FTC Fines Debt Collector $2.5 Million For Deceiving Consumers

After years of writing about shady practices by debt collectors, it’s nice to finally write that there’s a small bit of justice in this world. Today, the Federal Trade Commission announced a $2.5 million civil penalty against Asset Acceptance, one of the country’s largest debt collectors, for making misrepresentations and deceiving consumers in the name of collecting debts.

Asset Acceptance had been charged with the following nine counts:
* misrepresenting that consumers owed a debt when it could not substantiate its representations;
* failing to disclose that debts are too old to be legally enforceable or that a partial payment would extend the time a debt could be legally enforceable;
* providing information to credit reporting agencies, while knowing or having reasonable cause to believe that the information was inaccurate;
* failing to notify consumers in writing that it provided negative information to a credit reporting agency;
* failing to conduct a reasonable investigation when it received a notice of dispute from a credit reporting agency;
* repeatedly calling third parties who do not owe a debt;
* informing third parties about a debt;
* using illegal debt-collection practices, including misrepresenting the character, amount, or legal status of a debt; providing inaccurate information to credit reporting agencies; and making false representations to collect a debt; and
* failing to provide verification of the debt and continuing to attempt to collect a debt when it is disputed by the consumer.

In addition to the $2.5 million penalty, Asset Acceptance must now investigate any disputed debt and ensure that it has a reasonable basis for claiming the consumer owes the debt before it continues its collection efforts. And the company can’t place debt on consumers’ credit reports without notifying them about the negative report.

Last year, Consumers Union and the East Bay Community Law Center issued a report on debt collection issues [PDF] in which they urged courts, states and federal regulators to enact a number of reforms, including:

• End robo-signing and attempts to collect without proper documentation: Debt collectors should be required to document that they are attempting to collect from the right person, for the right amount, and on a debt that they can lawfully recover.

• Establish a sell by date for all debt: It should be illegal to sell or attempt to collect debt that is more than seven years old, which is too old to be reported on a credit report under the federal Fair Credit Reporting Act.

• Require debt collectors to provide more information to consumers: All debt collectors, including debt buyers, should be required to identify the name of the original creditor and to provide an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, and to provide detailed records about the debt to consumers within five days after the first notification.

• Require debt collectors to submit more detailed information when filing suit: Debt collectors should be required to submit basic information about the debt, including the name of the original creditor and an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, when they sue over a debt, so that the consumer can see if it is his or her debt, and in the right amount.

• Increase oversight to ensure consumers are properly notified of lawsuits: Courts should be required to provide supplemental notice of all filed debt collection lawsuits to debtors and default judgments should be prohibited if the notice is returned to the court as undeliverable.

Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception [FTC.gov]

Comments

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  1. MaxH42 thinks RecordStoreToughGuy got a raw deal says:

    In before the “how are you going to collect it” jokes.

    • HomerSimpson says:

      I’ve got the bingo chip on “If you deadbeats paid your bills, debt collectors wouldn’t *need* to exist!”

  2. Evil_Otto would rather pay taxes than make someone else rich says:

    Why are they still in business? If their violations are egregious enough to require a multimillion dollar fine, why are they still allowed to conduct business?

    “Here’s your fine, now don’t do it again!”

    My fear is that they’ll just see this as a cost of doing business and make sure they don’t get caught again.

    • SeattleSeven says:

      How would you shut down a business exactly? Just tear up their business license and hope they don’t go get a new one?

    • ZachPA says:

      Cost of doing business…..You hit the nail on the head.

      It’s really just a numbers game. If a junk debt buyer buys $1 million worth of junk debt for 2c on the dollar, they’ve spent $20k for the right to collect on debt worth $1 million. Assuming their tactics result in just 4% of the debtors paying their bills in full, they’ve effectively doubled their money. The sky’s the limit. They have no realistic hope of collecting the entire $1 million, but anything over their initial investment plus costs is profit. And when someone sues over a violation of some law, it’s always cheaper to settle than to fight the suit.

      Last year, after a couple of months of collection efforts on an invalid debt, I sued the offending collection agency for $12,000. The week before it was scheduled to go to trial, they called and eventually settled with me for $8000. It was cheaper to settle and send me a check than to fly someone here from Florida and/or pay an attorney to represent them here, especially considering the likelihood that they would lose at trial anyway. Just a numbers game.

  3. Snowblind says:

    Wonder if these guys are connected to Chase. I just submitted a story about them pencil whipping accounts.

  4. Maltboy wanders aimlessly through the Uncanny Valley says:

    They will either appeal endlessly, or pay the fine (chump change for them), and tomorrow they will continue to do business as usual.

  5. Buckus says:

    So, in other words, all the stuff they were supposed to be doing, they didn’t do?

    How’s that whole GOP fantasyland of “Less government intervention will let businesses regulate themselves” working out for you?

    It’s stuff like this that makes it clear that there should be at least some government oversight. If there wern’t any, people would go to prison over debt or possibly incur physical harm from shady debt collectors associated with shady crime rings.

    • Snowblind says:

      Better than your strawman.

      At least mine is safe from Guy Fawkes day.

      • Loias supports harsher punishments against corporations says:

        My 7-D specs must be off, because I can’t discern what your meaning was.

        • Buckus says:

          Thanks. I was wondering what strawman he is referring to. Guess we’ll have to wait and see.

          • Jaynor says:

            We’ll run it up the flagpole and see who salutes.

            I’m glad we’re all getting on the right side of the horse on this one.

      • skakh says:

        Blind you are! Apparently, only those with eyes wide open can understand the only regulation the GOP likes is regulation which benefits them, the one percent.

        Exactly what argument raised by Buckus do you consider a strawman? To those of us with eyes wide open all Buckus stated is accurate. The world awaits an answer.

        Gunpowder?

  6. CubeRat says:

    This seems like a tiny fine for all these types of violations, and the number of violations.

    • Buckus says:

      Agreed. They need to fine them enough to make them go out of business. Of course, I’m sure the original owner is incorporating under a different name and will continue these shady practices.

  7. alternety says:

    There needs to be another issue resolved. Part of it overlaps the idea that the debt collectors need to verify ownership of debt, but there also needs to be a requirement that the people that sold the debt continue to be responsible to the supposed debtor for verifying the validity of the debt.

    Brief discussion of my case.

    Collector called and said my wife had a long overdue debt under her maiden name. It was a phone bill from Verizon. They provided only the phone number. We did some simple research and there was still a women with the same name who was a current phone customer in the same general place.

    Collectors not interested.

    Tried to talk to Verizon. Either they or the collectors attached my fifes SSN to the debt. Probably by a simple search of a database of names and SSN. Verizon refused to provide any information. They simply stated that they had sold the debt and were no longer in any way responsible for incorrect information or the verification of same.

    This went on for weeks. Many human and automated calls.

    Finally they said we need to file a report of identity theft to make it go away. We said it was clearly not identity theft. They insisted.

    We called local police, although the supposed fraud was committed years earlier and 3000 miles away. We explained the whole mess to a helpful policeman and we got a form for having filed a fraud complaint.

    So, to get the collection agency to stop, for an incorrectly attributed debt, we were supposed to lie to the police (which we did not; we explained everything) to get them to stop. I am guessing there was some financial benefit to the collectors for having that statement.

    This should not be allowed. In this case, if Verizon had checked their records two things would most likely have occurred; they would have found no SSN associated with the record they sold, and they would have found that the same customer was still active in their area.

    • vorpalette says:

      Ha, I had a similar situation with T-Mobile. The debt has been sold a number of times, is years past the SOL, has not been on my credit report for just as long, and I’m STILL getting letters trying to collect, AND I’ve moved four or five times since then. I just toss ‘em in the shredder.

      • Dallas_shopper says:

        Same here. In my less-responsible youth I ran up a smallish debt that went to collections. This was well over ten years ago. I still occasionally get calls for it. I deny that it’s mine and tell them not to call me anymore. Six months later they call again and I do the same things. It can’t be put on my credit report and it’s been so long that I’m not going to pay it since doing so would lower my credit score.

        Sorry, but there it is. I’m responsible NOW and I’m not making excuses for things I did in my early 20s, but the debt collectors can kiss my ass on this one.

    • Lyn Torden says:

      You did good. Filing a false police report is a CRIME. And this would have been knowingly false since you knew it was a bookkeeping and/or computer and/or research mixup most likely at Verizon. I believe encouraging someone to file a false police report is also a CRIME. Maybe someone at Verizon needs to be charged with a crime.

  8. dez says:

    In my younger days I made some financial mistakes. Asset Acceptance was one of the companies that I had to deal with for a credit card that went unpaid ($2000 limit ended up with a $7500 bill) how should I go about verifying if I was mislead over the actual amount of that debt.

    I was never able to get an amount from the credit card company I owed money to (MBNA America) because they had passed off the account to Asset Acceptance.

    Now that I see this story it triggered those thoughts again that the amount seemed a bit too high.

    • aja175 says:

      They did that to me too. They fully admit it’s WAY past the SOL, been off my credit report for years and that they have absolutely no proof of the debt other than them telling me I owe them 10k or so. They won’t even mail me a letter that says what I owe.

  9. balderdashed says:

    Certainly these guys are scumbags — but what about the companies that sold old, worthless and legally unenforceable debts to Asset Acceptance? I must have received at least a dozen dunning letters and numerous harassing phone calls from Asset Acceptance on behalf of the public utility Xcel Energy — their slogan is “Responsible by Nature,” and they seem to think my father is still responsible for settling an unpaid utility bill, despite the fact that he’s been dead for more than six years now. The real crime here is that outfits like Xcel can make a quick buck selling these non-assets to Asset Acceptance, while hiding behind a mask of respectability. If Asset Acceptance is guilty to the tune of $2.5 million, Xcel and other companies who sold them these debts are essentially co-conspirators. They should be investigated and held accountable as well — at the very least, in the court of public opinion.

  10. Froggmann says:

    This has me laughing. I’ve had these aholes bugging me for the better part of 7 years attempting to collect on a phone bill that was my Father’s. I finally got it off my credit 2 years ago after multiple disputes. Oh yea their proof I needed to pay them? A notarized document saying my dad had to pay them. As for why they were barking after me? I think my dad used my ssn to open the phone account.

  11. RayanneGraff says:

    I’d like to see the Omni Mediation Group fined like this as well. They’re a gang of extortionists who have been calling my dad, saying in very menacing tones that I’ve committed check fraud, while claiming to be investigators who have the power to throw me in jail if I don’t send them money within the next 48 hours.

    LOL. I haven’t even owned a checkbook since 2004 -__-

    There are a ton of complaints against these people all over the internet(including the BBB complaint I filed against them last week) for abusive debt collection practices, misrepresentation of debts, trying to collect beyond the statute of limitations, & impersonating law enforcement to intimidate people. If you ever get a call like this from 716-312-1818 or 888-551-5070, record it & file complaints with the Eden, NY police dept, the FTC, and the BBB.

  12. DrLumen says:

    As soon as the original creditor sells the bad loan and takes the tax write-off they have nothing to do with the debt. This is only for junk debt buyers though. The JDB has to contact the creditor for the original supporting documents.

    Luckily though when they sell the debt for pennies on the dollar they apparently don’t provide any backup documentation. Then companies, like Asset, skate by on consumers ignorance of the law – or just lie outright. Hence the settlement and illegal activity shown above.

    I’ve heard that a JDB has to pay extra for the backup documentation and most don’t do it since they are still able to continue to be their slimy selves and bluff as much as possible to get some people to give them money. If someone fights them they had rather just resell to other pond scum than have to try to fight the issue. YMMV though as if it a large enough debt and they can get documentation they will stick with it and file lawsuits – not that will win but they are more inclined to be persistent.

  13. Lyn Torden says:

    Another thing that should be required is that the collector show proof they own the debt or otherwise by assignment have a right to collect on it. There are cases where debt collectors have not actually owned the debt account, but tried to collect, anyway, even suing. They may later buy the debt from who really owns it to make it all legal, after the fact. Some, however, won’t even do that and the debtor still owes the whole amount to the real creditor.

  14. wickedpixel says:

    A number of years ago after moving out of a spared apartment, the phone line didn’t get properly transferred out of my name and I ended up with an Asset Acceptance debt for about $70. Didn’t even know about it until it was already after the statute of limitations had run out in my state, and I didn’t want the date to reset on my credit report so I didn’t bother to pay it. We’re coming up on 7 years in May and they’ve started sending me letters again, each time with a lower and lower “settlement offer”. It’s down to $9. I can’t wait to receive a offer for less than the cost of the postage to mail me the letter.

  15. aja175 says:

    Oh good, maybe they’ll stop bugging me about someone else’s debt that they could never send proof of.

  16. Telekinesis123 says:

    If a regular individual did this (thought no one could the crimes are that extensive) they would probably be charged with “terrorism” or other ridiculous charges they use to terrorize regular people. These scumbags need to go to jail, not be fined where they made more money doing the crime then what had to be paid out in a fine.

  17. newmie says:

    The excutives should also be given the death penalty. Scum like this needs to be removed from the face of the earth.

  18. SteveHolt says:

    I had a similar group call me about someone’s T-Mobile debt. Despite the fact that I said repeatedly that I wasn’t this woman, I was given sensitive information, threatened, etc. I finally did a Google search of her name, and apparently she’s on death row somewhere. I mentioned that during a call, and the calls stopped.

  19. oldwiz65 says:

    They can simply declare bankruptcy after hiding all the profits in an offshore account, then open a new business in another city. They should be sent to jail as well.

  20. LadyTL says:

    Awesomeness!! I’m one of the people who reported them since they have been sending me fake notices for years now. I hope their company fails and goes away for good!

  21. Denidil says:

    only 2.5mil? NOT SUFFICIENT TO DETER.

  22. Promethean Sky says:

    And how much money did they make pulling this crap? I’ll bet it was a hell of a lot more than 2.5 million.

    Fines aren’t going to do anything to discourage corrupt business practices until they become significantly larger than the benefits of breaking the law.

    • balderdashed says:

      Good point. The fines companies pay for violating the law are almost always far less that the profit they made, and are allowed to keep, as a result of their illegal activity. In fairness, perhaps we should re-evaluate all of our laws in light of this reality. You hold a up a gas station, make off with $500 bucks and are caught red-handed? You should have to give at least $250 back. You shoplift an IPOD and a blu-ray player from an electronics store? You should just get to keep the IPOD. We need to hold crooks accountable, right?

  23. Sarge says:

    A move….a SMALL move in the right direction, but its movement……

    The strength that these debt collectors have is that the normal average Joe doesn’t know the law….and as a FORMER debt collector (the worst job I have had in my life) you use that to EVERY advantage.

    If you really want to pass legislation to control these junk collectors better……do not give them the ability to add anything to a credit report, pass a law limiting that to the original debtor only…….

  24. britswim04 says:

    My University has attempted to collect $55 from me for a parking ticket I never received. They already gave me my diploma. They’ve since sent it on to a debt collection agency, and I just ignore the letters. I even leave a comment on my donation that says “Stop harassing me about the $55 parking ticket I never got.”

  25. bioflava says:

    These guys are low. Sued me for an alleged debt just before the SOL ran out but they had no evidence whatsoever. They kept delaying and delaying in court and each time, their attorney would have a little chat with me outside the courtroom before our case was called trying to get me to admit it was my debt.

    I did my research, never admitted to anything and forced them to prove their case. They never had ANY documentation so after they used up their last delay, the case was dismissed with prejudice in my favor.

    While the case was pending and for at least 3 months after it had been adjudicated, AA would call 3-4 times a day, even after I sent a letter demanding that all correspondence be in writing. Technically I could sue them for violating the FCRA but I’m just glad it’s over.