Teaching the Fair Debt Collection Practices Act to Legal and Ethical Environment of Business Undergraduate Students Through a Role‐Play Experiential Learning Exercise

• DOI: http://doi.org/10.1111/jlse.12061
• Published date: 01 August 2017
• Date: 01 August 2017

Journal of Legal Studies Education

Volume 34, Issue 2, 207–240, Summer 2017

Teaching the Fair Debt Collection

Practices Act to Legal and Ethical

Environment of Business

Undergraduate Students Through

a Role-Play Experiential Learning

Exercise

Konrad S. Lee∗and Matthew I. Thue∗∗

I. INTRODUCTION

The following is a description of a role-play exercise for teaching the Fair

Debt Collection Practices Act (FDCPA)1to an introductory Legal and Ethical

Environment of Business Law (Business Law) undergraduate class. Part II

provides the context for consumer debt in the United States. Part III explains

the problems of debt collection. Part IV offers a brief introduction to the

applicable federal consumer protection law for debtors. Part V explains why

role plays are effective in teaching the FDCPA and outlines how to prepare

for the role-play exercise. Part VI presents the role-play exercise. Part VII

contains the instructor notes to accompany the role play. Part VIII provides

a framework for the instructor to measure the learning goals and eff‌icacy of

the exercise.

∗Associate Professor in the Practice of Law and Ethics, Department of Management, Jon M.

Huntsman School of Business, Utah State University.

∗∗Adjunct Professor of Business Law, Department of Management, Jon M. Huntsman School of

Business, Utah State University.

115 U.S.C. §§ 1692-1692p (2012).

C2017 The Authors

Journal of Legal Studies Education C2017 Academy of Legal Studies in Business

207

208 Vol. 34 / The Journal of Legal Studies Education

II. THE SCOPE OF CONSUMER DEBT IN AMERICA

Currently, the aggregate debt in U.S. households2is $12–13 trillion.3This

represents an overall debt-to-GDP4ratio of eighty percent,5with an average

household debt of $100,000+.6This debt manifests itself in a staggering array

of loan products and interest rates.7According to a recent study, sixty-nine

percent of all households are carrying debt, with thirty-six percent holding a

mortgage on real estate, nineteen percent carrying student loans, twenty-nine

percent carrying car loans, and thirty-f‌ive percent with outstanding balances

on credit cards.8

The growth rate of household debt and leverage is equally remark-

able. Between 2000 and 2007, aggregate household debt doubled.9It has

2The U.S. Census Bureau def‌ines a household by its occupants: “A ‘household’ comprises

all persons who occupy a ‘housing unit,’ that is, a house, an apartment or other group

of rooms, or a single room which constitutes ‘separate living quarters.’” U.S. CENSUS BU-

REAU,STATISTICAL ABSTRACT OF THE UNITED STATES: 1999, 6 (1999), http://www2.census.

gov/library/publications/1999/compendia/statab/119ed/tables/sec01.pdf.

3FED.RESERVE BANK OF NEW YORK,QUARTERLY REPORT ON HOUSEHOLD DEBT AND CREDIT 3(Feb.

2017), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/

HHDC_2016Q4.pdf. This amount is down slightly from its peak in 2008. Id

4Gross domestic product (GDP) is the monetary value of all the f‌inished goods and services

produced within a country’s borders in a specif‌ic time period. See J. Vernon Henderson et al.,

Measuring Economic Growth from Outer Space, 102 AM.ECON.REV. 994-1028 (2012).

5FED.RESERVE BANK OF ST.LOUIS,HOUSEHOLD DEBT TO GDP FOR UNITED STATES, https://

fred.stlouisfed.org/series/HDTGPDUSQ163N (last visited Mar. 20, 2017).

6ERIN ELISSA, 2016 HOUSEHOLD CREDIT CARD DEBT STUDY (2016), https://www.

nerdwallet.com/blog/average-credit-card-debt-household/ (last visited Mar. 22, 2017).

7REN S. ESSENE &WILLIAM APGAR,JOINT CTR.FOR HOUSING STUDIES OF HARVARD UNIV.,

UNDERSTANDING MORTGAGE MARKET BEHAVIOR:CREATING GOOD MORTGAGE OPTIONS FOR

ALL AMERICANS 1 (2007), http://www.jchs.harvard.edu/sites/jchs.harvard.edu/f‌iles/mm07-

1_mortgage_market_behavior.pdf.

8Id. For a ref‌ined statistical abstract of United States of mortgage debt, see BD.OF

GOVERNORS FED.RESERVE SYS., MORTGAGE DEBT OUTSTANDING, https://www.federalreserve.

gov/econresdata/releases/mortoutstand/current.htm (last visited Mar. 22, 2017). For a detailed

breakdown of credit card debt in the United States, see ROBERT HARROW,AVERAGE CREDIT CARD

DEBT IN AMERICA: 2016 FACTS AND FIGURES (2016), https://www.valuepenguin.com/average-

credit-card-debt.

9See FED.RESERVE BANK OF ST.LOUIS,HOUSEHOLDS AND NONPROFIT ORGANIZATIONS;CREDIT

MARKET INSTRUMENTS;LIABILITY,LEVEL, https://fred.stlouisfed.org/series/CMDEBT (last vis-

ited Mar. 22, 2017).

2017 / Teaching the Fair Debt Collection Practices Act 209

quadrupled since World War II.10 The household debt-to-income ratio has

been creeping up steadily over the last several decades. It was under thirty

percent in the early 1950s.11 After coming close to one hundred percent

in 2008, the ratio has more recently settled back down at around eighty

percent.12

Part of this expanding indebtedness comes from consumer credit,13

which is composed of credit card debt, payday loans, and other consumer

f‌inance,14 and is generally held at higher interest rates than long-term secured

loans.15 Some interest rates are an effective zero rate, while others, such as

pay day or title loans, carry an annual rate of up to three hundred percent.16

10Id. For a discussion of factors that may have led to this increase, see LOUIS HYMAN,DEBTOR

NATION:THE HISTORY OF AMERICA IN RED INK (POLITICS AND SOCIETY IN MODERN AMERICA)

(2012).

11FED.RESERVE BANK OF ST.LOUIS,HOUSEHOLDS AND NONPROFIT ORGANIZATIONS;CREDITMAR-

KET INSTRUMENTS;LIABILITY,LEVEL/GROSS DOMESTIC PRODUCT 100, https://fred.stlouisfed.

org/graph/?graph_id=136424&category_id=7519 (last visited Mar. 22, 2017).

12Id.

13FED.RESERVE BANK OF NEW YORK,QUARTERLY REPORT ON HOUSEHOLD DEBT AND CREDIT

3 (Feb. 2017), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/

pdf/HHDC_2016Q4.pdf (last visited Mar. 20, 2017). The FDCPA def‌ines “consumer” as “any

natural person obligated or allegedly obligated to pay any debt.” 15 U.S.C. § 1692a(3) (2012).

14The Board of Governors of the Federal Reserve System def‌ines consumer credit as “credit

that is used by individuals for nonbusiness purposes and that is not collateralized by real

estate or specif‌ic f‌inancial assets like stocks and bonds. Consumer credit includes auto

loans, home-improvement loans, appliance and recreational goods credit, unsecured cash

loans, mobile-home loans, student loans, and revolving consumer credit.” BD.OF GOVER-

NORS OF THE FED.RESERVE SYS., REPORT TO THE CONGRESS ON PRACTICES OF THE CONSUMER

CREDIT INDUSTRY IN SOLICITING AND EXTENDING CREDIT AND THEIR EFFECTS ON CONSUMER

DEBT AND INSOLVENCY 1, n.1 (2006), https://www.federalreserve.gov/boarddocs/rptcongress/

bankruptcy/bankruptcybillstudy200606.pdf. The Bankruptcy Code def‌ines “consumer debt” as

“debt incurred by an individual primarily for a personal, family, or household purpose.” 11

U.S.C. § 101(8) (2012).

15See Ronald J. Mann, Bankruptcy Reform and the “Sweat Box” of Credit Card Debt, 2007 U. ILL.L.

REV. 375, 384 (2007) (noting that credit card issuers’ “most prof‌itable customers are sometimes

the least likely to ever repay their debts in full”).

16Christopher Nieger, Why Car Title Loans Are a Bad Idea, CNN.COM (Oct. 8, 2008),

http://www.cnn.com/2008/LIVING/wayof‌life/10/08/aa.car.title.loans. For a bibliography of

cases involving predatory interest rates, see Hilary B. Miller, Payday Loans and Predatory Lending,

Consumer Financial Litigation, PLI Corp. Law & Practice Course, Handbook Series No. B-1242

(2001), WL 1242 PLI/Corp. 113, 127.