Debt Collector Pays Largest Penalty Ever Obtained by FTC in a Debt Collection Case: $626,810

The Federal Trade Commission announced today that Robert James Smith, the owner of National Financial Services ("NFS"), a Baltimore, Maryland, debt collection agency, has paid a penalty of $625,810 to the U.S. Treasury stemming from a lawsuit filed by the U.S. Department of Justice, on behalf of the FTC, against NFS and Smith in 1991 for massive violations of the Fair Debt Collection Practices Act (FDCPA). In January 1993, the U.S. District Court for the District of Maryland found that NFS and Smith violated the FDCPA by, among other things, mailing collection letters to consumers that threatened lawsuits, when, in fact, the defendants did not sue consumers and did not intend to sue them. In July 1995, the same court ruled that NFS and Smith had mailed millions of the illegal collection letters and ordered the defendants to pay a civil penalty of $500,000. When NFS and Smith appealed to the Fourth Circuit Court of Appeals, that court affirmed the District Court's findings.

Of the amount that Smith paid, $50,000 constitutes a surcharge authorized by law because the government was forced to engage in post-judgment enforcement litigation in order to collect the debt. In addition, Smith paid $75,810 in interest accrued from the date the District Court ordered Smith to pay a civil penalty of $500,000.

"This penalty is the largest ever collected by the FTC in a debt collection case," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "The fact that the Commission and other federal agencies sought and obtained the surcharge and the interest on the civil penalty owed in this case illustrates the government's commitment to making defendants pay the judgments that courts award."

NFS and Smith refused to pay the civil penalty required by the court's order. The FTC, the Justice Department's Office of Consumer Litigation, and the Maryland U.S. Attorney's Office were forced to follow post-judgment collection procedures -- including a freeze on many of Smith's assets -- for more than a year before Smith finally agreed to pay the civil penalty. Because Smith put the federal agencies through these costly and time-consuming efforts, in addition to the initial civil penalty, the federal government was entitled to a ten percent surcharge under a federal debt collection statute and to post-judgment interest dating from the time the penalty was assessed by the District Court. Smith's payment of the $625,810 resolves the government's case against Smith and NFS.

Copies of the documents related to this case are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Copies of consumer education material about fair debt collection and other credit issues are available on the FTC's web site at: http://www.ftc.gov or from the Consumer Response Center. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(Civil Action No. L-91-226)
(FTC File No. X910020)
(January 1993 order: 820 F.Supp.228 (D. Md. 1993))