Michigan Collections Manager License Practice Test

What is the minimum civil penalty if a debtor sues an agency for prohibited acts?

1. Equal to the damages incurred

2. Not less than 3 times actual damages or $150

3. Only attorney fees

4. None, no penalty applies

The correct answer is: Not less than 3 times actual damages or $150

The minimum civil penalty for a debtor suing an agency for prohibited acts under applicable laws is structured to ensure that debtors have a significant recourse option when their rights are violated. When the law provides for a penalty of not less than three times the actual damages suffered or a specified minimum amount, it is intended to discourage unfair practices and provide adequate compensation. This provision serves several purposes: it acts as a deterrent against violations by collection agencies, compensates debtors for the distress and disruption caused by those violations, and incentivizes agencies to adhere to ethical practices. By establishing a baseline penalty that includes a multiple of actual damages or a fixed amount, the policy aims to address both the compensatory and deterrent aspects of civil penalties in this context. This contrasts with the other potential options, which do not adequately reflect the intended consequences of prohibited acts in debt collection practices. For example, purely relying on incurred damages or attorney fees does not account for situations where those figures may be minimal, failing to provide sufficient redress for wronged debtors. Options that suggest no penalty applies altogether undermine the enforcement of ethical standards in debt collection.