Last week, the Federal Trade Commission announced it had settled a lawsuit with several debt collectors after it learned they were fraudulently conducting business. As a result, the companies were forced to pay out nearly $800,000 to consumers after deceptively charging a fee for payments authorized by telephone. The FTC opened its investigation after receiving complaints that debt buyers and specific debt collection attorney lied to consumers and told them the fees were not negotiable.
The strong-arm tactics were used only on consumers who paid their debts via their telephone while those who paid via traditional USPS mail and online did not incur those fees. Worse, the companies threatened to sue the consumers if they refused to pay the fee. This is in violation of the law as a debt collector is prohibited by law from using false, deceptive, or misleading representations or tactics when attempted to collect a debit of any kind.
Both of these companies – the debt buyer and the legal firm – are based in Mississippi and according to the FTC, both violated the FTC Act and the Fair Debt Collection Practices Act. Charging telephone authorization fees is illegal.
Security Credit Services, which is the debt buyer and Jacob Law Group have partnered at least since 2006 in their efforts of collecting debts on a national level with accounts in nearly every state. Security Credit buys consumer debt accounts and contracts with Jacob Law to collect on them, often using threatening legal jargon to get consumers to pay up. The FTC accused Jacob Law of calling and then applying unrealistic pressure to consumers to make payments on the spot and making it easy for them by saying they could process the payments, either via their credit cards or their checking accounts, on the phone. When the consumers agreed to do that, they were then told there was a processing fee of $18.95 to do it via the phone call. They did not tell those consumers that they could avoid paying the fee by paying online or by mailing their payments in.
Interested in knowing how much those fees padded the two companies’ bottom lines? How about $800,000 since 2008? That’s massive when you consider this is the sum of just those fees for paying on the telephone and it’s divvied up between just two companies. It’s also clear just how far these unethical companies and individuals will go.
Warnings About Debt Collection Calls
The judgment made it clear that no companies are allowed to make any types of material promises or providing assistance to other partner companies that falsely represent fee structures, that nonpayment will result in a lawsuit or other similar promises. Further, they must disclose to consumers in a clear and prominent manner before the consumers agree to pay how much any associated fees are, how many times it will be charged, the reasons for the fees and ways they can avoid having to pay it all. In this instance, the two companies failed to tell consumers that they could avoid the fees by paying via other avenues, specifically online or via traditional mail routes.
The judgment also prevents companies to lie or use any other type of deception in their efforts of collecting debts.
Perhaps most interesting is the fact so few consumers know that they have rights. Especially those with student loan debt and credit card debt, the collectors can be brutal, invasive and unethical. They can also act illegally. As a result, the Federal Trade Commission provides these tips:
Harassment – Debt collectors are prohibited from harassing, oppressing or abusing consumers or any third parties they contact. This includes:
- Using threats of violence or harm
- Publishing names of those who refuse to pay their debts (but they can give this information to the credit reporting companies)
- Using obscenities or profane language
- Repeatedly phoning someone to annoy them.
False statements – Debt collectors are also prohibited from lying to a consumer in his efforts of collecting a debt. This includes:
- Falsely claiming they are attorneys or representatives of the government
- Falsely claiming the consumer has acted criminally
- Falsely representing that they operate for a credit bureau – such as the three major bureaus
- Misstating the amount the consumer owes.
There are very specific things a debt collector may not say to a consumer. Those include threats of being arrested if the consumer refuses or fails to pay the debt, threats of seizing, attaching, selling your property or garnishing your wages unless they are actually allowed by law to do so and if it is a probability they will follow through with those efforts. They may not tell a consumer that any legal action will be taken against them if it’s illegal or if they have no intentions of following through.
Other rules collection agencies and their employees must follow include not giving wrong information about you to anyone, including credit bureaus nor may they send anything to you that appears to be some type of official document or court ruling and they may not tell you they work for any government agency if they don’t.
Finally, collectors may not tack on interest, fees or other charges if it’s illegal in your state. They may not deposit post dated checks prior to the agreed upon date or the date on the face of the check. They may not send postcards that makes the information visible to anyone who sees it.
There are growing concerns that some debt collectors are turning to social media to embarrass consumers. These efforts are unethical but the legalities are seemingly a little blurred especially when the unscrupulous debt collectors post information on your friends or family members’ walls. It’s becoming increasingly clear that these issues will have to be addressed in the very near future.
In the meantime, if you feel as though you’ve been victimized by unscrupulous debt collectors, you can file a complaint with the Consumer Financial Protection Bureau or the Federal Trade Commission. What are your thoughts? Have you ever been unfairly targeted by collection agencies or debt collectors? Share your story with us.