FTC for first time spanks illegal text messenger with $1M fine

Debt-collectors tactics have been under scrutiny this year

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The Federal Trade Commission this week said it levied a $1 million fine on California-based debt collector who used text messages to falsely collect debts. 

The FTC said National Attorney Collection Services, Inc., and National Attorney Services LLC used English- and Spanish-language text messages and phone calls in which they unlawfully failed to disclose that they were debt collectors.  The FTC charged the defendants with violating both the Fair Debt Collection Practices Act and the FTC Act.

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According to the FTC, in the companies' text messages, phone calls, and mailings, the defendants also falsely portrayed themselves as law firms - by using the names National Attorney Services, National Attorney Service, National Attorney and Abogados Nacionales.  Building on their deceptive company name, the defendants falsely threatened to sue consumers for not paying their debts or to garnish their wages.

The FTC also alleged that the companies illegally revealed debts to the consumers' family members, friends and co-workers.  Among other tactics, the defendants used mailing envelopes picturing a large arm shaking money from a consumer who is strung upside down (see image). 

The law does not allow debt collectors to disclose publicly someone's private debts, because doing so could endanger their jobs and reputations.  Mailing envelopes can include only the name and address of the company, and cannot indicate that the consumer may owe a debt, the FTC says.

"Getting texts from debt collectors might be annoying, but it's not illegal. What is illegal is an incomplete disclosure and a harassing or deceptive attempt to collect money. For example, it's against the law for debt collectors to pretend to be attorneys or falsely threaten to sue you, regardless of how they communicate - through texts, through letters, or through phone calls," the FTC stated.

The FTC noted that it recently settled its first case against a debt collector who used text messages to contact consumers. According to the FTC, National Attorney Collection Services broke the rules by pretending to be lawyers (check out the company's name), never mentioning they were debt collectors. The company also falsely threatened to sue consumers, and sent letters in envelopes showing a person literally being "shaken down" for money, the FTC said.

This week's action could be the tip of the iceberg when it comes to text messaging abuses. The FTC held a workshop in 2011 and issued a report in 2009 that addressed how debt collectors can use text messages to collect debts in a lawful manner while maintaining consumers' privacy.

In its 2009 report, the FTC said the use of new technologies also has fundamentally altered the debt collection business. "Communication technologies, in particular, have spurred profound changes in this industry. Debt collectors no longer must use individually-typed letters and manually-dialed telephone calls to contact consumers. Collectors now are able to easily and relatively inexpensively mass-produce and send letters to debtors. Collectors also now use sophisticated automated dialing and interactive voice recording technologies to efficiently place telephone calls to consumers. Consumers likewise use new communication technologies to handle incoming calls. They receive calls on mobile telephones as well as on landline telephones, and they use Caller ID services and answering machines to filter the calls they receive."

 The FTC also noted that other technologies have "increased exponentially the ability of creditors and debt collectors to obtain, store, and transfer data about consumers and their debts. Changes in database technologies have dramatically enhanced the ability of debt collectors to aggregate disparate pieces of information about consumers, thus making it cheaper and easier to locate and contact consumers."

The FTC has stated in the past that debt collectors generally should be allowed to use all communication technologies, including new and emerging technologies, to contact consumers. The central law, the Fair Debt Collection Practices Act, must be applied to avoid collectors' use of communication technologies in a manner that causes consumers to incur charges, or otherwise subjects them to unfair, deceptive, or abusive acts and practices, the FTC stated.

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