Bill Collectors Accused of Going Too Far : Collections: Employees of giant Payco American illegally pressured debtors, a federal complaint alleges.
In its largest such case ever, the federal government on Monday charged the nation’s biggest debt-collection agency with using an arsenal of illegal intimidation tactics against debtors nationwide.
In a civil complaint filed by the Justice Department in U.S. District Court in Milwaukee, the government said Payco American Inc. employees pressured debtors by swearing at them, calling them at odd hours, threatening to have them arrested and revealing their debt to employers. Such acts violate the federal Fair Debt Collection Act. The suit seeks certain changes in Payco’s operating practices and fines of up to $10,000 for each violation.
Payco, with field offices in California and other states, did not return calls to its Brookfield, Wis., headquarters for comment.
The suit comes amid growing complaints about abusive tactics by debt-collection agencies, whose activities have grown as overextended consumers find it harder to repay debt. The Federal Trade Commission said that such complaints doubled in 1992, to 2,000.
“We consider it a serious problem,” an FTC spokeswoman said.
The charges against Payco had been expected. In July, the company announced that it had set aside reserves of $400,000 to cover possible penalties. In NASDAQ trading Monday, its stock closed up 25 cents at $8 per share, unaffected by the news. Payco reported $1.8 billion in accounts received for collection for the six months ended June 30.
Credit agencies have not been regulated by California for a year. Before the state ended its regulatory chores, the Pleasanton office of Payco was sent a “warning letter” for consumer abuse.
The federal suit against Payco results from an FTC investigation. David Medine, FTC associate director for credit practices, said the charges against Payco stand out in severity and scope.
It is highly unusual for credit agencies to pressure debtors by contacting employers, Medine said. “We consider that very serious,” he said. “We know people can lose their jobs, or feel threatened that they may lose their jobs, by this.”
Other charges against Payco include: calling debtors before 8 a.m. and after 9 p.m.; calling debtors at their place of employment; threatening arrest or garnishment of wages, which cannot be done; using obscene language or causing the debtor’s telephone to ring continually; posing as attorneys, and threatening legal action with no intention of following through.
Medine said that alleged abuses “involve more than a few employees acting on their own. . . . Violations are widespread and ongoing,” although he could not estimate the number of potential victims.
The government is seeking an order that Payco issue debtors what is known as a “shut up letter,” or a notice that under law, debtors can tell collection agencies to leave them alone. The law permits creditors--such as banks, department stores and oil companies--to continue to seek to collect the debt on their own.
The government also wants Payco to tell its employees in writing that it is illegal to discuss a debt with any other person except the debtor’s lawyer or spouse, and that individual collection agents may be responsible for violations.
