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From Banking and Finance Law Daily, August 8, 2014

Debt collectors pay FTC price for deceptive debt collection tactics

By Katalina M. Bianco, J.D.

The Federal Trade Commission has charged debt collectors in two states for deceptive practices. The debt collectors, one based in Memphis, Tenn., the other located outside New York City, N.Y. will pay civil money penalties to settle the FTC’s charges.

“The FTC is committed to protecting consumers from all types of deceptive and harassing debt collection tactics,” said Jessica Rich, Director of the Commission’s Bureau of Consumer Protection.

Regional Adjustment Bureau, Inc. The FTC charged the Memphis-based company, Regional Adjustment Bureau, Inc., (RAB) with unfair and deceptive debt collection practices in violation of the Federal Trade Act (15 U.S.C. §§ 45(a), 45(m)(1)(A), 53(b), and 56(a)) and the Fair Debt Collection Practices Act (15 U.S.C. §§ 1692-1692p). RAB engages in debt collection activities throughout the United States, collecting or attempting to collect approximately 900,000 to 1 million consumer accounts per year, according to the FTC’s complaint.

The FTC alleges that RAB uses false or deceptive means to collect or attempt to collect debts, including falsely claiming that persons owe debts that they do not owe. In many cases, RAB is told that they are speaking with the wrong person. Contacted persons have provided RAB with identification, such as Social Security numbers, to prove that RAB has the wrong person. Despite being informed they have the wrong person, RAB collectors continues to call these persons, and frequently, to attempt to collect debts from them. The FTC charges that the contact continues even though RAB does not obtain any new or additional information as to the person owing the debt.

Further, according to the FTC’s complaint, RAB has, in numerous cases, withdrawn funds from consumers’ bank accounts without obtaining consumers’ express informed consent for the withdrawals. The FTC also alleges that RAB:

  • calls consumers at their places of employment, even when knowing the calls are inconvenient or prohibited by employers;

  • discloses the existence of consumers’ debts to third parties, including their relatives, employers, and co-workers;

  • leaves messages on answering machines or voice mail stating they are debt collectors seeking the consumer for a debt that the consumer owes;

  • asks third parties to relay messages to the consumer; and

  • continues to call consumers and demand payment after receiving written demand from consumers to cease communications.

The FTC alleges that RAB collectors call consumers “repeatedly or continuously with the intent to annoy, harass, or abuse” them.

RAB stipulated order. RAB agreed to pay a $1.5 million civil penalty to settle the FTC charges under the stipulated order. Additionally, RAB is permanently prohibited from engaging in false, deceptive, unfair, and harassing debt collection practices. The order requires the company to address specific problematic conduct alleged in the FTC’s complaint. Specifically, when a consumer disputes the validity or the amount of a debt, RAB must either close the account and end its collection efforts, or suspend collection until it has conducted a reasonable investigation and verified that the information about the debt is accurate and complete. The order also restricts situations in which the company can leave voicemails that disclose the alleged debtor’s name and the fact that the person may owe a debt.

Credit Smart, LLC. Credit Smart, LLC is a debt collection organization based in Suffolk County, N.Y. The FTC’s complaint charges Credit Smart and several associates with unfair and deceptive tactics in violation of the FTC Act and FDCPA. Specifically, Credit Smart allegedly pretends to offer relief to consumers. Company associates leave pre-recorded messages that promise to provide information about various financial relief programs that do not exist, according to the complaint. The FTC charges that the calls were a ploy to get consumers to speak with debt collectors.

When Credit Smart collectors do speak with consumers, they falsely threaten to sue them, garnish their wages, or arrest them, none of which the collectors had the authority or ability to do, the FTC said in its complaint. Further, the collectors also allegedly threaten to collect on old debts barred by the statute of limitations, and often will reveal those debts to relatives, employers, and co-workers.

Stipulated order. The FTC’s stipulated order imposes a $1.2 million penalty on Credit Smart. However, because of the company’s inability to pay, Credit Smart will pay $490,000 to settle the FTC charges. The order prohibits the company and its associates from continuing their illegal debt collection tactics. They also must provide consumers with a disclosure that explains their rights regarding the collection of time-barred debt, and another explaining how to file a complaint with the FTC if they feel they are being treated unfairly.

Companies: Credit Smart, LLC; Regional Adjustment Bureau, Inc.

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