FTC Announces Settlements with Two Collection Agencies for $2 million

The Federal Trade Commission late Thursday announced settlements with debt collection agencies totaling $2 million in two separate actions alleging very different violations. A joint settlement announcement is rare for the FTC.

In the first case, the FTC charged that Memphis-based collection agency Regional Adjustment Bureau (RAB) used unfair and deceptive collection tactics, such as repeatedly calling consumers and accusing them of owing debts that they did not owe, contacting consumers at work while knowing that their employers did not allow the calls, making unauthorized withdrawals from consumers’ bank accounts, and disclosing confidential information about debtors to third parties. The company collects on about a million consumer accounts a year and is charged with violating the FTC Act and the Fair Debt Collection Practices Act (FDCPA).

Under the proposed order settling the FTC’s charges, RAB will pay a $1.5 million civil penalty and is required to address specific conduct alleged in the Commission’s complaint — whenever a consumer disputes the validity or the amount of a debt, RAB must either close the account and end its collection efforts, or suspend collection, until it has conducted a reasonable investigation and verified that the information about the debt is accurate and complete. The order also restricts situations in which the company can leave voicemails that disclose the alleged debtor’s name and the fact that he or she may owe a debt.

RAB, one of the largest collection agencies in the Mid-South, said in a statement provided to insideARM.com that it worked cooperatively with the FTC in addressing the Commission’s concerns. As part of the settlement, RAB did not admit any of the allegations.

“As a private collection agency with very large borrower account inventories that serves the type of creditors we serve, RAB takes regulatory compliance extremely seriously and invests heavily in industry-leading compliance programs to ensure appropriate, legal and compassionate business practices,” stated Robert Wyatt, Chief Compliance Officer of Regional Adjustment Bureau, Inc.  “Although we could have chosen to vigorously defend ourselves in U.S. District Court, we determined that mounting a defense over what promised to be an extended period of time, and for claims that were several years old, would have been too costly and distracting to our employee-owned business. Working cooperatively and amicably with the FTC investigators, RAB is pleased to have resolved this matter quickly and is eager to continue to provide our world-class services to our clients.”

The second, unrelated case involved New York-based Credit Smart, LLC and several associated companies and individuals. The FTC charged that the collection agency used unfair and deceptive tactics, such as leaving pre-recorded messages for consumers that pretended to offer financial relief. The messages provided a number to call, and promised to provide information about a “Tax Season Relief Program,” a “stimulus relief package,” or a “balance transfer program.” In reality, there was no financial relief plan, and the messages were merely a ruse to get consumers on the line with debt collectors, according to the FTC.

The complaint also alleges that when collectors spoke to consumers, they would falsely threaten to sue them, which they had no plans to do; garnish their wages, which they could not do without a court order; or arrest them, which they had no legal right to do. The defendants also allegedly threatened to collect on old debts that were beyond the statute of limitations, refused to provide information about the debt that consumers were legally entitled to request, continued to attempt to collect on debts without a reasonable basis for telling consumers they owed the debt, told consumers they owed interest on debts when they didn’t, and revealed the debt to consumers’ relatives, employers, and coworkers. The FTC charges that Credit Smart’s tactics violated the FTC Act and the FDCPA.

Under the proposed order with the FTC, Credit Smart will pay a $1.2 million civil penalty, of which all but $490,000 will be suspended due to inability to pay. The company must also halt their illegal debt collection tactics, including making false threats to sue and arrest consumers and garnish their wages, pretending to be financial counselors, falsely insisting that consumers owed large amounts of interest, and otherwise violating the federal debt collection law. They also must provide consumers with a disclosure that explains their rights regarding the collection of time-barred debt, and another explaining how to file a complaint with the FTC if they feel they are being treated unfairly.