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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The Fair Debt Collection Practices Act was first passed by U.S. Congress in 1966 and was thoroughly revised in 2006.

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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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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Alabama State Flag

Alabama collection lawsuits are up almost 4 times according to court documents for the U.S. District Court for North Alabama. Many of these cases are related to collection agencies collecting from the wrong person, and certain companies seem to have a very high rate of suits.

Unifund tops the list with 26 suits filed in the last 12 months in North Alabama alone. Behind them is California’s Midland Credit Management with 22 suits in the last year. Here is an excerpt from the article in the Birmingham News:

California-based collection agent Midland Credit Management was sued by a woman living in Limestone County.

The problem? The woman was getting regular phone calls from Midland Credit’s bill collectors. Among the messages left by the collectors, according to the suit: “Trash like you need to pay your bills and stop ignoring them.”

The real problem was that the woman didn’t owe $1,492 to a furniture dealer for a debt allegedly incurred in 2003. Midland Credit Management was never able to substantiate the debt with receipts or signed credit agreements or other documentation, despite repeated requests, the suit said.

A spokesman for Midland Credit’s parent company, San Diego-based Encore Capital Group, said the corporation doesn’t comment on collections lawsuits. The case, like many, was settled under confidential terms.

Of course it was settled under “confidential terms.” That’s the standard method of operation for many of these collection agencies. Consistently and systematically break the collection laws that are there to protect consumers and settle any lawsuits that come up as fast and quietly as possible. Then, the lawyers representing consumers get 75% of the settlement money. Unethical collection agencies just view these lawsuits as a cost of doing business. Until there is greater enforcement from state agencies or the FTC, consumers will continue to suffer from collection harassment, while lawyers and collection agencies reap the profits.

**Read the full Birmingham News Story**

Charles Schumer, US Senator from New York

Earlier this month, we posted on the New York Times article regarding agencies that collect on dead people’s debt.

Well, it appears that US Senator Charles Schumer from New York has read the article as well (or maybe he heard about it here?) and has called for a Federal Investigation into collecting on dead people.

It is probably unlikely that there will be an actual investigation or that anything will come of this, but we can always hope. Either way, it is certainly positive to see the respected US Senator shine some light on this despicable practice but bottom-feeding collection agencies.

In a letter to Federal Trade Commission Chairman Jon Leibowitz, Schumer writes:

I am dismayed to learn from recent media reports that some debt collection companies have made it a practice to attempt to collect unpaid credit card balances – and perhaps other types of unsecured debts – from the families of the deceased…

I find it shocking that a debt collection company would determine that it is worth causing profound anguish and embarrassment in order to collect debts that are sometimes as low as $50, or which result in a payment of $15 a month from a widow or widower who is struggling to make ends meet. If a debt is large enough to be worth collecting, there are legal ways to obtain payment.

First, if a surviving family member has also signed for the card, that family member will be obligated to pay the debt. Second, an unsecured creditor such as a credit card issuer can obtain payment from the estate of the deceased through a routine probate proceeding, after the holders of secured debt – such as mortgagors– are paid. This practice of harassing living family members for upfront payments results in putting credit card issuers in the front of the line to get money from an estate, rather than after those who hold secured debt.

Given that the FTC receives more complaints about debt collection companies than any other American business, I hope and expect that you will be thorough in your investigation of this matter.

I could not have said it better myself Senator Schumer.

We’ll keep you updated if there are any developments on this issue.

**Complete press release and letter to FTC Chairman Leibowitz**