The Federal Trade Commission has joined the Consumer Financial Protection Bureau (CFPB) in filing an amicus brief in the matter of Hernandez v. Williams, Zinman & Parham, P.C before the U.S. Circuit Court of Appeals for the Ninth Circuit. The case concerns the interpretation and enforcement of the Fair Debt Collection Practices Act (FDCPA).
The FDCPA provides that “a debt collector” must send a consumer a notice containing important information about the consumer’s debt and rights either in “the initial communication” or “[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt.” Consumers have 30 days after receiving such a notice to dispute the debt and to request information about the original creditor.
The FTC, joining the CFPB, argues in the brief that each debt collector that contacts a consumer — not just the first debt collector that attempts to collect a particular debt — must send a notice that complies with this provision. The brief therefore concludes that the Circuit Court should reverse the District Court’s prior ruling granting summary judgment to the ARM firm in the case.
The Commission vote authorizing filing of the joint amicus brief was 5-0. It was filed on August 20, 2014.
Debt collector gets 27 years in scams, threats that targeted elderly
Article by: JOY POWELL
August 20, 2014 – 7:22 PM
A crooked debt collector was sentenced Wednesday to 27½ years in federal prison for stealing clients’ money and identities and going so far with intimidation that he threatened to push a disabled veteran in a wheelchair off a bridge.
Khemall Jokhoo, 36, formerly of Lonsdale, Minn., and Burnsville, was sentenced in U.S. District Court in Minneapolis on 33 counts after trying to steal more than $700,000 by using identities of more than 60 victims. He targeted the elderly.
A jury trial found that Jokhoo was formerly registered as a debt collector and was the owner and sole employee of First Financial Services, which he ran from a Burnsville apartment, from May 9, 2002, through Nov. 3, 2009.
As a debt collector, Jokhoo, who has lived in several metro communities, had access to customers’ sensitive credit information, including dates of birth, addresses and more.
“Jokhoo used this information to harass and intimidate victims and to demand payment to him for purported debts,” the U.S. Attorney’s Office in Minneapolis said in a statement Wednesday. “When he could not convince victims to pay him, Jokhoo impersonated victims, using their bank accounts and other identifying information to take over and steal directly from their account.”
In addition to using intimidation tactics, Jokhoo threatened victims with physical harm if they did not pay him, including the disabled veteran in the wheelchair.
U.S. Attorney Andrew Luger said identity theft is a widespread problem, and local and federal law enforcement agencies joined to stop Jokhoo — and to prevent additional victims.
“The term ‘identity theft’ seems an inadequate description for what the defendant did to the victims in this case,” said Assistant U.S. Attorney Lola Velazquez-Aguilu.
“He used their identifying information not only to steal their money but also to terrorize them, taking pleasure in making other human beings feel completely powerless and without worth. This defendant’s sentence sends an important message to debt collectors who use their positions of trust to steal.”
She and fellow prosecutor LeeAnn Bell tried Jokhoo, leading to convictions for 11 counts of bank fraud, 10 counts of aggravated identity theft, nine counts of mail fraud, two counts of wire fraud and one count of impersonating an officer or federal employee.
U.S. District Judge David Doty said after 175 months in federal prison, Jokhoo will be on five years of supervised release. Doty also ordered Jokhoo to pay more than $257,000 in restitution, according to a spokesman for federal prosecutors.
The Minnesota Financial Crimes Task Force, state commerce department, U.S. Postal Service and Lonsdale police investigated.
State commerce officials had stripped Khemall “Kenny” Jokhoo of his debt collection and real estate licenses and fined him and his company $100,000 in May 2011.
An administrative law judge had found earlier that Jokhoo misrepresented himself as a lawyer, harassed debtors over extremely old, uncollectable accounts, made unauthorized withdrawals from debtors’ financial institutions, cashed forged checks and concealed a prior criminal record on at least seven state license applications since 2005.
Since the collapse of the subprime mortgage market, lenders have all but stopped offering loans that sound too good to be true. But that’s not the case with subprime automobile loans, which lenders continue to market aggressively to consumers with imperfect credit.
“Don’t let bad credit stop you from getting a new car!” a voice actor exclaims in one television ad, as images of shiny sport utility vehicles appear onscreen. “At 450Credit.com, a 450 credit score, plus $450 a week in income, equals a brand-new car!”
Advances in technology could explain why lenders continue to offer subprime car loans. While the loans are still risky, these technologies have made the process of repossessing vehicles cheaper and easier, minimizing potential losses on soured loans.
For example, massive databases can now track the location of license plates so that lenders can quickly snatch up cars on which their owners have missed multiple payments. The past decade has also seen the proliferation of in-car devices that some lenders use to locate vehicles and lock ignitions when their customers miss payments.
Taken together, the technologies improve the chances that auto lenders will recover their collateral.
“We have the ability to find auto assets when traditional methods of finding auto assets don’t work,” said Chris Metaxas, the chief executive officer at of Fort Worth, Texas-based Digital Recovery Network, which uses cameras mounted in the cars of repo men around the country to take pictures of license plates on parked cars. “And that’s hundreds of repossession agents simultaneously, with thousands of cameras.”
The photos get matched with GPS data and fed into a searchable database. Then auto lenders can marry that data with information from other sources in order to get a rich understanding of their customers’ daily habits.
Privacy advocates are raising concerns about how technology has changed the repossession industry. But there’s no question that cameras have simplified the process of retrieving cars. Rather than knocking on neighbors’ doors to track down delinquent borrowers, repo men can often go straight to locations where the vehicle has been seen recently.
Scott Jackson is chief executive officer of MVTRAC, a Palatine, Ill., company that maintains another database of license plates and their locations. Improved technology, he said, has sped up the recovery process to the point where fewer loans are being getting charged off.
Today, auto lenders are finding additional uses for these databases earlier in the lending process. For example, when a borrower fills out a loan application, the address he provides can be cross-checked with a license-plate database and other sources, in order to determine whether he is actually living at the address listed.
Even if lenders have reason to believe a borrower is lying, some will still make the loan, according to Jackson. That’s because the lender knows where to find the car, and the borrower doesn’t know that the lender knows.
And there are other technologies that are further changing the risk calculus for auto lenders.
In deep-subprime lending, which Experian defines as loans to borrowers with credit scores below 550, cars often come loaded with devices that use GPS technology to track the vehicle’s movement, as well as ignition locks that can be activated remotely if the borrower misses payments.
These devices are controversial, with some drivers reporting that they’ve found themselves stranded in the middle of an intersection after the ignition was locked.
“When you have a subprime credit score, you might feel like this is the only option you have,” said Chris Kukla, senior counsel for government affairs at the Center for Responsible Lending. “In most cases, it’s a take-it-or-leave-it proposition.”
But from the lender’s standpoint, an ignition lock can act as a powerful motivator for a borrower to pay. The devices also make the repossession process easier.
“They reduce the number of collectors that you need, because a collector can handle more accounts,” said Ken Shilson, president of the National Alliance of Buy-Here Pay-Here Dealers, a trade group representing auto dealers that extend credit directly to borrowers, often at high interest rates. “And you get an increased recovery rate because you find the vehicle quicker.”
Still, it’s not clear whether these improvements in lenders’ ability to recover their collateral will be enough to compensate for an increase in risky auto lending.
Subprime auto lending hit at an eight-year high in the first four months of 2014, Equifax said last week. And according to Experian, auto loans to deep-subprime borrowers rose by 51% in the first quarter when compared to a year earlier. In a reprise of the subprime mortgage boom, much of the lending is being driven by strong demand from secondary-market investors.
Among banks, 4% of auto loans made in the first quarter were classified as deep-subprime, and another 14% were subprime, according to Experian. Those percentages were far higher among buy-here pay-here dealers and auto finance companies.
There are some recent signs of deterioration in the performance of subprime auto loans, but industry analysts say there’s no reason to panic.
According to Standard & Poor’s, the percentage of subprime auto loans that lenders recover after borrowers default fell to 48.7% in the first quarter, down nearly five percentage points from a year earlier, though the recovery rate was still well above its recession-era low.
“Yes, losses are rising, but from record-low levels,” Amy Martin, senior director of S&P’s asset-backed securities group, said last week during a conference call.
Factors that may be counteracting the improvements in the tracking of collateral include longer loan terms and smaller down payments.
What’s more, vehicles are losing their value at a faster rate than they were a few years ago, according to a report released last week by Black Book and Fitch Ratings. The report projected that depreciation rates will rise to 13.5% this year and 15% next year.
Higher depreciation rates mean bigger losses for lenders when their loans go bad.
In 2011, the depreciation rate plunged to 7.7%, as the inventory of new cars was sharply reduced during the financial crisis, but pre-recession rates ranged from 15% to 18%, according to the report.
“It’s still a good market. It’s not a market that’s been as good as we’ve had the last few years,” said Ricky Beggs, senior vice president at Black Book.
He said that the post-recession boost in new car manufacturing and the large number of leased cars that are expected to be resold in the next few years will continue to put downward pressure on used car prices.
CFPB Issues Bulletin to Prevent Runarounds in Mortgage Servicing Transfers
Bureau Highlights Risks in Transferring Loans Under Loss Mitigation Review
Washington, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) is releasing a bulletin outlining expectations for mortgage servicers that transfer loans. The bulletin includes information on how mortgage servicers should pay special attention to new rules protecting consumers applying for loss mitigation help or trial modifications.
“At every step of the process to transfer the servicing of mortgage loans, the two companies involved must put in appropriate efforts to ensure no harm to consumers. This means ahead of the transfer, during the transfer, and after the transfer,” said CFPB Director Richard Cordray. “We will not tolerate consumers getting the runaround when mortgage servicers transfer loans.”
Mortgage servicers are responsible for collecting payments from mortgage borrowers on behalf of loan owners. They also typically handle customer service, escrow accounts, collections, loan modifications, and foreclosures. Generally, borrowers have no say in choosing their mortgage servicers. Servicing transfers among servicers are common and may occur in several ways. The mortgage owner may sell the rights to service the loan. In some case the owner of the loan may hire a sub-servicer rather than servicing the loan itself.
In January 2014, the CFPB’s new common-sense mortgage servicing rules took effect. The rules protect mortgage borrowers from runarounds by their servicers. Servicers are now required, for example, to maintain accurate records, promptly credit payments, and correct errors on request. Among other things, the new regulations also require servicers to maintain policies and procedures to facilitate the handover of information when a servicer transfers a loan to a new company.
Today’s bulletin gives examples of some things CFPB examiners will look for when loans are transferred. In particular, CFPB examiners will carefully scrutinize transfers of loans with pending loss mitigation applications or approved trial and permanent modification plans. Examples of good practices by servicers include flagging those loans and taking special care to ensure that all relevant documents are transferred in a timely manner.
If servicers are not fulfilling their obligations under the law, the CFPB will take appropriate actions to address these violations and seek all appropriate corrective measures, including remediation to harmed consumers.
Throughout 2013 and 2014, the CFPB has been working to ensure a smooth industry transition to compliance with the new mortgage servicing rules. The Bureau maintains a Regulatory Implementation website, which consolidates all of the new mortgage rules and related implementation materials and resources, at:http://www.consumerfinance.gov/regulatory-implementation
New York Law Journal article about one of our cases:
Secondary Debt Collectors Must Give Notice, Judge Says
Mark Hamblett0 8/18/2014
The fair Debt Collection Practices Act requires subsequent debt collectors to notify consumers in writing, even if the prior holder or debt collector had already given notice, a federal judge has ruled.
Deciding an issue that has divided courts, Southern District Judge William Pauley III ( See Profile) said secondary collectors still must send a validation notice to avoid confusion by consumers over who holds the debt and whether they have the right to contest it.
In Tocco v. Real Time Resolutions, 14-cv-810, Pauley said the requirement of a validation notice in 15 U.S.C. §1692g “applies to initial communications from each successive debt collector.”
Under §1692g, once a debt collector has initially contacted the consumer, it must send, within five days, a notice stating the amount of the debt, the name of the creditor and a statement that the debt will be assumed valid if the consumer does not dispute it within 30 days of receiving it.
If any portion of the debt is disputed, the collector has to send verification of the debt to the consumer as well as a statement that, at the consumer’s written request, the collector will send the name and address of the original creditor if it is different from the current creditor.
Plaintiff Angelique Tocco filed a putative class action in the Southern District in 2014 against Real Time Resolutions, a debt collector that sent her a form letter on July 31, 2013 informing her that the servicing of her mortgage had been transferred to Real Time.
Tocco’s complaint alleged that the form letter failed to disclose the current owner of the debt and lacked the required notice of dispute.
Tocco also alleged that a second letter she received on Oct. 1, 2013, one that advised her of options to resolve her past due account, did not disclose the amount of the debt, identify the creditor, or inform her of her right to dispute the debt.
Real Time made an offer of judgment for $1,100 plus reasonable costs and attorney fees, but Tocco rejected it.
Real Time then moved to dismiss the complaint, arguing before Pauley that neither the July 31 nor the Oct. 1 letters were “initial communications” under the FDCPA because Tocco had already engaged in litigation over the same debt with the Real Time’s predecessor-in-interest, Solace Financial.
Pauley, noting a division among courts that have considered the issue, rejected that argument in an opinion issued Wednesday.
“Reading the text broadly to effect the FDCPA’s consumer-protective purpose, this court holds that a debt collector must send a validation notice under section 1692(a) even if a prior debt collector already sent a notice regarding the same debt,” he said. “This interpretation is consistent with the recommendations of the Federal Trade Commission and forecloses some confusion a consumer might experience when faced with a successive debt collector.”
As an example, Pauley said, “a consumer who has challenged an initial debt collector to verify a debt may not realize she has the same right with respect to a subsequent collector.”
Real Time also contended that the July letter did not require FDCPA notice because it was already required to give notice under another law—the Real Estate Settlement Procedures Act.
The company said its July 31 letter was informational only and did not explicitly demand payment, and therefore falls outside the FDCPA’s notice requirements for any communications “in connection with the collection of any debt.”
Pauley said, “Several courts have embraced this distinction between informational letters and attempting to collect a debt,” but the U.S. Court of Appeals for the Second Circuit has yet to weigh in. Pauley read the statute differently from the courts that have made the distinction.
“The fact that a letter may have been a required informational notice under a separate statute does not prevent it from being an initial communication ‘in connection with the collection of [a] debt’ under the FDCPA,” he said. “‘In connection with’ is synonymous with the phrases ‘related to,’ ‘associated with,’ and ‘with respect to.’”
The phrase is “expansive,” he said. “And it is broad enough to encompass a letter identifying a new debt collector, providing an address for future payments and warning ‘[t]his is an attempt to collect on a debt and any information obtained will be used for that purpose.’”
Real Time had argued that reading the requirements that broadly would bring every communication between a debt collector and a debtor under the act. Pauley disagreed.
“[I]t is not burdensome for a debt collector contacting a debtor in ‘an attempt to collect a debt’ to, at least that first time, include the full set of section 1692 notices or follow up with them in five days,” he said. “To do otherwise risks confusing the debtor.”
Pauley also resolved another question that has split the courts on Federal Rule of Civil Procedure 68, which permits a defendant to “serve on an opposing party an offer to allow judgment on specific terms.”
Under the rule, a plaintiffs claim is rendered moot when an offer of judgment exceeds what the plaintiff could recover.
Pauley said neither the U.S. Supreme Court nor the Second Circuit has addressed the effect a Rule 68 offer has before a court has had the opportunity to resolve a motion for class certification under Rule 23, but some courts have held that Rule 68 cannot be enforced prior to a decision on certification because it would allow defendants to “pick off” individual name plaintiffs until the certification decision is made by a different, perhaps more favorable judge.
Here, he said, Tocco asked permission to file for certification, and Pauley treated the request as a motion for such.
“If a Rule 68 offer made before a plaintiff had a reasonable time to move for class certification would not moot a claim, then by extension a Rule 68 offer made after the plaintiff has moved for class certification should not do so,” he wrote.
Abraham Kleinman, of Kleinman LLC in Uniondale and Tiffany Nicole Hardy of Edelman, Combs, Latturner & Goodwin in Chicago represent the plaintiffs.
Kleinman said Thursday the judge got it right.
“The original Tocco case versus Solace Financial—that was a case that listed Lehman Brothers as the current creditor and, at that date, Lehman Brothers was defunct, it was gone,” he said. “So who owns this lady’s mortgage?”
Geoffrey Garrett Young and Casey Devin Laffey of Reed Smith represented the defendants.
There is an article in today’s New York Times Magazine, “Paper Boys–Inside the Dark World of Debt Collections,” which underscores why a consumer should never, ever just assume that someone attempting to collect a debt from them is entitled to do so, even if they purport to have information about the debt.
“As long as paper continues to be stolen, double-sold or otherwise exchanged without accurate supporting information — like statements or copies of the original signed contracts — consumers will be exploited and collectors like Siegel and Wilson will have to fend for themselves.”
“As he soon discovered, after creditors sell off unpaid debts, those debts enter a financial netherworld where strange things can happen. A gamut of players — including debt buyers, collectors, brokers, street hustlers and criminals — all work together, and against one another, to recoup every penny on every dollar. In this often-lawless marketplace, large portfolios of debt — usually in the form of spreadsheets holding debtors’ names, contact information and balances — are bought, sold and sometimes simply stolen.”
“Later, he also became a debt broker or dealer, a type of role he knew quite well: “I used to buy pounds of weed, all right, and then break it down and sell ounces to the other guys, who were then breaking it down and selling dime bags on the corner, right? Well, that’s what [I’m] doing in debt.” …“I buy old crap,” Wilson said. “I’m the King of Crap.”
“It was part of a much larger package of roughly $50 million worth of debt, which he bought for just 12 basis points — or one-twelfth of a penny on the dollar. It had been bad paper, Owens said, and he’d gotten burned on the deal. After the purchase, Owens discovered that another agency was collecting on the same paper and, what’s more, that some of the dates on the debts had been manipulated so that the paper appeared newer than it actually was. As Owens saw it, when buying from debt brokers, this was all part of the risk you faced. He concluded: “It is just data you are purchasing.”
“The [Consumer Financial Protection] bureau vowed to police the nation’s largest 175 agencies, but one recent projection on the industry estimates that there will be 8,501 debt-collection firms in 2015 in the United States. And the companies engaging in the most grievous behavior — like falsely threatening lawsuits or collecting on bad paper — tend to be the smaller operators. It inevitably falls upon the state attorneys general to go after them, which means depending on overburdened officials like Karen Davis.”
Note that the mere fact that a debt collector has information about you or about the debt does not establish that it in fact has any right to collect.
If the information in your credit report is not accurate, a lender or credit card company could say that you qualify, but for a high interest rate when in fact you may actually qualify for a lower rate. In some cases inaccuracies could even lead lenders to turn you down entirely.
The Federal Fair Credit Reporting Act (FCRA) promotes the accuracy, fairness and privacy of information about consumers in the files of credit reporting agencies. One right consumers have is tochallenge the accuracy of the information contained in their credit file. Under the FCRA, both the credit reporting company and the information provider (that is, the person, company or organization that provides information about you to a consumer credit reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take full advantage of your rights under this law, LaShawn Brown, Extension Educator with Michigan State University Extension suggests you contact the credit reporting company and the information provider. Brown says, “You do not need to hire someone to fix your credit report.”
If you identify information in your file that is incomplete or inaccurate and report it to the consumer credit reporting agency, the credit reporting company must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. Tell the creditor or other information provider, in writing, that you dispute an item. Include copies (NOT originals) of documents that support your position. Keep copies of everything you submit.
In February 2014, the Consumer Financial Protection Bureau (CFPB) reported that consumers now have an option to provide supporting documents such as a paid bill, a letter written explaining the issue, a police report or proof of identity information, or other correspondence when you submit a dispute to Experian, TransUnion or Equifax. You can upload, mail or fax any supporting documents you have to explain the errors in your credit report.
The CFPB states that the credit reporting companies must forward your dispute, including all relevant information, to the information provider. If the information provider corrects your information
When the investigation is complete, the credit reporting company must give you a short written response and describe the results which include how your report has changed. If an item is changed or deleted, the credit reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The response provided by the credit reporting company must also include notice that says you can request a description of the procedure used to determine the accuracy and completeness of the information, including the business name, address and phone number of the information provider.
From the August 9, 2014 New York Times, editorial pages:
Dealers who can offload loans to banks before the loans fail take the same rapacious approach that mortgage lenders took in the run-up to the recession. They prey on less sophisticated borrowers, falsifying the borrower’s income information and writing loans with astronomical interest rates and hidden fees that deliver a quick profit to the dealers.
One of the more egregious tactics is the “yo-yo,” in which the buyer drives away believing that the deal has been closed, only to be summoned back days or weeks later and told that original deal has fallen through and that he or she must either surrender the car or accept a higher interest rate and terms that are much less advantageous. Borrowers who desperately need cars to get to work or to convey ailing parents back and forth to the doctor often feel that they have no choice and end up signing on the dotted line.
If you’re a student preparing to head back to campus, you may encounter offers from banks and other companies that promote debit cards, prepaid cards, bank accounts, and other products branded with your school’s name or logo. When your school makes a deal with a company to market a financial product, it’s important for you to have basic information about this agreement and to understand what this means for your options. Last year, we launched an inquiry into financial products marketed to college and university students to determine whether the market is working for students and families.
We called on financial institutions to publicly disclose agreements with institutions of higher education to market financial products to students. Information about these arrangements is already required to be disclosed when marketing credit cards and private student loans to students—these requirements were put in place after companies were found to have paid schools and school officials in order to steer students into these products.
Making these agreements available for all financial products shows schools’ and companies’ commitment to transparency, helping students and their families understand basic information about these products before you sign up.
We decided to take a look at the financial institution partners of a group of some of the largest universities in America – members of the Big Ten conference – to see if they’ve disclosed agreements on their websites. Together, these schools enroll more than a half a million students.
Of the 14 member schools (yes, there are 14 schools in the Big Ten), it appears that at least 11 have established banking partners to market financial products to students. Of those 11, we were able to easily find only four contracts on the partner websites, but three of those four contracts did not contain important information, such as how much they pay schools to gain access to students in order to market and sell them financial products and services.
We’re not the only ones to take note. Recently, the Government Accountability Office also noted that “increased transparency for college card agreements could help ensure that the terms are fair and reasonable for students and the agreements are free from conflicts of interest.”
We’re also sending alerts (here’s an example) to schools to make sure they know that their bank partner has not yet committed to transparency when it comes to student financial products.
If you’re starting school this fall, be sure to check out our guide on student banking. You can learn about various options when looking for a bank account. And remember, you can’t be required to use the bank that pays your school to market to you.
Have you been able to find your school’s contract with its bank partner? Tell us your story and tag it as “student banking.”
Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visitconsumerfinance.gov/students.
Updated August 7, 2014: An earlier version of this post noted that Purdue University and Indiana University had established agreements in place with partner financial institutions, but these agreements are related to real estate. We’ve updated this post accordingly.
Two Operations to Pay Total of Two Million Dollars in Civil Penalties
A Memphis-based debt collector has agreed to stop deceiving and harassing consumers and otherwise violating federal debt collection laws, and will pay a $1.5 million civil penalty to settle Federal Trade Commission charges, while a debt collection operation headquartered outside New York City will pay $490,000as a penalty to settle a separate FTC complaint.
“The FTC is committed to protecting consumers from all types of deceptive and harassing debt collection tactics,” said Jessica Rich, Director of the Commission’s Bureau of Consumer Protection.
Regional Adjustment Bureau
In its complaint against Regional Adjustment Bureau, the FTC charges that the Memphis-based company used unfair and deceptive collection tactics, such as repeatedly calling consumers and accusing them of owing debts that they did not owe, contacting consumers at work while knowing that their employers did not allow the calls, making unauthorized withdrawals from consumers’ bank accounts, and disclosing confidential information about debtors to third parties. The company collects on about a million consumer accounts a year and is charged with violating the FTC Act and the Fair Debt Collection Practices Act (FDCPA).
Under the proposed order settling the FTC’s charges Regional Adjustment Bureau is permanently prohibited from engaging in false, deceptive, unfair, and harassing debt collection practices. The order requires the company to address specific problematic conduct alleged in the Commission’s complaint — whenever a consumer disputes the validity or the amount of a debt, Regional Adjustment Bureau must either close the account and end its collection efforts, or suspend collection, until it has conducted a reasonable investigation and verified that the information about the debt is accurate and complete. The order also restricts situations in which the company can leave voicemails that disclose the alleged debtor’s name and the fact that he or she may owe a debt.
The Commission is grateful for the critical assistance provided by the Tennessee State Attorney General’s Office during the course of its investigation of this matter.
Credit Smart, LLC
In the second case announced today, the complaint, which names Suffolk County-based Credit Smart, LLC and several associated companies and individuals, charges that Credit Smart used unfair and deceptive tactics, such as leaving pre-recorded messages for consumers that pretended to offer financial relief. The messages provided a number to call, and promised to provide information about a “Tax Season Relief Program,” a “stimulus relief package,” or a “balance transfer program.” In reality, there was no financial relief plan, and the messages were merely a ruse to get consumers on the line with debt collectors, according to the FTC.
The complaint also alleges that when collectors spoke to consumers, they would falsely threaten to sue them, which they had no plans to do; garnish their wages, which they could not do without a court order; or arrest them, which they had no legal right to do. The defendants also allegedly threatened to collect on old debts that were beyond the statute of limitations, refused to provide information about the debt that consumers were legally entitled to request, continued to attempt to collect on debts without a reasonable basis for telling consumers they owed the debt, told consumers they owed interest on debts when they didn’t, and revealed the debt to consumers’ relatives, employers, and coworkers. The FTC charges that Credit Smart’s tactics violated the FTC Act and the FDCPA.
Under the proposed order settling the FTC’s charges, the defendants must halt their illegal debt collection tactics, including making false threats to sue and arrest consumers and garnish their wages, pretending to be financial counselors, falsely insisting that consumers owed large amounts of interest, and otherwise violating the federal debt collection law. They also must provide consumers with a disclosure that explains their rights regarding the collection of time-barred debt, and another explaining how to file a complaint with the FTC if they feel they are being treated unfairly. The order also imposes a $1.2 million civil penalty. Due to the defendants’ inability to pay, however, all but $490,000 of the penalty is suspended.
Our consumer protection, collection abuse and class action law firm, attorneys and lawyers represent clients throughout Illinois and Wisconsin including, but not limited to Chicago, Elgin, Aurora, Schaumburg, Naperville, Bolingbrook, Joliet, Plainfield, Barrington Hills, Waukegan, Winnetka, Evanston, DeKalb, Geneva, Batavia, Wheaton, Woodridge, Rockford, Harvey, Markham, Westchester, Cicero, Berwyn, Belvidere, West Chicago, Country Club Hills, Crestwood, Rolling Meadows, Romeoville, Chicago Heights, Tinley Park, Orland Park, Oak Forest, Homewood, Lansing, Calumet City, Hazel Crest, Dolton, Riverdale, Midlothian, Frankfurt, Oak Lawn, Oak Park, Cook County, DuPage County, Kane County, Will County, McHenry County, Lake County and more.