FTC Bans New York Debt Collector; Resolves 2015 “Operation Collection Protection” Action

On August 24, the FTC, in coordination with New York AG Schneiderman, announced that it issued a final order banning a debt collector and his four companies from the debt collection business. According to the order, the defendants engaged in deceptive and abusive debt collection practices in violation of the FTC Act, the Fair Debt Collection Practices Act, and New York General Business Law. The final order resolves a 2015 Operation Collection Protection action alleging, among other things, that the defendants “regularly threatened, pressured, and harassed consumers into paying debts [they] did not owe,” continuing to “collect on these fake debts even after the supposed creditor notified them that the debts were bogus.” The final order imposes a judgment of more than $18.4 million, which will be partially suspended due to the defendants’ inability to pay. AG Schneiderman and the FTC issued a separate order to the owner’s ex-wife, imposing a $418,000 judgment, which also will be partially suspended.

LinkedInFacebookTwitterGoogle+Share

FTC Continues Operation Collection Protection Efforts

On July 14, the FTC announced that two debt collectors and three companies (collectively, Defendants) previously charged with using false threats and other illegal collection tactics in violation of the FTC Act and the FDCPA have agreed to a stipulated final order. According to the FTC, the Defendants purchased consumer debts and then collected payment by intimidating consumers with false threat of lawsuits, wage garnishment and arrest, and by impersonating attorneys or process servers. In addition, the FTC alleged that the Defendants (i) failed to disclose to consumers their right to receive verification of a debt; (ii) did not identify themselves as debt collectors; and (iii) disclosed debts to third parties. The final order imposes a $4,802,646 judgment, which the FTC partially suspended upon the surrender of certain assets, and requires that the two individual debt collectors separately pay $59,207 and $50,562. The action is part of the FTC’s Operation Collection Protection, a nationwide initiative designed to combat alleged abusive and deceptive debt collection practices.

LinkedInFacebookTwitterGoogle+Share

Ninth Circuit: Discovery Rule Applies in FDCPA Actions

On June 8, the Ninth Circuit reversed the district court’s dismissal of a plaintiff’s complaint alleging that the debt collector defendants’ collection action against her violated the Fair Debt Collection Practices Act (FDCPA), finding that the plaintiff’s complaint was filed within one year of the date on which she first learned of the collection action and was thus timely. Lyons v. Michael & Associates, No. 13-56657 (9th Cir. June 8, 2016). On December 7, 2011, the defendants filed a debt collection action against the plaintiff in Monterey, California, despite the fact that the plaintiff resided in San Diego at the time she incurred the debt. On January 3, 2013, the plaintiff initiated a separate action alleging that the defendants violated the FDCPA by bringing their collection action against her in the wrong judicial district. The district court dismissed the plaintiff’s complaint as time-barred, finding that it was filed more than one year after the defendants filed their collection action against plaintiff. The Ninth Circuit reversed, opining that the “discovery rule” applies in FDCPA actions and, therefore, the statute of limitations on the plaintiff’s FDCPA claim did not begin to run until the plaintiff “kn[ew] or ha[d] reason to know of the injury which is the basis of the action.” Because the plaintiff did not have knowledge of the defendants’ collection action until she was served with process—which was less than one year before she filed her action—her FDCPA complaint was timely.

LinkedInFacebookTwitterGoogle+Share

Supreme Court: Special Counsel Using State AG Letterhead Not in Violation of FDCPA

On May 16, the Supreme Court reversed the Sixth Circuit’s ruling that special counsel using Ohio AG letterhead to collect debts owed to the state is false or misleading in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §1692. Sheriff v. Gillie, No. 15-338 (U.S. May 16, 2016). In a unanimous 8-0 opinion delivered by Justice Ginsburg, the Court opined that its “conclusion is bolstered by the character of the relationship between special counsel and the [AG].” Specifically, the Court determined that, because special counsel acts on behalf of the AG to provide legal services to state clients, a “debtor’s impression that a letter from special counsel is a letter from the [AG’s] Office is scarcely inaccurate.” The Court further opined that, being required by the AG’s office to send debt collection communications, special counsel “create no false impression in doing just what they have been instructed to do.” The Court rejects the Sixth Circuit’s argument that consumers may have concern regarding the letters’ authenticity: “[t]o the extent that consumers may be concerned that the letters are a ‘scam,’ the solution is for special counsel to say more, not less, about their role as agents of the [AG]. Special counsel’s use of the [AG’s] letterhead, furthermore, encourages consumers to use official channels to ensure the legitimacy of the letters, assuaging the very concern the Sixth Circuit identified.” The Court concludes by emphasizing the AG’s authority, as the top law enforcement official, to take punitive action against consumers who owe debts, commenting that §1692e of the FDCPA prohibits collectors from deceiving or misleading consumers, but “it does not protect consumers from fearing the actual consequences of their debts.” Read more…

LinkedInFacebookTwitterGoogle+Share

Fourth Circuit: Default Status of Debt Is Not Determining Factor of “Debt Collector” Under FDCPA

Recently, the U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s decision that a consumer finance company collecting debts on its own behalf, which it purchased from the original creditor, is still a creditor and is not subject to the FDCPA. Henson v. Santander, No. 15-1187 (4th Cir. Mar. 23, 2016). The plaintiffs in the case each signed a retail installment sales contract with a financial services provider, and when “the plaintiffs were unable to make the payments required by the contracts and thereby defaulted, [the financial services provider] repossessed and sold their vehicles and subsequently informed each plaintiff that he or she owed a deficiency balance.” In 2011, the defendant bought the defaulted loans from the financial services provider and, thereafter, sought to collect on the debts the plaintiffs owed. In their complaint, plaintiffs argued that because the terms “debt collectors” and “creditors” as used in the FDCPA are “mutually exclusive,” any person that “receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another” (which is excluded from the definition of creditor in 15 U.S.C. § 1692a(4)) must be a debt collector. However, the court emphasized that the material distinction between a debt collector and a creditor is “whether a person’s regular collection activity is only for itself (a creditor) or whether it regularly collects for others (a debt collector).” Read more…

LinkedInFacebookTwitterGoogle+Share