FTC Highlights Expanded Work on Debt Collection Issues over the Past Year

The Federal Trade Commission stepped up enforcement of the Fair Debt Collection Practices Act in the last year by cracking down on collectors who allegedly used abusive tactics to intimidate consumers, misled consumers while seeking payment on time-barred debts, used faulty data to identify debtors and the amount they owe, used deceptive tactics to collect on payday loans, and otherwise committed egregious violations of the Act and other federal laws, according to a letter the FTC sent to the Consumer Financial Protection Bureau.

“Protecting consumers from deceptive or abusive debt collectors is one of the most important things the FTC does,” said David Vladeck, Director of the agency’s Bureau of Consumer Protection.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to submit annual reports to Congress on the Fair Debt Collection Practices Act, a task previously assigned to the FTC.  The first CFPB report is due on March 20, 2012, and to assist the CFPB in preparing its report, the FTC’s letter summarizes its own recent work on debt collection issues.

Over the past year, the FTC has brought or resolved seven debt collection cases affecting hundreds of thousands of consumers.  This is the highest number that it has brought or resolved in any single year.  In two cases that included civil penalties, the FTC obtained $2.8 million and $2.5 million, respectively, for West Asset Management, Inc., and Asset Acceptance, LLC, the two largest civil penalty amounts the agency has ever obtained for alleged violations of the Fair Debt Collection Practices Act.

The FTC also filed actions against payday lenders American Credit Crunchers, LLC for allegedly making misrepresentations to collect on payday loan debts that they in fact weren’t authorized to collect on, or that consumers did not owe; and LoanPoint, LLC and Payday Financial, LLC for allegedly misrepresenting that they could lawfully garnish supposed debtors’ wages without obtaining a valid court order.  The FTC charged two other debt collectors with especially egregious practices:  Defendants in Forensic Case Management Service, Inc., doing business as Rumson, Bolling & Associates, allegedly threatened physical harm to consumers, desecration of their deceased family members, and killing of their pets to persuade consumers to pay.  They also allegedly retained more fees from their clients than they had agreed to take.  Defendants in Rincon Debt Management Services, LLC targeted English- and Spanish-speaking consumers, impersonating process servers and other officials, and falsely threatening to sue and arrest those whom they claimed owed money, the FTC alleged.

In outlining the FTC’s other debt collection enforcement efforts, the Commission noted its new policy statement addressing whom debt collectors can contact if an alleged debtor has died and what collectors can do in collecting on debts in these circumstances. The FTC also filed two “friend of the court” briefs in federal court.  The first amicus brief opposing a proposed class action settlement with debt buyer Midland Funding LLC argued that the settlement would require consumers to surrender important protections provided by the Fair Debt Collection Practices Act in exchange for a minimal payment.  The FTC also joined the Solicitor General’s office in filing an amicus brief in Fein, Such, Kahn, & Shepard PC advocating that the U.S. Supreme Court decline to hear an appeal from an appellate court decision addressing whether the Fair Debt Collection Practices Act applies to collector communications with consumers’ attorneys.

The letter also references the FTC’s consumer education work, as well as its 2011 Debt Collection 2.0 workshop on protecting consumers amid technological change in the industry, a pending study of the debt buying industry, and follow-up work from the agency’s 2010 report on debt collection litigation and arbitration, Repairing A Broken System:  Protecting Consumers in Debt Collection Litigation and Arbitration.

The Commission vote approving the report was 4-0.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FTC File No. P064803)