United States: FTC Continues Crackdown On Illegal Debt Collection Activities

Last Updated: January 14 2016
Article by Julie D. Hoffmeister and David N. Anthony

On January 7, the Federal Trade Commission announced four new enforcement actions targeting debt collectors and continuing the FTC's nationwide crackdown of illegal debt collection tactics. The cases are part of Operation Collection Protection, a coordinated federal-state enforcement initiative targeting deceptive and abusive debt collection practices. Over the past year, 130 actions have been brought by more than 70 law enforcement partners in the Operation Collection Protection initiative.

The FTC actions announced on January 7 include the following:

AFS Legal Services

National Payment Processing LLC; National Client Services LLC, also d/b/a AFS Legal Services; Omar Smith; and Ernest Smith were charged in a November 2015 FTC complaint alleging illegal, deceptive, and harassing debt collection tactics.

According to the complaint, the defendants operated a nationwide collection scheme to deceive consumers into paying purported debts through the use of threats of arrest, jail, and other legal action. Defendants claimed to posses the consumers' personal information such as Social Security numbers, financial account numbers, and the names and contact information of relatives, leading consumers to believe that the collection calls were legitimate. Defendants even impersonated investigators or law enforcement authorities and demanded immediate payment on the purported delinquent debts.

On January 5, the defendants agreed to be bound by a preliminary injunction, pending the litigation in which they are prohibited from using the illegal collection tactics described in the FTC's complaint and barred from activities that violate the Fair Debt Collection Practices Act ("FDCPA").

Samuel Sole and Associates

Defendants Premier Debt Acquisitions LLC d/b/a PDA Group LLC; Prizm Debt Solutions, LLC d/b/a PDS, LLC; Samuel Sole and Associates, LLC d/b/a SSA Group LLC and Imperial Processing Solutions; Charles Glander; and Jacob E. Kirbis have entered into a stipulated order that imposes a judgment of more than $2.2 million, which represents the amount of the defendants' illegal debt collection revenue.

The FTC complaint filed in May 2015 alleges that the defendants used false threats to extract payments from consumers – particularly false threats of arrest and false threats of litigation. For example, defendants would often claim that they were calling from "The State Officials Office" and threatened to dispatch "a uniformed officer to [the consumer's] home or place of employment to enforce" the action. Defendants' actions violated both the FTC Act's prohibition against unfair or deceptive acts or practices, and the FDCPA.

In addition to the monetary penalty, the stipulated order bans the defendants from debt collection activities, and prohibits them from misrepresenting material facts about finance-related products and services and from profiting from their former customers' personal information.

Warrant Enforcement Division

Defendants Municipal Recovery Services Corporation d/b/a Warrant Enforcement Division, and its owner, Marcos Neito, were also subject to an FTC enforcement action, in which the defendants agreed to settle charges that they violated the FTC Act and FDCPA by falsely implying that collection letters were from a municipal court and falsely threatening consumers with arrest if they did not pay their overdue bills.

The stipulated order prohibits the defendants from misrepresenting any material fact while collecting debts, including misrepresentations that the consumers will be arrested for failing to pay or threatening to take any action that cannot legally be taken. The order also imposes a nearly $200,000 judgment against defendants.

Williams, Scott & Associates

The final enforcement action was taken against Williams, Scott & Associates; WSA LLC d/b/a Warrant Services Association; and John Williams, for a nationwide debt collection scheme to deceive consumers into paying debts that the consumers did not actually owe or that defendant did not have the authority to collect. The defendants falsely claimed to be affiliated with federal and state agents, investigators, and other law enforcement agencies, and also pretended to be a law firm, in their attempt to deceive consumers.

The defendants were ordered to pay $3.9 million and were banned from further debt collection activities.

Based on these four enforcement actions, Operation Collection Protection continues to assert a strong presence in protecting consumers against illegal debt collection activities.

The Troutman Sanders’ Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here

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Authors
Julie D. Hoffmeister
David N. Anthony
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