The debt collection industry continues to be a major focus of the Federal Trade Commission’s enforcement efforts, as shown by the agency’s decision to simultaneously announce two settlements last week with Tennessee and New York debt collectors involving different alleged violations of the Fair Debt Collection Practices Act (FDCPA) and the FTC Act. The settlements require the Tennessee and New York companies to pay civil penalties of respectively $1.5 million and $1.2 million (with all but $490,000 of the latter amount suspended due to the defendants’ inability to pay).
According to the FTC’s complaint filed in a Tennessee federal court, the Tennessee debt collection company, which was alleged to have made between 10,000 and 15,000 calls daily in an attempt to collect on approximately one million consumer accounts annually, violated the FDCPA and Section 5 of the FTC Act by conduct that included:
Repeatedly calling consumers and accusing them of owing debts that they did not owe, including after they had told the company they were not the individuals who owed the debts or asked the company in writing to cease communications
Contacting consumers at work while knowing that their employers did not allow the calls
Making unauthorized withdrawals from consumers’ bank accounts
Improperly communicating with third parties, including disclosing consumers’ alleged debts to third parties through communications that included voicemail messages left on general business lines or shared home lines and asking third parties to pass messages to the consumer on the company’s behalf
In addition to the $1.5 million civil penalty, the stipulated order contains a permanent injunction prohibiting the company from continuing to engage in the conduct alleged in the FTC’s complaint as well as any other conduct that violates the FDCPA or FTC Act. The order also requires the company to take specific steps to address the FTC’s allegations. For example, when a consumer disputes a debt’s validity or amount, the company must either cease collection (in which case it may not sell or transfer the debt) or suspend collection until it has conducted a reasonable investigation and determined whether the consumer owes the debt.
The order also includes content requirements for recorded messages left by the company, documentation requirements for telephone calls to obtain location information, and a required disclosure to be included on all written communications sent to debtors for the purpose of collecting past-due debts (which includes advice on how consumers can complain to the FTC about the company’s conduct). The requirements for recorded messages track the standards for such messages set out by the FTC in its July 2013 settlement with Expert Global Solutions.
The FTC’s complaint filed in a New York federal court against several affiliated New York debt collection companies and their individual principals included alleged violations of the FDCPA and FTC Act similar to those alleged in its Tennessee complaint. These alleged violations included improperly disclosing consumers’ alleged debts to third parties and continuing to call consumers who had told the companies they did not owe the debts. The complaint also alleged the defendants:
Engaged in a ruse to get consumers to call the defendants by leaving pre-recorded messages that encouraged consumers to call a specified number to take advantage of pretend financial relief such as a “tax season relief program,” “stimulus package,” “hardship settlement,” or “balance transfer option”
Threatened to collect debts that were beyond the statute of limitations
Attempted to collect interest without a statutory or contractual basis or where the previous owner of the debt had waived the collection of interest for certain time periods
In addition to requiring the defendants to pay $490,000 of a partially suspended $1.2 million civil penalty, the stipulated order permanently enjoins the defendants from violating the FDCPA, including by engaging in conduct alleged in the complaint, and misrepresenting consumers’ liability for interest. The order also imposes requirements for investigating disputed debts and requires the defendants to make a specified disclosure in all written collection communications advising consumers how they can complain to the FTC about the defendants’ conduct, as well as additional specified disclosures in communications concerning debts that are or may be time-barred. The required time-barred debt disclosures track those required by the FTC in its January 2012 settlement with Asset Acceptance.
The debt collection industry continues to be a major Consumer Financial Protection Bureau focus, with the CFPB nearing the issuance of proposed debt collection regulations.