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WBK Industry News - Federal Regulatory Developments

FTC Charges Georgia Debt Collectors with FTC Act and FDCPA Violations, and Federal Court Issues Temporary Restraining Order

On October 23, 2017, the FTC filed a complaint in the Northern District of Georgia for permanent injunctive relief and various other types of equitable relief as a result of Georgia debt collectors’ alleged acts or practices in violation of the unfair or deceptive acts or practices (UDAP) provision of the FTC Act and several provisions in the Fair Debt Collection Practices Act (FDCPA).  The defendants in the case include corporate entities alleged to have operated as a common enterprise while engaging in the activities at issue, as well as individuals that had significant involvement and control in the corporate entities’ acts and practices.  Because the Court found, among other things, that (1) there is good cause to believe that the defendants engaged in or are likely to engage in prohibited acts or practices and (2) immediate and irreparable harm will result from such ongoing acts unless the defendants are prevented from doing so by order of the court, the Court entered a temporary restraining order against the defendants.

The FTC charged the debt collectors with two counts of UDAP violations.  The first count alleged that they made false or misleading threats regarding the consequences of not paying the consumer’s debt.  This charge stemmed from allegations that the debt collectors directly or indirectly represented to consumers, when such representations often were false when made, that: (1) the consumer had committed a crime, (2) civil or criminal charges had been or would be filed, (3) garnishment action had been or would be taken, (4) the consumer would be arrested or imprisoned, or (5) a law enforcement officer would come to the consumer’s home or place of employment.  The second count alleged that the debt collectors made false, misleading, or unsubstantiated representations that the consumers owed the debts at issue (e.g., that the consumer was delinquent on a debt they had the authority to collect or the consumer had a legal obligation to pay them).

The FTC also charged the debt collectors with three counts of FDCPA violations.  An FDCPA violation is itself considered an unfair or deceptive act or practice in violation of the FTC Act.  The first such count alleged that the debt collectors used false, deceptive, or misleading representations or means, citing many of the same practices noted in the FTC charges.  The first count also alleged that they failed to disclose: (1) in the initial communication with a consumer that they were debt collectors attempting to collect a debt and any information obtained would be used for that purpose, and (2) in subsequent communications that they were debt collectors.  In the second count, the FTC alleged that the debt collectors communicated with third parties in violation of the FDCPA, e.g., for purposes other than acquiring consumer location information without proper permissions to do so.  The third count alleged that the debt collectors did not properly provide required notices to consumers regarding the debt and the right to dispute the debt.

As a result, the FTC alleged that consumers have suffered, and would continue to suffer, substantial injury due to these actions, that the defendants received unjust enrichment as a result of these actions, and that they were likely to continue to cause injury to consumers, gain further unjust enrichment, and harm the public interest if the court did not impose injunctive relief in this situation.  Upon review, the U.S. District Court for the Northern District of Georgia generally found good cause to believe that which was claimed by the FTC, and it therefore entered a temporary restraining order against the debt collectors.  The order included, among other things, a temporary halt on the alleged acts in violation of the FTC Act and FDCPA, certain releases of customer information, and use of certain of defendants’ assets.  The court also appointed a receiver to take specified actions in connection with the case.

The FTC’s summary of this case, as well as the referenced court documents, can be found at: https://www.ftc.gov/news-events/press-releases/2017/11/ftc-charges-debt-collection-business-defrauded-consumers-paying.