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Paying the Debts of the Dead

New rule allows collectors to contact a wider circle of people

Debt collectors will be allowed to cast their nets wider to determine who can repay money owed by people who have died, the Federal Trade Commission said this week, announcing a revised policy that takes effect Aug. 29.

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Under the new policy (PDF), collectors will be allowed to contact relatives and friends of the deceased, who were previously off-limits. But these contacts will be allowed only for the purpose of finding out who, if anyone, is responsible for repayment — typically the executor or other representative of the deceased's estate.

The collectors will not have permission to suggest that the contacted person should repay any debts from personal funds.

The policy governs enforcement of the Fair Debt Collection Practices Act (PDF), passed in 1966 in response to widespread complaints about abusive tactics by collectors.

Current policy was more restrictive

Under the current policy, collectors seeking payment on the debts of a person who has died can legally get in touch only with members of a limited group, including the deceased's spouse, attorney, estate executor and administrator.

As a result, debt collectors often zero in on the person easiest to find, the grieving spouse, telephoning immediately after the death.

"A consumer in this vulnerable condition may end up feeling as if he has an obligation — legal, moral, or otherwise — to pay the debt from personal funds, even though debt collectors cannot legally ask him to do so," says FTC Commissioner Julie Brill in a written statement (PDF).

Another problem with the old policy, according to the FTC: Some collectors immediately seek to recover debt by filing motions at probate court, "imposing substantial costs on the estate and delaying the distribution of assets to heirs and beneficiaries."

The FTC says that widening that group will serve survivors' interests, because by communicating with debt collectors, friends and more distant family members — who may be less traumatized by the death — can reduce the possibility of probate.

Next: You could get a call from a debt collector. >>

You could get a call

The new rules increase the chance that if you know a person who has died, you'll get a call from a collector.

"But you do not have to answer questions or provide any information," says Stuart Cohen, AARP's senior vice president of legal advocacy. Collectors are limited to asking who is handling the deceased's estate and has authority to pay any outstanding bills of the deceased.

"They are not permitted to even say they are trying to collect a debt," adds Cohen. "And they cannot, in any way, indicate to the contacted individual that they are personally obligated to pay the debt of the deceased."

Read this FTC consumer alert to learn more about debts of the deceased, and who might be responsible for them.

Also of interest: Paying a deceased parent's debt. >>

Sid Kirchheimer writes about consumer and health issues.