FTC Settles With Collector Over Multiple Alleged FDCPA Violations

The Federal Trade Commission announced Friday that it had agreed to a settlement with American Municipal Services Corporation and its owners, Lawrence Bergman and Gregory Pitchford (Defendants), for alleged illegal debt collection tactics.

Without admitting or denying any of the allegations made against them, Defendants agreed to the Order and settlement.

The full text of the Complaint can be viewed here .

The full text of the court’s Order can be viewed here.

The firm collects debts owed to municipalities, including court fines, parking tickets, and debts for utility bills and other services on behalf of more than 500 municipalities in Alabama, Arkansas, Illinois, Louisiana, Mississippi, Oklahoma, and Texas.

The FTC said the company used “Warrant Enforcement Division” or “Municipal Enforcement Division” letterhead that falsely suggested that the letter was coming from a government agency. The defendants sent consumers an initial warning letter, and then a “FINAL NOTICE” falsely claiming, among other things, that the consumer was subject to imminent arrest for nonpayment, that their driver’s license may be suspended for nonpayment, and that the debts would be reported to consumer reporting agencies.

The defendants, who also employ collectors who call people in English and Spanish, are charged with violating the FTC Act and the Fair Debt Collection Practices Act (FDCPA).

Under a proposed stipulated order, the defendants are prohibited from making misrepresentations to collect debts, including: that an arrest warrant has been issued, that consumers must act immediately to avoid arrest, that failure to respond may lead to suspension of a driver’s license, that the defendants’ communications are from a government entity with arrest power, and that consumers’ payment status will be reported to credit reporting agencies.

The order also prohibits the defendants from making unsubstantiated claims and violating the FTC Act and the FDCPA, and imposes a $350,000 judgment that must be paid within seven days. Recordkeeping requirements are imposed for a period of twenty (20) years, including the following for any business that any of the Defendants owns or controls directly or indirectly:

• Records of all consumer accounts and payment histories
• Records of all documents evidencing the existence of a warrant
• Records of all consumer complaints, whether received directly or indirectly, such as through a third party, and any response
• Records of all contracts signed with client-creditors
• Records of all collection letters used in the collection of debts
• Personnel records showing, for each person providing services, whether as an employee or otherwise, that person’s name, addresses, telephone numbers, job title or position, dates of service, and (if applicatble) the reason for termination
• All records necessary to demonstrate full compliance with each provision of the Order, including all submissions to the FTC

The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 2-0. The U.S. District Court for the Eastern District of Texas, Sherman Division, entered the order on March 21, 2017.

The FTC announcement noted that the Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge.

insideARM Perspective

If proven true, the practices described here would be a textbook example of – at best – inadequate policies, procedures, and training, and – at worst – blatant and intentional violations of the law.

One also wonders where the oversight was. This organization supported over 500 clients. Nobody asked to review the letters or procedures?