A Glendale collection agency has agreed to pay $1 million to resolve a lawsuit accusing it of illegally texting debtors and improperly disclosing debts to family, friends and colleagues.
The Federal Trade Commission had accused National Attorney Collection Services Inc. of misrepresenting itself as a law firm in text messages, phone calls and in mail. In some cases, according to the FTC lawsuit, the company falsely threatened to have debtors arrested.
The FTC also accused the company and its chief executive, Archie Donovan, of unlawfully disclosing debts to family members, friends and co-workers of consumers. In some cases, they sent out debt notices in mailing envelopes that included a photo of a big arm shaking money from a consumer who is upside down. US 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.
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Many debtors had fallen behind on payments to payday loan companies, which often charge exorbitant interest rates to borrowers with bad credit histories, the FTC said in its lawsuit, filed in U.S. District Court. from Los Angeles.
“Defendants engaged in deceptive and unfair practices in nearly every aspect of their dealings with these consumers,” the FTC lawsuit said.
It is not illegal for a debt collector to communicate by text, the FTC said. But the communication must be factual and must include information about the debtors’ legal rights.
“No matter how debt collectors communicate with consumers — by mail, phone, text or any other means — they must follow the law,” said Jessica Rich, director of the Office of Consumer Protection at the FTC. “The FTC has a zero tolerance policy for deception.”
In addition to the $1 million civil penalty, the settlement requires defendants to stop sending text messages that do not contain the required information and to obtain consumer consent before contacting them by text message. Defendants were also prohibited from falsely claiming to be law firms and falsely threatening to sue or take actions – such as seizing property or garnishing wages – that they did not actually have the right to. intend to take.
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