Debt collection double feature

The 2011 science fiction movie “The Adjustment Bureau” dealt with a dystopian future (Is there any other kind in sci-fi movies?) where mysterious forces plot against individuals. But for many consumers, Regional Adjustment Bureau, a Memphis-based debt collector, made their day-to-day reality just as dystopic. An FTC lawsuit against the company – and a separate action against Credit Smart, LLC, headquartered in Suffolk County, New York – reminds businesses that when it comes to debt collection, the use of “fiction” (science or otherwise) can run afoul of the FTC Act and the Fair Debt Collection Practices Act.

Regional Adjustment Bureau makes between 10,000 and 15,000 calls every day in an attempt to collect on close to a million consumer accounts annually.  But according to the FTC, in many cases, even after consumers told the company they didn’t owe the debt – for example, that their name, Social Security number, or address was different from the person who actually owed the money – the defendant continued to hound them.

And the calls kept on coming over and over, day after day. Even when consumers asked the company to stop, the FTC says the harassment continued. In addition, collectors allegedly called people at work even though they knew or should have known it was inconvenient for people to get calls there or that their employer prohibited personal calls.

The complaint also charges that the company was loose-lipped about the existence of debts, illegally disclosing information to consumers’ relatives, neighbors, employers, and co-workers. Loose-lipped and relentless, repeatedly calling third parties, too. In addition, collectors allegedly left voicemail messages on general business lines or shared home lines, meaning that people other than the consumer who owed money could find out. Another favorite tactic: asking third parties to pass messages to the consumer on the debt collector’s behalf.

In some cases, even when the company got a consumer’s approval to withdraw a certain amount from their bank account, the FTC says Regional Adjustment Bureau helped themselves to more. (For industry members who track the statutes carefully – and we hope that includes you – the complaint alleges that was an unfair practice under the FTC Act and an “unfair or unconscionable means to collect a debt” under the FDCPA.)

To settle the case, Regional Adjustment Bureau will pay a $1.5 million civil penalty. The proposed order bans false, deceptive, unfair, and harassing debt collection practices, and includes provisions designed to squelch the conduct challenged in the complaint. For example, in the future, if a consumer disputes the validity or amount of a debt, Regional Adjustment Bureau has two choices: 1) close the account and stop collection efforts; or 2) suspend collection until it investigates and verifies that the information is accurate. In addition, the order restricts how the company can use voicemail to collect debts.

Also on the marquee of this debt collection double feature is a lawsuit against Credit Smart and affiliated companies and individuals. (After reading the allegations, we’ll leave it to you to decide how smart it is to violate the FTC Act and FDCPA.) The complaint challenges illegal conduct similar to the Regional Adjustment Bureau lawsuit – ignoring consumers’ pleas that they had the wrong person and contacting third parties illegally – and addresses a few novel collection methods, too.

According to the FTC, Credit Smart left taped messages for consumers, suggesting they call a number for information about a “Tax Season Relief Program,” a “stimulus relief package,” or a “balance transfer program.” In reality, it was just a trick to get people on the phone.

Credit Smart also threatened to sue consumers (which they had no intention of doing), to garnish their wages (which they can’t do without a court order), or to have them arrested (which they had no legal right to do). In addition, the FTC says the defendants threatened to collect on old debts that were beyond the statute of limitations, refused to give consumers information about the debts they supposedly owed, and falsely claimed they owed interest.

The Credit Smart order imposes a $1.2 million civil penalty, all but $490,000 of which will be suspended due to the defendants’ financial condition. The settlement bans false threats of lawsuit, arrest, or wage garnishment; requires that the defendants explain to people certain legal rights about time-barred debts; and mandates that debt collectors tell consumers how to complain to the FTC at www.ftc.gov or 877-FTC-HELP.  Also prohibited: any variation on Credit Smart’s fiction about offering financial relief or assistance.

Consult the FTC's debt collection page for compliance resources.

 

6 Comments

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I see clients every day who tell me about how they continue to tell their debt collectors that they are not allowed to take personal calls at work, but their debt collectors continue to call their job. It's really a sinful and obnoxious business these debt collectors are in.

What about debt collectors who call 2 and 3 times a day? Or, call before 9 a.m. or after 9 p.m. in the supposed debtors time zone? Or call on Sundays, which is Gods day?

Thank you

What about finding other FTC resources for your easily obtained answers, since you found your way to this blog page?

http://www.ftc.gov/os/statutes/fdcpajump.shtm

What makes a call pattern excessive is relative. One has to ask: Was the agency told to stop or not? Did a person answer a call or not? How many days did the campaign last?

Per the FDCPA debt collectors have a default thirteen hour window for their calls, same as sales callers, each calendar day. Only state laws can overcome this and few do. Sunday is not "God's day" to non-Christians. We cannot ask all commerce and business to halt for a "blue law" mentality. That said, I believe a majority of collection agencies don't bother working Sundays, and many knock off early on Saturdays.

While financial penalties seem norm to the regulators, I wonder should restitution be done for individual persons who were harmed.

1. In cases when an individual was hounded by the calls, even when they never had unpaid debts, would the regulator require the debt collector to issues letters of apologies or some other kind of restitution. After all the idea of harassing at employers place, passing information to third parties, are tactics to cause reputational harm and coerce the individual to pay. Should not the debt collector be required to perform remediation for past actions?

2. If more money was withdrawn than authorized, will the excess be returned to the customer?

3. Are the fines linked to unfair revenues collected? If my revenue from unfair practices is greater than the fines imposed, then would not the business assume the fines as cost of business, instead of as a deterrent for unfair practices? It gets worse when the executives draw large compensations and not personally liable. They may profit and when caught the fines would be paid and at worst the business is liquidated. The executives still keep the money. At the least, should not the regulator require the company to claw back from the executives an amount that pays for the fines?

} Should not the debt collector be required to perform remediation

Did you read the civil complaints? They both ask for refunds to victims among the forms of relief. Doesn't mean that will happen, of course. As usual in these cases, the lawbreakers settled out without admitting fault. They will continue to abuse people to make up their losses. Their business model demands it.

Nothing is stopping individual victims from seeking their own relief in court. We might see real progress toward industry reform if more people did that rather than succumb to apathy and fear.

I don't understand why pay of the fine was suspended. If they couldn't pay, they should have been forced to use the same remedies ordinary debtors use.

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