FTC Settlement is Largest Ever for a Debt Collection Agency

West Asset Management has agreed to pay $2.8 million, the largest civil penalty ever won by the FTC in a debt collection case, to settle charges that it violated the FDCPA when collecting debt from consumers.

West Asset Management employs over 1,500 collectors and manages collections on over 20 million delinquent accounts. The FTC alleged that West Asset Management, Inc. violated the FTC Act and Fair Debt Collection Practices Act when collecting debts from consumers. It would be easy to simply dismiss this as an example of a bad collection agency, but this is a major collection agency that is part of all the major trade organizations and the Federal Trade Commission continues to report more complaints about debt collectors than any other single industry.

Here are some of the FTC’s complaints against West Asset Management, all of which violated federal law:

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Debt Collectors looking to use Facebook, MySpace LinkedIn and other social media sites will have try another tactic. Last week, a Florida judge ordered Mark One Financial LLC, a debt collection agency, to stop using Facebook and other social media websites to locate debtors.

Mark One Financial had been sued for, among other things, using Facebook to locate a Tampa woman over her $362 late payment on her car loan. The presiding judge, W. Douglas Baird, ordered the Jacksonville, Fla. company to refrain from contacting the woman’s family or friends on Facebook.

Melanie Beacham filed a lawsuit last August against the collection agency. According to her complaint, Mark One sent several messages to Ms. Beacham herself and her family members on the Facebook networking site. Messages asked her family to have her call the agency asap about the alleged debt.

Billy Howard of the Morgan and Morgan law firm in Tampa, said the debt collectors violated his client’s privacy and the agencies actions constituted harassment under Florida law. He said that in the past few months, over a dozen potential clients have reached out to him because debt collectors have used social media sites to track them down or harass their friends and relatives.

“It’s the beginning of an epidemic,” Howard said, calling it “another weapon” unethical debt collectors can use, if allowed.

Allegedly, Mark One contacted Ms. Beacham up to 10 times a day by phone, sent text messages to her cell phone, called her neighbors and dispatched a paid courier to deliver a letter to her place of work. Last November, Mark One said it would not discuss Beacham’s case and denied breaking any Federal or Florida laws. However, the company did acknowledged that instructs its collectors to use Facebook to find people when they don’t respond to efforts at contact, like sending letters and making phone calls.

This is not an isolated case, as many consumers are filing suits relative to being contacted via social media. In one Chicago case, a man accepted a new friend request from a young woman in a bikini. But, much to his surprise, the account was a debt collector’s. The man figured this out when the new Facebook “friend” posted a message on his wall for all his friends to see. The message read: “Pay your debts, you deadbeat.”

Payday loan company Quik Cash has agreed to pay $170,000 to settle a collections fraud lawsuit filed by the Attorney General of Arizona. The lawsuit was originally filed in 2009 by former Arizona Attorney General Terry Goddard. Goddard lost a bid for the Governor’s office last year and is well known for his battles with payday lenders in Arizona. Payday Loans are now illegal in Arizona, largely due to Goddard’s efforts to eradicate the industry.

The lawsuit alleged that Quik Cash’s collections practices “raised an onerous burden” for the customers that they sued. Quik Cash claims it did not do anything illegal, but the Attorney General disagreed. Basically, Quik Cash sued Arizona customers over payday loan debts of $500 or less. However, they sued all of their Arizona customers and even some Nevada residents in Pima and Maricopa counties.

The catch? Many of these clients received loans at locations hundreds of miles away. This made it extremely difficult for the cash-strapped payday loan or cash advance customers to attend the hearings. Therefore, default judgments and subsequent garnishments were easy for the company to obtain.

According to a press release from the Arizona AG:

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The FTC has settled a case against a payday lender that illegally garnished consumers wage, among other illegal debt collection tactics. According to the FTC’s complaint, Ecash and GeteCash, offered loans to be paid back using borrowers’ future paychecks. Online loan applicants were required to check a check box indicating their agreement with the terms of the loan, including a hard to find “wage assignment” clause that said that their wages would be garnished to cover delinquent loan payments. Then, using the name LoanPointe, the defendants attempted to collect on delinquent payday loans by sending garnishment notices directly to consumers’ payroll departments.

Federal law allows federal agencies to require employers to garnish employees’ wages without a court order when the employees owe the government money, for tax debts for example. In letters to employers that sought garnishment of their employees’ wages, GeteCash and LoanPointe tried to pass themselves off as having the same collection rights as the government. The FTC’s complaint also alleges that GeteCash and LoanPointe falsely stated that consumers knew their pay would be garnished and had an opportunity to dispute the debt. In addition, GeteCash and LoanPointe allegedly violated the law when they told employers and co-workers about consumers’ debts without their consent. (See the complaint HERE)

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There are many debt collection videos on YouTube, so I thought I’d take the time today to share my Top 5 of these videos. Some have strong language so be careful watching these at work. Please share your thoughts and favorites in the comments section.

5. Premier Credit of North America – Calling on Federal Student Loans
In this recorded call, I debt collector yells into a voice mail machine. What makes this noteworthy is not the message itself, but the fact that they are (supposedly) collecting on behalf of the U.S. Government. It should be noted that the IRS ended private debt collection over a year ago, but private collection on Federal Student Loans continues.

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In an amazing story, a Pennsylvania debt collection company has been sued by the Pennsylvania Attorney General for using a fake courtroom to attempt to collect debts from consumers. According to the AG the company used a fake courtroom “to mislead, confuse or coerce consumers.” The main issue in the complaint is that bogus “hearings” were allegedly held in a company office that was decorated to look like a courtroom.

Corbett said the civil lawsuit was filed by the Attorney General’s Bureau of Consumer Protection against Unicredit America Inc., with corporate and business offices located at 1537 West 39th St., Erie, also identified as the “Unicredit Debt Resolution Center.” “This is an unconscionable attempt to use fake court proceedings to deceive, mislead or frighten consumers into making payments or surrendering valuables to Unicredit without following lawful procedures for debt collection,” Corbett said. “Consumers also allegedly received dubious ‘hearing notices’ and letters – often hand-delivered by individuals who appear to be Sheriff Deputies – which implied they would be taken into custody by the Sheriff if they failed to appear at the phony court for ‘hearings’ or ‘depositions’.”

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Maryland has suspended the license of Smith Haynes and Watson LLC, a debt collection company that was collecting on payday loans from a payday lender that was served with a cease and desist order from the state earlier this year.

The Maryland Collection Agency Licensing Board, a division of the Office of the Commissioner of Financial Regulation, decided last week to suspend the collections license of the Kansas-based collection agency that specializes in payday loan collections. The agency also issued a cease and desist order covering all collection activity by the company. As a part of the order, the company must turn over all information regarding its payday loan debt collection activities to the state of Maryland.

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Texas Attorney General Greg Abbott has charged an Oklahoma based payday loan company with impersonating a state official. Patrick D. “Dylan” White, whose businesses operate in Texas as CASHMAX, Fed Cash, TOPCASH and Cash Service Center, is owner of Federal Cash Advance of Oklahoma, LLC, and maintains offices in Dallas County.

According to State investigators, the defendant sent deceptive collection letters to Texans with outstanding payday loan debts. The letters were delivered in envelopes that contained the Dallas County Clerk’s forged signature and improperly bore the official seals of both the State of Texas and Dallas County. Inside the envelopes, the defendant inserted notices of debt collection that instructed recipients to call a telephone number, which belonged to Federal Cash Advance’s CASHMAX offices.

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New York Attorney General Andrew Cuomo is continuing his crusade against rogue debt collectors. His office announced on Wednesday that they have launched a statewide inquiry into debt collection agencies.

In addition, they have obtained a court order against Lamont Cooper and his two debt collection companies, Emanee Development, Inc. and Dial Tech LLC, under which the companies will shut down and Cooper will be forced to pay restitution to consumers statewide.

According to Cuomo’s Office, Cooper’s collections companies unlawfully lied to consumers, threatened to arrest them, and intimidated them into paying debts that they sometimes did not even owe. They would often call third parties like neighbors or employers to further embarrass and harass consumers. Emanee and Dial Tech allegedly did business under the names of various shell companies and fictitious law firms across the state, including: Claims Process Services, Claims America, CMC Recovery Services, Lomax & Barnes and Murray, Bradshaw & Associates.

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Yesterday, in U.S. District Court in San Jose, a jury awarded a California couple $500,000 in a fair debt collection case.  Credigy Services Corp. was found to be in violation of the Fair Debt Collection Practices Act and were trying to collect on money that was not owed.

The jurors in the cases cited Credigy Services Corp. used intentional and systematic efforts to cause emotional distress for the consumers, Manuel G. Fausto and his wife Luz.

Credigy Service Corp’s lawyers said it’s too early for them to comment on the jury’s decision. U.S. District Court Judge James Ware has yet to enter judgment on the case. If he does not approve the verdict, that could give Credigy’s attorneys an opportunity to get it overturned.

This is certainly a huge win for consumers, not to mention the Fausto’s. Let’s just hope the judge upholds the jury’s decision and sends a message to debt collectors who violate state and federal laws.

UPDATE: The Faust’s lawyers have sent me a link with more details on this debt collection lawsuit.