws reflect federal regulations, such a violation can also lead to liability under the TCPA, where a creditor or collector may be required to pay a consumer between $500 and $1,500 per illegal call that was placed.
When a Collector Goes Too Far
Iowa law also stops debt collectors from threatening you with adverse consequences. Again, there’s no fine print here. Collectors cannot:
- threaten to arrest you
- threaten that litigation will be brought against you
- threaten to foreclose on real estate regularly
- threaten to take other action, which if lawful, would not be taken
- tell you that you will be arrested
- tell you that litigation will be brought against you
- tell you you will be sued
- warn you about the above items that they do not intend to pursue.
Debtors’ Protections Under Iowa Law
The rights and protections available to debtors under Iowa law extend beyond just the provisions of the Iowa FDCPA. Federal law also provides debtors with statutory protections, such as those contained in the Fair Credit Reporting Act, which safeguards consumers by ensuring the credit reporting agencies maintain accurate information concerning them. When a person or company includes incorrect information about a person, that person is entitled to have the information disputed. To initiate a dispute, a person must contact the agency directly and inform them that he/she is disputing the information. The agency is then obligated to investigate the dispute and make the necessary corrections.
Under the Iowa FDCPA, all communications between a creditor and a debtor must be in writing. The debtor also has the right to dispute the existence of debt. As provided in Iowa Code § 537.6105: If a consumer notifies the creditor in writing, other than in payment on the debt, within thirty days of receiving the initial written notice required by subsection 1 that the consumer disputes the debt or a specified, identifiable section of the debt, the creditor may not communicate with the consumer in connection with the collection of the debt, except a. To advise the consumer that the creditor’s further efforts are being terminated, b. To notify the consumer that the creditor or lender may invoke specified remedies that are available to the creditor or lender under applicable provisions of law and, where applicable, of the right of the consumer to request from the creditor or lender the name and address of the original creditor, if different from the current creditor, c. To provide the name of and address of the original creditor, if requested by the consumer or provided in the initial notice, or d. As permitted by the rules of the court. Iowa Code § 537.6105. The Iowa FDCPA binds debt collectors from placing unverified communication on a debtor’s credit report. Iowa Code § 537.6104(6) states: A debt collector shall not report, for credit reporting purposes, a delinquent debtor’s failure to comply with the debt collector’s requests for verifying a debt until the written notice required in subsection 1 has been sent. If a debtor feels his/her rights under the Iowa FDCPA have been violated, the debtor can sue the offending collection agency in state court. Under the Iowa FDCPA, debtors have a right to recover actual damages, costs and attorney fees provided for by the Iowa FDCPA. Couple this with the federal FDCPA, both debtors have very strong protections under the laws of Iowa.
Time Limit For Debt Collection
The statute of limitations for most debts is 10 years, but other types of debt are subject to varying limitation periods. Iowa Code Sec. 614.1(4). Contracts in writing generally have a limitation period of 10 years from the time a cause of action should have accrued. However, contracts under seal and judgments have a limitation period of 20 years. Written or verbal contracts not in writing have a limitation period of 5 years. Promissory notes and written contracts involving loans to purchase certain types of personal property (i.e., motor vehicles) have a limitation period of 5 years . Statutes of limitation apply to judicial claims and, importantly, to collection lawsuits. Iowa Code Secs. 614.1(1) and 614.102. Statutes of limitation do not automatically bar claims; they must be affirmatively raised ("pleaded") by a party to a lawsuit. Although the statute of limitation periods above are uniformly referred to as "limitation periods," a more precise term is "prescriptive period." A limitation period is a "defense" to a claim. When a statute of limitations (or prescriptive period) expires, that is presumed to determine the ultimate rights of the parties, as opposed to merely the right to assert a claim.
Filing a Lawsuit and Complaining About a Collector
If a debtor believes a debt collection agent has violated their rights, there are several avenues to explore for remediation. First and foremost, the debtor can file a complaint with the CFPB. The steps to take are as follows:
- Create a CFPB account
- Log in to the account and choose the type of issue to report – of which one is "I’ve been contacted by a debt collector."
- Complete the information to compose the complaint and submit it to the CFPB.
The CFPB will forward the information to the Federal Trade Commission (FTC) as well as the Iowa Attorney General’s Office for investigation and follow-up. As an additional option, a complaint can be brought to the attention of the FTC directly. The FTC will assist the debtor in figuring out whether or not the situation falls under their jurisdiction.
If the debtor has already filed a lawsuit against the creditor and/or debt collector in regards to the alleged violation of the FDCPA, this does not preclude the debtor from filing a complaint with the CFPB. The FDCPA does not preempt any state or other federal laws. However, if the CFPB is aware that there is litigation pending, they may close the complaint without action, and refer the debtor to the court. In addition to filing a complaint, the debtor may still be entitled to recompense from the creditor or their attorney in specific situations, including but not limited to:
- The creditor has violated its own contract with the debtor (i.e. adding fees or not noting specific things on the credit report)
- Violation of another federal law applying to credit reporting
- Violation of other state or federal laws
In Iowa, the debtor also has the right to bring action in a dispute with a company in Iowa Small Claims Court or District Court. However, a successful claimant will likely only receive damages if and when they can prove their case.
Latest News, Legal Decisions and Changes in Iowa Debt Collection Laws
Recently in Iowa, the legislature passed a number of bills that could have an impact on debt collection practices in the state. The most significant of these was the enactment of § 537.5201, Iowa Code, which makes it an unfair trade practice and a violation of the Iowa Consumer Fraud Act for a debt collector to call a consumer more than 2 times a month. This amendment also potentially impacts communications by a debt collector with third parties. The statute states that a debt collector may only communicate with a consumer’s employer, spouse, or parent to determine the consumer’s place of employment or where the consumer lives if the debt collector has first obtained written consent from the consumer. This provision could limit the extent to which debt collectors can obtain location information under the Fair Debt Collection Practices Act.
Another change to Iowa’s debt collection laws is the passage of SF 529 amending § 537.5201 to add that debt collectors are also subject to civil liability to the extent that they have violated the federal Fair Debt Collection Practices Act. In addition, SF 529 allows the filing of a civil action in district court by a victim of a violation and states that upon finding that a violation has occurred, the court can award restitution, other civil relief, and reasonable fees and costs.
Also of note is SF 337 which amended Iowa’s general prohibitions on usury (i.e., interest rates) in transaction § 537.2307. The law caps the amount of interest that can be charged at the greater of 6% per annum above the published federal reserve discount rate or 12% per annum. The rates are based on the average published rates for six months preceding the determination date of the interest. If the amount of interest is greater than $5,000,000 and the lender is a bank, savings and loan, savings bank, credit-union, or other financial institution chartered under state or federal law, interest charges are unlimited. The law also addresses contracts for loans of less than $1,000 or loans made primarily for personal, family, or household purposes.
Tips and Tricks for Dealing with Collectors
When facing debt collectors, I cannot stress enough the importance of communication. Although the main goal for debt collectors is payment, not all communications are as helpful as they may seem. You have the right to designate how you want to be contacted, whether it is by phone, mail or email. Unless you authorize a certain method of communication, they are required to comply with your wishes. Many debtor clients allow the collection lawyer to use email for all communication. For instance, when a lawsuit is filed, the lawyer in Iowa is required to send the Summons and Petition (or Complaint), and other documents such as discovery and/or bankruptcy motion when appropriate, to the subject via email as well as by regular mail. Email is the best because the lawyers can schedule dates for responses to motions, etc. that are filed without much delay.
If your communication preference is not adhered to, you may be able to sue for violating the Fair Debt Collection Practices Act (FDCPA) or the Iowa state protections. However, it is important to remember that there are strict time limits for filing suits under the FDCPA and Iowa law. A suit for FDCPA violations must be started within 1 year of the violation. A lawsuit for Iowa violations must be filed within 5 years of the violation. Despite the differences in the statute of limitations in the state and federally based collection lawsuits, the $1,000 damages limit in the FDCPA applies to both statutory actions . It could make sense to file statute based claims as well as FDCPA based claims in the same complaint if there are FDCPA and Iowa violations. The damages can total $10,000 ($1,500 statutory damages in Iowa plus $3,500 for actual damages, up to $9,500) for each lawsuit which is crying out for filing the two actions together.
Many collectors may offer lump sum settlements with a lump sum payment for a discount on your total debt owed. However, if possible and especially in a lawsuit situation where you don’t owe interest and all fees, try to set up a payment arrangement for monthly payments over time with a small down payment. This is especially helpful for people on Social Security. Collectors also may offer a percentage settlement. While this may be enticing, always analyze what the balance owed is and see if it is worth paying a percentage of your debt. The settlement offers are not always in your best interest.
Debt collectors must have permission from a court, before garnishing bank accounts, paycheck, property, etc. If you found out that a creditor (not a collector) seized money from your bank account, this might be authorized by a judgment in a lawsuit or by statute. Typically, judgment creditors can take "non exempt" funds from a bank account by garnishment action. It is very complicated and it is best to run this by an attorney who knows how it is supposed to work before taking any action.