FTC Letter Reveals Increased FDCPA and Debt Collection Enforcement

The Federal Trade Commission (FTC) Wednesday issued its annual report on enforcement of the Fair Debt Collection Practices Act (FDCPA) in a letter to the Consumer Financial Protection Bureau (CFPB). The letter noted that the FTC has stepped up its law enforcement actions under the FDCPA as the CFPB takes over most other responsibilities.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to submit annual reports to Congress on the FDCPA, a task previously assigned to the FTC.  To assist the CFPB in preparing its report, the FTC issues a letter summarizing its own recent work on debt collection issues.

In Wednesday’s letter, the FTC noted that it brought or resolved nine debt collection cases in 2013, the highest total in a single year.

“When it comes to debt collection, the FTC has many tools in its arsenal, including research, enforcement, and consumer education,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “But in the years since the financial crisis hit, we have increased our emphasis on law enforcement.”

In 2013, the FTC obtained court orders stopping illegal debt collection activities in seven cases, and referred two other debt collection cases to the Department of Justice for civil penalties. In several of the cases, the FTC obtained temporary restraining orders halting the unlawful conduct, freezing the defendants’ assets, and appointing receivers to take over operations while court proceedings progressed (Asset & Capital Management Group and Goldman Schwartz Inc.). For the most egregious violators, the FTC obtained orders banning the responsible parties from ever participating in debt collection again (Forensic Case Management Services, Inc.).

The FTC’s enforcement division in 2013 also:

• Brought its first enforcement action regarding text message use in debt collection (National Attorney Collection Services, Inc.),
• Continued to pursue “phantom” debt collectors (Pinnacle Payment Services, LLC and Pro Credit Group, LLC), and
• Placed the largest third-party debt collector under an order that includes the agency’s highest debt collection civil penalty (Expert Global Solutions/NCO Group).

To help other jurisdictions with enforcement, the FTC also filed three amicus briefs in the last year. In its brief for the Seventh Circuit, the FTC argued that a payday lender’s mandatory pre-dispute arbitration clauses may be unconscionable, in part because they require alleged debtors to arbitrate in a remote tribal court, effectively pressuring those consumers to abandon their legal claims or defenses.

The FTC joined the CFPB in filing two other amicus briefs. The first, submitted to the Seventh Circuit, argued that a debt collector violates the law whenever its communications tend to deceive or mislead consumers into believing that a time-barred debt could be the subject of a collection suit. The second, submitted to the Second Circuit, argued that debt collectors whose process servers failed to notify consumers that they were being sued violate the FDCPA, which broadly prohibits deceptive and unfair collection practices in any form.

The FTC’s research and policy activities in 2013 included the Life of a Debt Roundtable Event which examined data integrity in debt collection and the flow of consumer data throughout the debt collection process.