Operation Collection Protection Secures $2 Million Civil Penalty Against President of Debt Collection Company

by Goodwin
Contact

Goodwin

On April 12, 2017, the Federal Trade Commission (FTC) announced that it had secured a $2 million civil penalty against the president of a debt collection company for violating the Fair Debt Collection Practices Act (FDCPA) in United States v. Commercial Recovery Systems, Inc.—one of over a hundred cases brought in connection with the coordinated effort by the FTC and other enforcement agencies to crack down on abusive debt collectors known as “Operation Collection Protection.

As LenderLaw Watch has previously reported here, Operation Collection Protection was announced back in November 2015, when the FTC, the Consumer Financial Protection Bureau (CFPB), and other law enforcement authorities around the country stated their intent to implement the first coordinated federal-state enforcement initiative targeting deceptive and abusive debt collection practices.  According to the November press release, among the practices targeted by Operation Collection Protection include “illegal tactics such as harassing phone calls and false threats of litigation, arrest, and wage garnishment.”

In its Memorandum Opinion and Order on the United States’ motion for summary judgment in Commercial Recovery Systems, Inc., the court observed that the defendant debt collection company—Commercial Recovery Systems, Inc. (CRS)—was a third-party debt collector that primarily collected consumer debt, including auto loans and credit card debts, on behalf of the original creditors.  CRS employees were incentivized to maximize their debt collection through rewards that included commissions, access to the company’s luxury suite at AT&T Stadium, and expensive dinners and lunches.  Despite CRS’s assertions that it provided new employees with an FDCPA compliance test and had a full-time employee to monitor calls for FDCPA compliance, former employees reported that “FDCPA training at CRS was virtually nonexistent,” “newly hired employees were on the floor collecting the day they were hired,” “no formal disciplinary system for FDCPA violations existed at the company,” and employees were only terminated for FDCPA violations when their actions resulted in a lawsuit against the company.

The court found that CRS’s collection practices generated a large number of complaints, including reports that CRS collectors were falsely representing or implying:

  1. the character or legal status of a debt;
  2. that Defendants’ collectors were attorneys or that a communication was on behalf of an attorney;
  3. that nonpayment of a debt would result in the filing of a lawsuit or other legal action against the consumer; and
  4. that nonpayment of a debt would result in the seizure, garnishment, or attachment of a person’s property or wages.

After reviewing samplings from CRS’s production of audio logs demonstrating that CRS engaged in these practices, the court noted that each of these four practices were explicitly barred by the FDCPA, and therefore held that CRS’s actions were in violation of the FDCPA.  In holding CRS’s president personally liable for these actions, the court found that he “not only played a role in formulating the policies and practices that resulted in the violative acts, but in fact actually set the policies of [the] company.”  The court held that civil penalties under the FDCPA were especially warranted against the president because the summary judgment record supported that he had actual or constructive knowledge of the violations.

Companies that engage in debt collection—and their officers—should stay apprised of Operation Collection Protection and developments like the $2 million civil penalty in Commercial Recovery Systems, Inc.  These industry participants should review their policies and procedures and ensure that they do not permit practices like the ones described in the Commercial Recovery Systems, Inc. case., Companies might consider, in particular, evaluating their incentive structures and internal FDCPA training with an eye towards preventing the onset of unlawful debt collection practices.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.