The Federal Trade Commission, joined by other federal and state agencies, are bringing charges debt collectors across the U.S. for allegedly abusive or deceptive practices.
Among the illegal tactics used by the collectors were phony threats of wage garnishment, arrest and lawsuits, as well as harassing phone calls, according to the FTC. Some firms also were found to be trying to collect a debt from consumers who they knew didn't owe money, known as "phantom debts."
"Being in debt is stressful enough for many Americans without also being subjected to intimidation and false threats," FTC Chairwoman Edith Ramirez said in a statement. "Debtors have certain rights, and rogue collectors that step outside the law will face the consequences of illegal behavior."
The 30 new cases announced Wednesday brings to 115 the number of actions taken to far this year by 70 law enforcement agencies participating in the operation, the FTC said.
Federal law is very specific about debt collection, including restricting when and how people can be contacted. Some the cases brought by the FTC highlight the sorts of tactics employed by unscrupulous collectors.
Collectors at BAM Financial, which was accused of lying to and intimidating consumers, allegedly bought and tried to collect debt by posing as attorneys or process servers and telling people that they faced arrest or wage garnishment if they didn't pay up.
In one case involving the California firm, BAM told a target's 84-year-old mother they had a warrant for her daughter's arrest, the FTC said. It also allegedly told the consumer that it represented a bounty hunter and would have a sheriff serve her with a process. Another consumer was told if that if she didn't pay, she would not be allowed to see her children.
The FTC received a temporary restraining order shutting BAM down.
The FTC, along with New York's Attorney General, also won a restraining order halting the operations of Delaware Solutions, which purchased payday loans that the company was informed were not valid. Despite being provided with evidence from consumers proving that the obligations were not real, the company continued to try to collect on them by posing as lawyers and process servers, as well as by falsely threatening arrest, the agency said.
In another case brought by the FTC and Illinois' Attorney General, a couple that ran a phantom debt collection scheme settled charges filed against them, agreeing to a $6.4 million judgment and a ban on working in debt collection.
The FTC said K.I.P. LLC, run by Charles and Chantelle Dickey, specifically targeted consumers who applied for payday or other short-term loans and then claimed the loans were delinquent, making threats to collect payment, including having their driver's license revoked. Many paid out of fear or just wanting the harassment to stop, the regulator said.
Consumers are protected by the Fair Debt Collection Practices Act, which requires debt collectors to clearly state what a person owes and offer a way to contest that debt. Among other restrictions in the FDCPA, debt collectors are barred from:
- Making calls to you before 8 a.m. or after 9 p.m. local time
- Telling anyone you owe money
- Using harassment or abuse to force payment
- Using obscene language.
- Deceiving you about how much you really owe
- Tricking you into paying by using such tactics as claiming you will be arrested
- Contact you at your workplace if you've told them that your employers doesn't permit such calls