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Debt collection in Utah is governed by both federal and state laws, offering protections for consumers and requirements for collection agencies. Here's what you need to know:
Noncompliance risks include criminal charges, fines, and lawsuits. Agencies must follow strict guidelines to avoid penalties and ensure fair practices.
Utah's Title 12 lays out the key rules for collection agencies operating in the state. According to Utah Code § 12-1-1, anyone acting as a collection agency or collecting debts for others must register with the Division of Corporations and Commercial Code. They are also required to maintain a $10,000 surety bond to protect the interests of those they collect for. Certain entities, like licensed attorneys in Utah, national banks, and state-chartered banks or trust companies, are exempt from these requirements. On the other hand, third-party collectors who lack these exemptions and fail to register could face a Class A misdemeanor, leaving them open to criminal charges.
Skipping the bond requirement comes with additional risks. Under Utah Code § 12-1-9, any credit information provided to reporting agencies by unbonded collection agencies is considered "void on its face". This means any negative credit marks placed by such agencies would be legally invalid, creating serious problems for agencies that depend on credit reporting as a collection strategy.
Utah law also tackles predatory lending to protect consumers from harmful practices. Utah Code § 70C-7-105 renders any credit agreement unenforceable if both parties understand that nonpayment could lead to violence or criminal harm. Furthermore, courts can refuse to enforce credit agreements deemed unconscionable at the time they were made. Violators may face penalties ranging from $100 to $5,000, plus attorney's fees. While these state laws establish operational standards, federal regulations under the FDCPA add another layer of oversight for third-party collectors.
Federal law, specifically the FDCPA, supplements Utah's state rules by regulating third-party debt collectors. The FDCPA applies to agencies collecting debts on behalf of others but generally excludes original creditors, such as banks, retailers, or healthcare providers managing their own accounts. This creates a dual framework where third-party collectors face stricter federal rules, while original creditors follow different standards.
Under the FDCPA, collectors are prohibited from contacting consumers outside the hours of 8:00 a.m. to 9:00 p.m. local time. They must also stop communication if a consumer submits a written request to cease contact. However, they can still inform the consumer of specific legal actions, like filing a lawsuit. If a consumer disputes a debt in writing within 30 days of receiving the initial notice, the collector must pause all collection efforts until the debt is verified.
Enforcement of the FDCPA involves several agencies. The Federal Trade Commission (FTC) leads enforcement efforts, while the Consumer Financial Protection Bureau (CFPB) handles rulemaking and administrative actions. At the state level, the Utah Division of Consumer Protection enforces related laws like the Uniform Debt-Management Services Act and the Consumer Sales Practices Act. Noncompliance carries steep penalties. Collectors violating the FDCPA may owe actual damages plus up to $1,000 in additional damages for individual cases. In class action lawsuits, liability can climb to $500,000 or 1% of the collector’s net worth, whichever is lower.
| Entity Type | Must Register in Utah (Title 12) | Subject to FDCPA |
|---|---|---|
| Third-Party Collection Agency | Yes | Yes |
| Licensed Attorney (Utah) | No | Yes (if regularly collecting) |
| National or State Bank | No | No |
| Original Creditor | No | No |
Utah Debt Collection Statute of Limitations by Debt Type
Understanding the time limits for filing lawsuits over unpaid debts in Utah is crucial for both creditors and debtors. These deadlines, known as statutes of limitations, define how long creditors have to take legal action. The clock starts ticking either from the date of default or the last payment made. For promissory notes with a set maturity date, the countdown begins once the maturity date arrives - unless the creditor accelerates the debt, making the full amount due immediately.
Utah law outlines different statutes of limitations depending on the type of debt:
| Debt Type | Statute of Limitations |
|---|---|
| Written Contracts / Promissory Notes | 6 Years |
| Credit Cards | 6 Years |
| Medical Debt (Written Agreement) | 6 Years |
| Payday Loans | 6 Years |
| Gym Memberships | 6 Years |
| Oral / Verbal Agreements | 4 Years |
| Open Store Accounts | 4 Years |
| Account Stated / Unjust Enrichment | 4 Years |
| Court Judgments | 8 Years (Renewable) |
| Fraud / Identity Theft | 3 Years |
| State Tax Debt | 3 Years |
| Short Sale Deficiency | 3 Months |
It’s worth noting that Utah has no statute of limitations for criminal fines, meaning they can be pursued indefinitely.
Once the statute of limitations runs out, creditors lose the ability to sue for repayment. However, the debt itself doesn’t disappear. Under the Fair Debt Collection Practices Act (FDCPA), third-party collectors are prohibited from suing over time-barred debts. As Stephenson Law Firm explains:
"Debt collectors are prohibited from suing to collect the debt if the statute of limitations expires... They can still call, email, write, and text. They just can't sue."
Original creditors, who aren’t subject to the FDCPA, may still file lawsuits, but the expired statute serves as a valid defense. Debtors must explicitly raise this defense in court; otherwise, they risk waiving it, which could result in a judgment against them.
Be cautious about actions that could revive an expired debt. Acknowledging the debt or making even a small payment can restart the statute of limitations. Utah Justice warns:
"Making a payment on a time-barred debt will revive, or restart, the statute of limitations. Even a tiny payment will revive the debt."
If a debt collector violates the FDCPA by suing or threatening to sue on a time-barred debt, you may be eligible for statutory damages of up to $1,000, plus attorney fees. For example, the Seventh Circuit Court of Appeals ruled against Portfolio Recovery Associates for using misleading language in collection letters to hide the fact that the debt was time-barred, deeming it a violation of federal law.
If you leave Utah, the statute of limitations pauses while you’re out of state. This means that any time spent outside Utah doesn’t count toward the limitation period. Also, keep in mind that these statutes are separate from credit reporting rules. A debt may be too old for legal action but could still appear on your credit report for up to seven years under federal guidelines.
Utah debt collectors must adhere to the rules set by the FDCPA, along with additional safeguards provided by state law. These measures are designed to ensure fair practices and protect the rights of debtors.
The FDCPA explicitly prohibits any behavior by collectors that is considered harassing, oppressive, or abusive. For instance, collectors cannot call before 8:00 a.m. or after 9:00 p.m., contact you at work if your employer disallows it, use offensive language, repeatedly call to annoy you, or hide their identity. If you have legal representation, collectors must communicate only with your attorney. Publishing "deadbeat lists" of consumers is also forbidden, except when reporting to credit bureaus.
Deceptive practices are equally outlawed. Collectors cannot mislead or impersonate others, such as pretending to be affiliated with the government, using fake badges, misrepresenting the amount owed, claiming to be an attorney, or threatening illegal actions like arrest or property seizure. They are also barred from using documents that mimic official court or government forms.
Additionally, collectors cannot impose unauthorized fees, interest, or other charges beyond what is outlined in the original agreement or allowed by law. Sending postcards or using envelopes that reveal the sender is a debt collector is also prohibited.
These federal restrictions are reinforced by Utah-specific laws, which further protect consumers.
Utah law provides additional rights to shield debtors from unfair practices. One key protection is the right to request debt validation. Within five days of their initial contact, collectors must send a written notice of the debt. If you request proof of the debt within 30 days, collection efforts must stop until the debt is verified.
You also have the right to stop communication. By sending a written request to cease contact, you can limit further communication to only two scenarios: confirmation that contact has stopped or notification of specific legal actions. If collectors continue to contact you after receiving this request, it could strengthen any legal claims for damages.
It's important to document all interactions. Since Utah is a one-party consent state, you can legally record phone calls with collectors as long as you're part of the conversation. Keep copies of letters, payment agreements, checks, and notes on call frequency and timing. These records can be critical if you need to assert your rights.
If a collector violates your rights, you have legal options. Under the FDCPA, you can recover up to $1,000 in statutory damages, along with actual damages and attorney fees. Utah law also allows penalties ranging from $100 to $5,000 if a court determines that a credit agreement or practice is unconscionable. In some cases, violations of Utah’s debt collection laws may even result in a class A misdemeanor.
In Utah, debt collectors are permitted to use specific legal methods to recover debts before pursuing legal action. The most common method is written communication, which must include a "validation notice" sent within five days of the first contact. This notice outlines the debt amount and the creditor's name. Collectors are also allowed to make phone calls or meet in person, but only during the hours of 8:00 AM to 9:00 PM.
Debt collectors can use letters, phone calls, or in-person visits during the permitted hours to communicate with debtors. The validation notice, sent shortly after initial contact, ensures that the debtor has the necessary information to verify the debt. If the case progresses to court and a judgment is obtained, collectors gain access to additional enforcement tools.
Once a court judgment is secured, creditors in Utah can utilize a broader range of enforcement options, all governed by the state’s legal guidelines. Judgments remain enforceable for eight years and can be renewed for another eight years if the debt remains unpaid. Among the most frequently used enforcement tools is a Writ of Garnishment (Rule 64D), which allows creditors to collect funds directly from a debtor's wages or bank accounts. For consumer debt, garnishment is limited to 25% of disposable earnings or the amount exceeding 30 times the federal minimum hourly wage[17, 19]. In cases involving child support, this limit increases to 50% of disposable income[17, 19].
Another option is a Writ of Execution (Rule 64E), which enables law enforcement to seize non-exempt property owned by the debtor. Creditors can also place a real property lien by recording a judgment in the county where the debtor owns real estate. This lien must be resolved before the property can be sold or refinanced. If creditors are uncertain about a debtor’s assets, they can request supplemental proceedings, compelling the debtor to disclose details about their income, property, and bank accounts under oath.
| Collection Method | Target Asset | Key Limitation/Detail |
|---|---|---|
| Wage Garnishment | Employer (Wages) | Maximum 25% of disposable earnings for consumer debt; 50% for child support[17, 19] |
| Bank Garnishment | Bank/Credit Union | Requires financial institutions to turn over non-exempt funds[18, 19] |
| Writ of Execution | Physical Property | Allows seizure of non-exempt real or personal property[18, 19] |
| Property Lien | Real Estate | Attaches to property in the county where the judgment is recorded[18, 19] |
To avoid delays or court rejections, creditors must ensure all filings include the debtor’s correct legal name and address. Additionally, a writ of continuing garnishment typically remains valid for one year from the date it is served.
Utah has clear legal guidelines for wage garnishment, a process that lets creditors collect debts directly from a debtor's paycheck. This applies only to disposable earnings, which are wages left after mandatory deductions like taxes and Social Security contributions.
The amount creditors can garnish depends on the type of debt. For consumer debts - like credit cards or medical bills - creditors can take the lesser of 25% of weekly disposable earnings or the amount exceeding 30 times the federal minimum wage. Since the federal minimum wage is $7.25 per hour, at least $217.50 per week must remain untouched. These limits are in line with federal rules.
Other types of debt have different garnishment caps:
| Debt Type | Maximum Garnishment Limit |
|---|---|
| Consumer Debt* | Lesser of 25% of disposable earnings or the amount exceeding 30 times the federal minimum wage |
| Education Loans | 15% of disposable earnings |
| Federal Student Loans (Default) | 15% of disposable earnings |
| Child Support (Supporting another family) | 50% of disposable earnings |
| Child Support (Not supporting another family) | 60% of disposable earnings |
| Child Support (Arrears > 12 weeks) | Up to 65% of disposable earnings |
*Includes credit card and medical debts
These limits ensure that a portion of wages remains protected from garnishment.
Certain types of income are protected from garnishment. For example, Social Security benefits and most pensions cannot be garnished for consumer debts. However, they may still be garnished for child support obligations. Debtors can also file a court claim of exemption if the garnishment threatens income necessary for family support, as long as they follow proper legal procedures.
Utah law offers additional protections for employees. Under Utah Code § 70C-7-104:
"No employer may discharge any employee because the employee's earnings are subject to garnishment in connection with any one judgment".
Debtors are entitled to a 10-day notice before garnishment begins, giving them a chance to file objections or negotiate payment arrangements. Additionally, filing for bankruptcy places an automatic stay on most wage garnishments, halting the process immediately.
Operating as a debt buyer or collection agency in Utah comes with strict legal obligations. First, ensure you're registered with the Division of Corporations and Commercial Code. This requirement applies even if you outsource collection activities to third-party agencies or law firms.
Another critical step is securing a $10,000 bond. Without this bond, any credit information you report to consumer reporting agencies is considered invalid.
Keep detailed records of all interactions, including correspondence, payment agreements, bills, and checks. These documents can serve as evidence if compliance issues arise.
It's also essential to check that the accounts you're pursuing are within the statute of limitations - 4 years for open accounts and 6 years for written contracts - before initiating legal proceedings. Within five days of first contact with a debtor, provide a written validation notice. This notice must include the debt amount, the creditor's name, and the debtor's right to dispute the debt within 30 days. If the debtor disputes the debt in writing during this period, all collection efforts must pause until the debt is verified. Using technology to automate and manage these processes can help maintain compliance efficiently.
Debexpert offers tools designed to help debt buyers and collectors stay compliant. For example, its secure file-sharing feature uses end-to-end encryption to protect sensitive debtor information and portfolio documentation, aligning with Utah's data security requirements.
The platform also provides portfolio analytics, enabling users to evaluate debt portfolios before purchase. This helps ensure accounts are within the statute of limitations and assess their collectability, reducing the risk of acquiring time-barred debt - pursuing such debt through litigation would violate the Fair Debt Collection Practices Act.
Debexpert’s auction tools, including English, Dutch, Sealed-bid, and Hybrid formats, promote transparency by tracking real-time buyer activity. This creates an audit trail, which is useful for compliance verification. Additionally, the platform’s real-time chat feature allows secure communication between buyers and sellers, making it easier to exchange compliance documents and verify registration before finalizing transactions.
In Utah, a collection fee can only be charged if specific conditions are met. First, the creditor must have a written agreement authorizing the fee. Second, the debt must be assigned to a registered collection agency or a licensed attorney. Finally, the fee is limited to either the actual cost incurred or 40% of the principal amount - whichever is less.
Here’s an example: If someone owes $1,000 in principal and the creditor pays a collection agency $300, the maximum fee allowed is $300. Even though 40% of $1,000 would be $400, the law caps the fee at the actual cost of $300.
"The amount [of the collection fee] may not exceed the lesser of: (i) the actual amount a creditor is required to pay a third party debt collection agency or licensed attorney... or (ii) 40% of the principal amount owed to the creditor for a debt." - Utah Code § 12-1-11
Additionally, collectors can charge convenience fees, but they must disclose these fees upfront. They’re also required to provide at least one fee-free payment option, such as paying by check. Attorney fees, if applicable, are handled separately.
With these clear limits in place, Utah law also ensures that violations come with strict consequences.
Charging collection fees beyond the allowed limits can lead to serious repercussions. Under Utah Code § 12-1-6, anyone who violates Title 12 faces a class A misdemeanor. On top of that, courts can impose penalties ranging from $100 to $5,000 for any excessive or unreasonable charges. These penalties may also include the cost of legal action and reasonable attorney fees.
"Any person, member of a partnership, or officer of any association or corporation who fails to comply with any provision of this title is guilty of a class A misdemeanor." - Utah Code § 12-1-6
If the violation also breaches the federal Fair Debt Collection Practices Act (FDCPA), additional federal penalties may apply. These could include statutory damages, further emphasizing the importance of adhering to these fee limits.
These provisions highlight the necessity for debt buyers and collectors in Utah to comply strictly with the law to avoid significant legal and financial consequences.
Utah debt collectors operate under strict legal guidelines to ensure fair practices. They must register with the Division, secure a $10,000 bond, and adhere to legal deadlines - six years for written contracts and four years for verbal agreements. Failing to comply can lead to serious consequences, including Class A misdemeanors, fines up to $5,000, and liabilities under the FDCPA of up to $1,000.
These regulations aim to protect both creditors and debtors. Collectors benefit from reduced legal risks and smoother operations, while debtors are safeguarded from unfair practices like excessive wage garnishment - limited to 25% of disposable earnings - and from being pursued for debts that are no longer enforceable due to expired statutes of limitations. As mentioned earlier, secure systems and clear validation processes are critical for compliance.
"Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy." - 15 U.S.C. § 1692 Congressional findings
Debt buyers and collectors must carefully verify the age of debts before taking legal steps, send validation notices within five days of initial contact, and halt communication if a written request is received. Platforms like Debexpert help facilitate compliance by connecting registered buyers and sellers through secure, transparent transactions, offering tools like portfolio analytics and detailed documentation.
Following Utah's debt collection laws is more than just avoiding penalties - it's about building ethical, sustainable practices that respect legal requirements and individual dignity. These laws strike a balance between creditor efficiency and debtor rights, ensuring fairness for all parties involved.
As of May 3, 2023, collection agencies in Utah are no longer required to register or submit bonds to operate. These requirements were previously in place but have since been repealed. For the most current updates or details, reach out to the Utah Division of Corporations and Commercial Code or check their online resources.
If a collector tries to revive a time-barred debt, let them know that the statute of limitations has expired. This serves as a legal defense against collection efforts or lawsuits. Be cautious - making a payment or even promising to pay could reset the clock on the debt. To protect yourself and handle the situation correctly, it’s wise to consult an attorney who can explain your rights and provide guidance.
To stop a debt collector from contacting you without acknowledging the debt, you can send them a written request asking them to stop all communication. Under the Fair Debt Collection Practices Act (FDCPA), they are required to comply, except in cases where they need to notify you about specific actions, such as filing a lawsuit.
Make sure to send this request via certified mail and keep a copy for your records. Once they receive your request, they are only allowed to contact you regarding legal actions they may take.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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