Federal Trade Commission Cracks Down on Unfair Debt Collection
Some debt collection companies are harassing, deceiving and threatening consumers in an effort to collect debts they may or may not still owe. Consumers should be aware of their right to be treated fairly by debt collection agencies. The Federal Trade Commission (FTC) has a mission to protect American consumers, and one of the agency's mandates is to guard consumers from deceptive or fraudulent practices. One such deceptive and fraudulent practice is unfair debt collection. Many state agencies also enforce consumer protection statutes against debt collectors
If you owe money for a vehicle loan, a mortgage, medical bills or credit card accounts then you are a debtor. If you fall behind on your debts, then a debt collector may contact you for payment. However, you do have a right to be treated fairly by the debt collectors who contact you.
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Some of these debt collectors are agencies hired by the original creditor to collect money for them, but others are debt purchasing companies-companies that buy up bad debts for pennies on the dollar and attempt to collect on them. In some cases, those companies buy debts that they know are no longer valid, realizing that a certain debtors won't know any better or will find themselves in a bind and pay the debt anyway to clear their credit.
The Federal Trade Commission originally passed the Fair Debt Collection Practices Act (FDCPA) in 1977 to "eliminate abusive debt collection practices by debt collectors." and ".to protect consumers against debt collection abuses." The FTC educates consumers about their rights under the act and works to stop companies who do not comply with the law.
The FDCPA prohibits a debt collector from harassing you, making false statements or engaging in unfair practices to collect a debt.
Debt collectors may not harass you by calling you at inconvenient times or continuing to contact you after you have properly stated you do not owe the debt. They may not call continuously to annoy you or threaten to harm you.
Debt collectors may not falsely imply they are someone else like an attorney, government agent or credit bureau employee. They cannot mislead you by misrepresenting the amount of your debt or saying they will seize, garnish or sell your property or wages unless it is legal to do so and they intend to do so.
Debt collectors are not allowed to collect amounts greater than the original debt unless permitted by state law. They do not have the right to take your property illegally.
Unfortunately, even though the law restricts these unfair practices and the FTC enforces the law, many debt collection companies continue to use the methods described and other methods to illegally collect debts from consumers.
Some debt collectors even try to collect on debts that have been discharged through a consumer's bankruptcy petition. If you filed a Chapter 7 bankruptcy petition, any debts discharged in your bankruptcy judgment are not legal for a debt collection agency to pursue for payment.
Consumers have the right to sue a collector who commits any of these illegal activities listed above. Also, consumers may report any abusive debt collector to their state's Attorney General's office or the Federal Trade Commission.
Consumers can read the FTC's informative brochure explaining Fair Debt Collection.
Take a look at some examples of debt collectors who have been caught for engaging in unfair debt collection practices and ultimately charged with a fine by the FTC.
Recent FTC and State Actions against Debt Collectors / Debt Purchasing Companies
Spanish-speaking Consumers Specifically Targeted in Extortion Scheme
Lydia Parnes, Director of the FTC's Bureau of Consumer Protection stated, "We will aggressively pursue companies that use these tactics to extort money from consumers." In this instance, she is specifically describing the tactics used by Tonor Records, dba Tono Music and Professional Legal Services, Tono Publishing, Promo Music, Millennium Three Corp., and Ducle Ulgade run by Luis Roberto Ruiz and Maria Oceguera in Los Angeles County, California.
An FTC complaint charges the defendants with violating the FTC Act and Fair Debt Collection Practices Act from 2003 to 2005 while they sold an English language course called "Ingles con Ritmor" that was advertised on the web sites and on Spanish television stations.
The defendants advertised the course as a government or non-profit subsidies sponsored program supposedly free of charge. However, the shipping and handling fee amounted to $100-$169. Even worse, the defendants subsequently posed as third-party debt collectors and attempted to collect additional money from the customers. The evidence in this case shows that the customers didn't have any such outstanding debts for which the defendants were attempting to collect in amounts around $900. The defendants harassed and threatened the customers with lawsuits and jail if they didn't pay the debts.
A U.S. district court judge has ordered a restraining order to freeze the defendants' assets. The FTC is working to make the defendants give up the money earned through the violations and permanently stop them from any similar activities.
Another Settlement Related To FTC Charges against CAMCO for Unfair Debt Collection
Joshua Raush is the last defendant to settle in the case brought by the FTC against Capital Acquisitions and Management Corporation (CAMCO). The original charges against CAMCO included violations of the Federal Trade Commission Act and the Fair Debt Collection Practices Act. Most of the debts being collected by CAMCO were old and unenforceable.
Raush was named as one of the defendants in the case. CAMCO agreed to a $1 million settlement to offset their illegal debt collection actions. Now Raush has agreed to settle the charges against for threatening and harassing consumers for old debts. The settlement prohibits Raush from participating in any debt collection activities. If the FTC later finds he misrepresented his financial condition, he will be charged with a $15 million judgment to cover the affected consumers injuries.
Idaho Department of Finance Shuts Down Unlicensed Collection Agency
The Idaho Department of Finance announced the issuance of a Cease and Desist Order against Cohen, Powers and Stone, an apparently unlicensed collection agency operating out of St. Louis, MO.
The March 2007 order came after reports that Cohen, Powers and Stone had used unlawful threats of criminal prosecution and had used aggressive, illegal collection tactics.
Gavin Gee, Director of the Idaho Department of Finance, said that under state and federal laws, collection agents are required to "deal openly, fairly and honestly, and only with a license, when collecting debts in Idaho." He went on to say that legitimate collection agencies do not use lies and harassment techniques in their collection activities.
If you live in Idaho and believe you have been subject to illegal threats or harassment by a collection agency, contact the Department of Finance. Other states maintain similar agencies to take action against debt collectors who violate the law and consumer rights.
FTC Bans CAMCO from All Debt Collection Activities
Ending a nearly three-year case against Capital Acquisitions and Management Corp (CAMCO), RM Financial and their principals, the Federal Trade Commission (FTC) agreed to a $1 million settlement for the collection agency's unfair and deceptive debt collection practices.
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The FTC originally charged Camco and the affiliated companies in 2004 for threatening and harassing thousands of consumers while engaging in their debt collection practice. The companies used abusive and deceptive collection techniques to get consumers to pay old and unenforceable debts. Many of the debts may have at one time been legitimate but were later discharged in bankruptcy, disputed or already settled. The FTC charged a $300,000 penalty and banned the companies and individuals from using any illegal collection practices in the future.
However, in December 2004, the FTC again sued the defendants for continuing to use unfair debt collection methods. Camco employees were allegedly attempting to collect falsified debts and old debts that were past the statute of limitations. Shortly thereafter, the company was completely shut down.
The final $1 million settlement represents income Camco and its affiliates received from their illegal debt collection activities. The US District Court for the Northern District of Illinois Eastern Division entered a permanent injunction against the owners and managers prohibiting all of them from engaging in future debt collection activities.
Applied Card Systems Inc. Charged With Harassing Consumers
In 2004, the FTC filed a complaint charging Applied Card Systems, Inc. and Applied Card Systems of Pennsylvania, Inc. with repeatedly harassing third parties of consumers whose alleged debts they were collecting. Consumers reported the company would call their relatives, neighbors and employers to collect the debts. When the third parties indicated they had no information and asked the representatives to stop calling, the representatives continued to call and occasionally used abusive or obscene language.
The FTC issued a consent order to prohibit the companies from harassing and abusing third parties related to a debtor. The order additionally bars the companies from making false representations, making threats to take action unless they intend to do so, or collecting and applying amounts other than what was originally agreed to when the debt was first initiated.
D.C. Credit Services Penalized For Submitting Inaccurate Information to Credit Reporting Agencies
D.C. Credit Services, Inc. and company co-owner David Cohen were charged with intentionally giving incomplete and inaccurate information to credit reporting agencies. Even after consumers disputed the debt, the collection company furnished the adverse information to the consumer reporting agencies. The FTC complaint also indicated the defendants used harassing, abusive and threatening language with the consumers.
The FTC penalized D.C. Credit Services and Cohen $300,000 in 2002 for violating the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. David Cohen was permanently banned from ever engaging in debt collection activities again.
FTC Takes Action When Spanish Speaking Consumers Rights Were Violated
In 2002, the FTC made its first enforcement action against a debt collection company for violating the rights of Spanish-speaking consumers. United Recovery Systems, Inc. (URS) was charged with repeatedly violating the Fair Debt Collection Practices Act by contacting third parties including consumers' parents, children, and co-workers. URS allegedly threatened to file a collection suits against the consumers without intending to do so. Representatives for URS also made inappropriate statements implying that the consumer's failure to pay might land them in jail.
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The FTC charged the company a civil penalty of $240,000 and required URS to inform consumers in writing that they can stop the company from contacting them about disputed debts. The consent decree also required URS to provide the consumers with a phone number and address the consumer can call to complain about the way URS attempts to collect a debt. The settlement further requires URS must investigate and respond to any consumer complaints.