FTC Reports on 2016 Enforcement Activities to Counter Illegal Debt Collection Practices

On February 14, the FTC announced that it has provided the CFPB with a letter summary of the Commission’s efforts during the past year to combat unlawful debt collection practices, provide education and public outreach activities, and conduct research and policy initiatives in the debt collection area. The purpose of the letter, as explained by the Commission, is to “assist the CFPB in its annual report to Congress about its administration of the [Fair Debt Collection Practices Act]”—an act for which the Commission and the CFPB share enforcement responsibilities.

According to the summary, many of the Commission’s law enforcement actions focused on curbing illegal debt collection practices, including phantom debt collection. Specifically, during 2016, the Commission, among other things: (i) filed or resolved 12 cases against 61 defendants, and obtained nearly $70 million in judgments; (ii) permanently banned 44 companies and individuals that engaged in “serious and repeated violations of law” from working in the debt collection industry; and (iii) obtained summary judgment decisions in three litigated matters that resulted in court orders banning the pertinent defendants from the debt collection industry. The summary notes further that, during 2016, two federal appellate courts adopted interpretations of the FDCPA that it considered “favorable” to consumers in cases in which the Commission and CFPB filed joint amicus briefs.

Moreover, with respect to educational initiatives, the summary highlights the Commission’s continued efforts to educate consumers and businesses during the past year about their rights and responsibilities under the FDCPA and the FTC Act. Among other things, the Commission reported: (i) reaching consumers through approximately 16,000 community-based organizations and national groups; (ii) distributing 15.5 million print publications to libraries, police departments, schools, non-profit organizations, banks, credit unions, and other businesses and government agencies; (iii) logging more than “43 million views” on its pertinent website pages; and (iv) reaching consumers through its videos, which were viewed more than 600,000 times. The Commission also noted that it continues to monitor and evaluate the debt collection industry and its practices through public workshops, and by providing input to the CFPB regarding related “rulemaking and guidance initiatives.”

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CFPB’s Monthly Complaint Report Focuses on Mortgages

On February 8, the CFPB released its monthly complaint report for December 2016. The report focused on complaints about mortgages. Along with debt collection and credit reporting, the report stated that mortgages are consistently among the three products and services generating the most complaints to the CFPB, and that since July 21, 2011, mortgages have been the second-most-complained-about product, representing 24 percent of all complaints. The most common issues raised by consumers are problems that arise when they are unable to pay their mortgage, such as issues related to loan modifications, collection, and foreclosure. Such issues were raised in 49 percent of complaints about mortgages. Other common issues raised in consumer complaints relating to mortgages include making payments (such as the misapplication of payments (33 percent)), applying for a mortgage (9 percent), signing the agreement (5 percent), and getting an offer of credit (3 percent).

The Report also noted that student loans showed the greatest increase in complaints year-over-year of any product or service—a 109 percent jump. The CFPB believes the increase may be due, at least in part, to the result of a February 2016 update to its student loan intake form allowing the submission of complaints about Federal student loan servicing. During the same period, complaints about prepaid products, payday loans, and mortgages declined by 59 percent, 23 percent, and 5 percent respectively—continuing a trend also observed in the Bureau’s last complaint report.

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FTC Fines Large Debt Collector $700,000 for Unlawful Collection Calls

On February 14, the FTC announced that it has entered a Stipulated Order for Permanent Injunction and Civil Penalty Judgment of $700,000 with a debt collector that allegedly used unlawful tactics to collect on federal student loans and other debts. According to the complaint, filed by the DOJ on behalf of the FTC in the District Court for the Southern District of Texas, agents working for the defendant-debt collectors (i) left messages that illegally disclosed purported debts to individuals other than the debtors without permission to do so; and (ii) contacted consumers multiple times despite being told they had the wrong number or that the person answering did not owe the debt. Furthermore, the company was alleged to have falsely represented to regulators that it would take steps to prevent its employees from making such unlawful calls. In addition to the $700,000 fine, the Stipulated Order also enjoined the company from continuing such practices going forward.

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Eleventh Circuit Rules Managing Member of Debt Collection Company Personally Liable for FTC Act Violations

In a ruling handed down on February 10 by an Eleventh Circuit panel in FTC v. Williams, Scott & Associates, LLC, 16-10063, an appellate panel held that a district court acted within its discretion in finding that the managing member of a debt collection company was jointly and severally liable for the amount of net revenue that the company had received while he was involved with the company. The Appellate Court noted, among other things, that the managing member had posed as a law enforcement official seeking payments for debts that consumers did not owe or debts that the company had no authority to collect. Furthermore, in determining the amount for which the individual defendant should be liable, the Appellate Court affirmed the district court’s holding that the total amount of net revenue earned—as opposed to profit—is the correct measure of unjust gains under section 13(b). The Appellate Court noted further that “the disgorgement amount must be limited to the time frame for which the party seeking disgorgement presented evidence of the defendant’s bad acts.”

A copy of the Amended Complaint filed with the district court can be found here.

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CFPB Orders Medical Debt Collection Law Firms to Refund $577,135 to Consumers

On January 9, the CFPB entered into a Consent Order and Stipulation against two medical debt-collection law firms and their president for alleged violations of the FDCPA and FCRA. Based on these allegations, the CFPB ordered the Respondents to provide $577,135 in relief to affected consumers, correct their business practices, and pay a $78,800 civil money penalty. According to the allegations set forth in the consent order, between January 2012 and August 2016, debt collectors working for the firms violated the FDCPA by giving the false impression that the firm’s “Demand Letters were from an attorney or that the firm’s attorneys were meaningfully involved in reviewing the consumer’s case or had reached a professional judgment that sending a Demand Letter or making a collection call was warranted.” The Bureau also found that the firms notarized consumer affidavits for use in debt-collection lawsuits without properly verifying the truth of the signature. The CFPB also alleged that the firms violated FCRA’s Regulation V by failing to establish, implement, and periodically review and update reasonable written policies and procedures regarding the accuracy and integrity of consumer information furnished to consumer reporting agencies.

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