The Federal Trade Commission (FTC) recently announced a settlement with a Houston debt collection company and its individual owner related to alleged violations of the Fair Debt Collection Practices Act (FDCPA). This action is the FTC’s latest demonstration to the debt collection industry that it does not intend to take a backseat to the Consumer Financial Protection Bureau (CFPB) when it comes to FDCPA enforcement.
According to the FTC’s complaint, which named both the debt collection company and its president and sole shareholder as defendants, the defendants violated the FDCPA and Section 5 of the FTC Act by conduct that included:
Falsely claiming that collection calls were made on behalf of an attorney or, when calling Spanish-speaking consumers, that the caller was an attorney
Making false threats to begin litigation or false claims that litigation has already begun
Using a deceptive scheme labeled a “Hard-Ship Program,” in which consumers were told they had to provide personal information to qualify for an assistance program when the defendants’ true purpose was to obtain such information to assist in future collection efforts
Deceiving consumers into paying transaction or convenience fees for telephone-authorized credit card, debit card, or check payments by leading them to believe such fees were required or could not be avoided, including by falsely telling consumers payments sent by mail were not accepted
The stipulated order imposes a $4 million penalty, but based on the defendants’ inability to pay, the FTC has agreed to suspend the remainder of the penalty upon payment of $100,000. The individual defendant is also required to transfer a motor home to a third party in an arms-length transaction or surrender it to the lienholder. The order bars the defendants from engaging in any practices that violate the FDCPA, including continuing to engage in the unfair and deceptive conduct alleged in the complaint.
The order also establishes a 10-year period during which the defendants must create and retain for five years certain records and, if certain specified changes occur, submit compliance reports. Such changes include a change in the corporate defendant’s structure or any entity in which it has an ownership interest and a change in the individual defendant’s role in any business activity.
The debt collection industry continues to be a major CFPB focus, with the CFPB nearing the issuance of proposed debt collection regulations.
Attorneys in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws, defend clients in FDCPA lawsuits and enforcement matters, and represent clients commenting on regulatory proposals. They are also preparing clients for CFPB examinations. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.