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.
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