Debt Collectors Settle with FTC, Agree to Stop Deceiving and Abusing Consumers

Defendants in a debt collection operation that allegedly sought payment for bogus magazine subscription debts have settled with the Federal Trade Commission.

The FTC alleged in its complaint that the defendants knew, or should have known, that some of the magazine subscription debts they were collecting were not valid. The defendants, who handle collection of hundreds of thousands of accounts each year, violated the FTC Act, the Fair Debt Collection Practices Act, and the Telemarketing Sales Rule, according to the complaint.

The proposed settlement order, filed by the Department of Justice on the FTC’s behalf, bars Luebke Baker and Associates, Inc., Kevin Luebke, and other defendants from representing that a consumer owes a debt without having a reasonable basis to do so, and from making any other misrepresentations when collecting debts or selling goods and services.  It also requires the defendants to conduct a reasonable investigation when a consumer disputes a debt or when the defendants otherwise have reason to question whether the debt is valid.

Under the proposed settlement order, when the defendants attempt to collect debts, they must provide consumers with disclosures about their rights under the Fair Debt Collection Practices Act.  The proposed order also requires the defendants to inform their collection employees of their personal obligations under the Act.

The Luebke defendants allegedly collected on debts for magazine subscriptions despite the fact that the FTC had successfully sued the company that originally sold the magazine subscriptions for deceptive marketing.  The defendants were notified of a 2003 federal court order against Cross Media Marketing Corp. that placed special requirements on anyone attempting to collect payment for these magazine subscriptions.

The FTC alleged that the Luebke defendants ignored these requirements and repeatedly told consumers the debts were due and payable.

The complaint also alleges that the Luebke defendants:

• illegally masked their identity and sent false information over caller ID, falsely posing as Ed McMahon, attorneys from a law firm, and other entities;
• falsely told consumers that magazine subscription debts are exempt from the statute of limitations; and  
• illegally threatened to garnish wages and take other unintended legal actions.

The defendants also marketed a credit repair CD titled “Credit Solutions,” allegedly collecting an up-front fee before providing any goods or services, in violation of the Telemarketing Sales Rule, which bans advance fees imposed by companies selling credit repair goods and services, according to the complaint.

The complaint and proposed settlement against Luebke Baker and Associates, Inc. and Kevin Luebke also name as defendants Leslie M. Farrar, Matthew T. Scott, and Joel P. Ferguson. They also name Kevin Luebke’s wife, Julissa Luebke, as a relief defendant.

The proposed settlement imposes monetary judgments totaling $3.1 million – $2.3 million in civil penalties for violations of the Fair Debt Collection Practices Act, $730,000 in disgorgement for collecting Cross Media Marketing Corp. accounts in violation of the FTC Act, and $45,000 in restitution to consumers for charging an advance fee for a credit repair product in violation of the Telemarketing Sales Rule.  In addition, a judgment is imposed against relief defendant Julissa Luebke for $420,000.  The judgments will be suspended, based on most of the defendants’ inability to pay, when Farrar pays $20,000.  If it is later determined that the financial information the defendants provided was false, the full amount of the judgments will become due.

For consumer information about dealing with debt collectors, see Debt Collectio n
FAQs:  A Guide for Consumers.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice and to approve the proposed consent decree was 3-1, with Commissioner J. Thomas Rosch voting no.  The Department of Justice filed the complaint and proposed consent decree on the FTC’s behalf in the U.S. District Court for the Central District of Illinois, Peoria Division, on May 11, 2012.  The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the defendant has actually violated the law.  This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation.  Consent decrees have the force of law when signed by the District Court judge.

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.