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 Collection Complaints Top 2010 FTC Complaint List

The FTC has released its 2011 Fair Debt Collection Report and in 2011 the FTC received more complaints against debt collectors than any other industry. Further, the number of complaints received by the FTC concerning third-party debt collectors and creditors increased from the previous year. The FTC is required to report annually on their enforcement efforts related to the FDCPA.

The report states the number of complaints related to third-party debt collectors and in-house creditors totaled 140,036 complaints and accounted for 27 percent of all complaints the FTC received. This represents an increase in total number of complaints compared to 2009, when the FTC received 119,609 debt collection complaints, accounting for 22.8 percent of all complaints to the FTC.

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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.”

Most of the questions we get here relate to what collectors can and can’t do. Since all collection agencies in the United States are governed by the FDCPA or Fair Debt Collections Practices Act, I decided it would be good to post on the Top 5 things most consumers DON’T KNOW about the FDCPA.
 

Most consumers understand that collectors can and cannot do certain things, but sometimes they make assumptions based on logic or intuition. However, it is important to understand exactly what FDCPA covers and what it does not… in many cases it may surprise even the most educated consumers.

So, here is our list of the Top 5 Things You Did Not Know About FDCPA.

5. You can have a collector to stop calling you. Just as simple as that. All you have to do is send the collector a letter and let them know you have no intention of paying the debt or that you are requesting that they cease communications. Section 805.c is very clear on this matter:

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Portfolio Recovery Associates, or PRA, is one of the nation’s largest debt buying collection agencies. Despite doing most of their business in California, Texas, Florida and New York, the company faced 47 lawsuits in U.S. District Court for Colorado in 2010. However, here is the kicker, nearly all the lawsuits were filed by one attorney, David Larson.

PRA specializes in buying debt. Late last year, the company reported owning over $50 billion in consumer debt. However, it paid less than $2 billion to buy this debt. This is fairly typical in the debt buying and debt selling industries.

Typically, debt collection lawsuits settle very quickly, as the debt collectors want to avoid lengthy litigation and consumer attorneys are looking for a quick, easy settlement to collect their fees on. They would prefer this to protracted litigation.

It is my belief that where there is smoke there is fire. If Portfolio Recovery Associates has this many cases filed against it in Colorado, there must be something systemically wrong with their collection practices. Otherwise, why would they settle the majority of the cases. In fact, the average time to settle each of the cases filed by Larson last year was 35 days.

We have posted some new and updated Debt Collection Letters to help you with different collection agency situations that may arise.

Debt Validation Letter
This letter will help you validate a debt if you aren’t sure you owe the debt, aren’t sure the amount is correct or think the statute of limitations may have expired on your debt.

Cease and Desist Collections Letter
This letter will help when you want a 3rd party collection agency to stop calling you and/or your references and family members.

Wage Assignment
Payday Lenders use wage assignment often, and I am pretty sure they are the only ones still using it. The reason is that the FTC has declared this practice virtually illegal and only shady online payday loan companies are still using this tactic to collect on debt.

Wage Garnishment
A court ordered Wage Garnishment cannot be stopped. This letter will do nothing for that situation unfortunately and you should contact a lawyer.

Payday Lenders claim to garnish wages often, but they are most often just referring to a wage assignment (see above). So, we refer you again to the wage assignment letter.

I hope you enjoy and use these letters to stop harassing debt collectors and as always, if you have any questions please Ask Brent.

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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American Credit Services, a payday loan collection scam, has come to my attention and I’d like to alert readers to the outline of how these fraudsters work.

Basically, the “company” is calling people and telling them they owe money on one or more payday loans. Some of the common characteristics of these fake collection calls are:

• Invariably the so-called collectors have moderate to heavy Indian accents. Presumably they are operating out of one of the thousands of offshore call centers in India.
• They start the call in most cases by telling the victim that they need to call their lawyer and appear in court the next day.
• These “collection agents” usually claim to be from some government agency, even claiming to be prosecutors in many cases. For some reason, they usually claim to be associated with the state of California.
• These fraudsters have a good bit of personal information on the people they are calling. They usually have some combination of Social Security Number, bank account and date of birth for the victim.
• They usually ask for a relatively large sum of money, about $1500 in most cases I’ve heard of.
• In some cases, through coincidence or otherwise, they actually claim to be representing a payday loan company that the victim actually owes money to.

The disturbing thing about this collection scam is Read the rest of this entry »