[Vision2020] F.T.C. Fines a Collector of Debt $2.5 Million

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>


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January 30, 2012
F.T.C. Fines a Collector of Debt $2.5 Million By TARA SIEGEL
BERNARD<http://topics.nytimes.com/top/reference/timestopics/people/b/tara_siegel_bernard/index.html?inline=nyt-per>

The Federal Trade Commission signaled on Monday that it would continue to
crack down on debt collectors who harass consumers for money they may not
even be legally obligated to pay.

In the second-largest penalty ever levied on a debt collector, the F.T.C.
said that Asset Acceptance, one of the nation’s largest debt collection
companies, had agreed to pay a $2.5 million civil penalty to settle
charges<http://ftc.gov/opa/2012/01/asset.shtm>that the company
deceived consumers when trying to collect old debts.

The settlement is part of a broader effort to patrol the industry, agency
officials said. The commission said it had pursued eight cases related to
debt collection companies over the last two years.

“Our attention to debt collection has increased over the past couple of
years because the complaints have been on the rise,” said J. Reilly Dolan,
assistant director for the F.T.C.’s division of financial practices.

Consumer complaints about debt collection companies consistently rank as
the second-highest category among all complaints at the agency, behind identity
theft<http://topics.nytimes.com/your-money/credit/identity-theft/index.html?inline=nyt-classifier>.
But in 2010, complaints jumped 17 percent to 140,036, which represented 11
percent of all complaints in the commission’s database, up from 119,540, or
about 9 percent of complaints, in 2009.

Asset Acceptance, based in Warren, Mich., was charged with a variety of
complaints, including failing to tell consumers that they could no longer
be sued for failing to pay some debts because the debts were too old. The
company’s collectors also failed to inform consumers that paying even a
small portion of the amount owed would revive the debt — in other words,
making a payment would extend the amount of time the collector could
legally sue.

Debt collectors have only a certain number of years to sue consumers. The
statute of limitations varies by state, but typically ranges from two to 15
years, Mr. Dolan said, beginning when a consumer fails to make a payment.
But borrowers often do not realize that making a payment on the old debt
may restart the clock.

Among other things, the complaint also contended that the company — which
buys unpaid debts for pennies on the dollar from credit card companies,
health clubs and telecommunications and utility providers and tries to
collect them — reported inaccurate information about the consumers to the
credit reporting agencies. It also said that Asset Acceptance failed to
conduct a reasonable investigation when it was notified by one of the
credit agencies that a debt was being disputed. Moreover, the complaint
says that the company used illegal collection practices and that it
continued to try to collect debts that consumers disputed even though the
company failed to verify that the debt was valid.

The proposed settlement with Asset Acceptance requires the company to tell
consumers whose debt may be too old to be collected that it will not sue.
It also requires the company to investigate disputed debts and to ensure it
has a reasonable basis for its claims before going after the consumer. It
is also barred from placing debt on credit
reports<http://topics.nytimes.com/your-money/credit/credit-scores/index.html?inline=nyt-classifier>without
notifying the consumer.

The penalty “is certainly a slap on the wrist and probably a little bit
more, but it really depends on what the F.T.C. does to enforce this in the
coming months and years,” said Robert
Hobbs<http://www.nclc.org/about-us/bob-hobbs.html>,
deputy director at the National Consumer Law Center and author of “Fair
Debt Collection” (National Consumer Law Center, 1987). But “it is a great
step forward. It is not self-enforcing, and it has a mechanism for the
F.T.C. to follow up.”

Still, while the settlement requires the company to take more
responsibility for checking the statute of limitations before it contacts
consumers, he said most states did not require debt collectors to do that.
That means it is up to consumers to know the
rules<http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt144.shtm>on
the statute of limitations, which, he said, can be “an enormously
complex legal question.”

In a statement, Asset
Acceptance<http://investors.assetacceptance.com/phoenix.zhtml?c=148416&p=irol-newsArticle&ID=1654112&highlight=>said
that the settlement ended an F.T.C. investigation that began nearly
six years ago, and that the company did not admit to any of the
allegations. “We are pleased to have this matter behind us, and to have
clarity on the F.T.C.’s policies and expectations of the debt collection
industry,” said Rion Needs, president and chief executive of Asset
Acceptance.

In March, another leading debt collection company, West Asset
Management<http://ftc.gov/opa/2011/03/wam.shtm>,
agreed to pay $2.8 million, the largest civil penalty ever levied by the
F.T.C., to settle charges that its collection techniques violated the law.
The commission charged that West Asset’s collectors often called consumers
multiple times a day, sometimes using rude and abusive language, about
accounts that were not theirs. The Consumer Financial Protection Bureau and
the F.T.C. now share enforcement authority for debt collection companies,
though the new bureau has a power that the F.T.C. did not: it can write new
rules for debt collectors. But F.T.C. officials said that debt collection
enforcement would remain a top priority.

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Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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