A Glendale collection agency has agreed to pay $1 million to resolve a lawsuit accusing it of sending unlawful text messages to debtors and inappropriately disclosing the debts to their family, friends and co-workers.
The Federal Trade Commission had accused National Attorney Collection Services Inc. of falsely portraying itself as a law firm in texts, telephone calls and by mail. In some cases, the FTC lawsuit said, the company falsely threatened to have debtors arrested.
The FTC also accused the company and its chief executive, Archie Donovan, of illegally revealing debts to consumers’ family members, friends and co-workers. In some cases, they sent notices about the debts in mailing envelopes that included a picture of a large arm shaking money from a consumer who is strung upside down. U.S. law does not allow debt collectors to publicly disclose someone’s private debts, because doing so could endanger their jobs and reputations, the FTC said.
Many of the debtors had fallen behind on payments to payday loan companies, which often charge exorbitant interest rates to borrowers with poor credit histories, the FTC said in its lawsuit, filed at U.S. District Court in Los Angeles.
“Defendants have engaged in deceptive and unfair practices in almost every facet of their dealings with these consumers,” the FTC lawsuit said.
It is not unlawful for a debt collector to communicate by text message, the FTC said. But the communication must be factual and must include disclosures about the debtors’ legal rights.
“No matter how debt collectors communicate with consumers – by mail, by phone, by text or some other way – they have to follow the law,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The FTC has a zero tolerance policy for deception.”
In addition to the $1 million civil penalty, the settlement requires the defendants to stop sending text messages that do not include the required disclosures, and to obtain a consumer’s consent before contacting them by text message. The defendants were also barred from falsely claiming to be law firms, and from falsely threatening to sue or take any action – such as seizing property or garnishing wages – that they do not actually intend to take.
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