CCM Collections & Recovery 2 — Questions and Answers
Question 1: Under the Fair Debt Collection Practices Act (FDCPA), which communication time restriction applies to third-party collectors?
- Calls prohibited before 8 a.m. or after 9 p.m. local time of the debtor (Correct answer)
- Calls prohibited before 9 a.m. or after 8 p.m. local time of the creditor
- Written notices must be sent within 5 days of first contact
- Collectors must wait 30 days before placing a second call
Correct answer: Calls prohibited before 8 a.m. or after 9 p.m. local time of the debtor
The FDCPA prohibits third-party debt collectors from calling consumers before 8 a.m. or after 9 p.m. local time of the debtor.
Question 2: A debtor sends a written cease-communication request to a third-party collector. What is the collector's required response?
- Cease all further contact except to confirm no further action or to notify of specific legal action (Correct answer)
- Immediately refer the account to an attorney
- Continue contact but only by mail
- Transfer the account back to the original creditor within 10 days
Correct answer: Cease all further contact except to confirm no further action or to notify of specific legal action
Upon receiving a written cease-communication request, the FDCPA requires the collector to stop contacting the debtor except to confirm cessation or to advise of specific remedies.
Question 3: Which metric best measures the effectiveness of a collections department over a rolling period?
- Days Sales Outstanding (DSO) (Correct answer)
- Gross profit margin
- Inventory turnover ratio
- Current ratio
Correct answer: Days Sales Outstanding (DSO)
DSO measures the average number of days receivables remain outstanding, directly reflecting collection efficiency.
Question 4: A debtor disputes a debt in writing within 30 days of initial notice. Under the FDCPA, what must the collector do?
- Cease collection activity and provide verification of the debt before continuing (Correct answer)
- Immediately file suit to establish the debt
- Remove the debtor's credit file entry within 5 business days
- Transfer the account to a different collector
Correct answer: Cease collection activity and provide verification of the debt before continuing
The collector must stop collection efforts and mail verification of the debt before resuming any collection activity.
Question 5: In a Chapter 7 bankruptcy proceeding, what is the effect of the automatic stay on a creditor's collection efforts?
- All collection actions, including lawsuits and calls, must immediately stop (Correct answer)
- Only wage garnishments are paused; calls may continue
- Secured creditors may continue foreclosure actions unimpeded
- The stay applies only to unsecured creditors
Correct answer: All collection actions, including lawsuits and calls, must immediately stop
The automatic stay halts virtually all collection actions against the debtor immediately upon the bankruptcy filing.
Question 6: Which collection strategy involves selling a portfolio of delinquent accounts to a third party at a discount?
- Debt sale / portfolio sale (Correct answer)
- Charge-off acceleration
- Skip tracing
- Dunning letter escalation
Correct answer: Debt sale / portfolio sale
A portfolio sale transfers ownership of delinquent accounts to a buyer at a discounted price, allowing the creditor to recover immediate cash.
Question 7: What is 'skip tracing' in the context of collections?
- Locating a debtor who has moved or disappeared without a forwarding address (Correct answer)
- Tracking the aging bucket movement of delinquent accounts
- Identifying accounts approaching the statute of limitations
- Reviewing the debtor's payment skip history
Correct answer: Locating a debtor who has moved or disappeared without a forwarding address
Skip tracing uses investigative techniques and data sources to locate a debtor who cannot be reached at their known address.
CCM Collections & Recovery 2
Under the Fair Debt Collection Practices Act (FDCPA), which communication time restriction applies to third-party collectors?