By Andrew A. Turner, J.D.
The Federal Trade Commission is touting results during the past year from its debt collection work addressing “phantom debt collection” and protecting limited-English-proficiency (LEP) consumers. Activity targeted by the FTC also included false threats, harassment or abuse, and the unlawful disclosure of consumers’ sensitive personal information by debt brokers. The FTC 2014 efforts were described in a letter to the Consumer Financial Protection Bureau to help meet requirements for an annual report to Congress about federal government efforts to aid consumers victimized by unlawful debt collection practices.
Phantom debt collection. Phantom debt collectors engage in unfair, deceptive, or abusive conduct by attempting to collect on debts that either do not exist or are not owed to the phantom debt collector. The Commission initiated or resolved three actions against phantom debt collectors in 2014.
In FTC v. Pinnacle Payment Services, LLC, the FTC halted the abusive debt collection practices of an operation that used fictitious names and threatened consumers into paying debts they may not have owed. The Commission charged that the defendants, working out of offices in Cleveland and Columbus, Ohio, and Atlanta, Georgia, collected and processed millions of dollars in payment for phantom debts using robocalls and voice messages that threatened legal action and arrest unless consumers responded within a few days. During phone conversations with consumers, collectors often misrepresented that the consumers would face felony fraud charges, that their bank accounts would be closed or their wages garnished, and that the collectors worked for a law enforcement agency or a law firm.
Collection practices affecting LEP Latinos. The FTC initiated or resolved three cases against abusive debt collection operations that targeted Spanish-speaking consumers, one of which involved phantom debt collection. Along with a Debt Collection and the Latino Community roundtable, this represented an effort to protect limited-English-proficiency consumers from illegal debt collection practices.
In FTC v. Centro Natural Corp., the FTC secured a preliminary injunction against a group of telemarketers that allegedly pressured and harassed consumers to settle “phantom” debts that consumers did not owe. In its complaint, the FTC alleged that the defendants targeted thousands of Spanish-speaking consumers and used deceptive and abusive tactics to collect on debts that these consumers did not owe and to coerce them into purchasing goods that they did not want. The defendants allegedly held themselves out to consumers as court officials, government officials, or lawyers, and threatened dire consequences, such as arrest, if consumers failed to pay amounts demanded.
In October 2014, the FTC and the CFPB co-hosted a roundtable in Long Beach, California, to examine how debt collection and credit reporting issues affect Latino consumers, especially those who have limited English proficiency. Topics included an overview of the Latino community and their finances; pre-litigation collection from Latino consumers; the experience of LEP Latinos in debt collection litigation; credit reporting issues among LEP Latinos; and developing improved strategies for educating and reaching out to LEP Latinos about debt collection.
Security of consumer data in the buying and selling of debts. In two separate cases (FTC v. Bayview Solutions, LLC and FTC v. Cornerstone and Company), the FTC obtained preliminary injunctions against debt sellers that it alleges posted the sensitive personal information of over 70,000 consumers, including bank account and credit card numbers, birth dates, contact information, employers’ names, and information about debts that the consumers allegedly owed, on a public website. The defendants in these cases allegedly exposed this sensitive information while trying to sell portfolios of past-due payday loan, credit card, and other purported debt.
For more information about the FTC's letter to the CFPB on fair debt collection enforcement efforts, subscribe to the Banking and Finance Law Daily.
