Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Debt collector settles FTC charges over text messages, (Sep 25, 2013)

By Tobias J. Gillett, J.D., LL.M.

A debt collector and two companies he controlled have settled FTC charges that they sent consumers deceptive text messages, attempting to collect on debts, among other charges, the FTC announced today. The settlement includes a $1 million civil penalty. According to the FTC, the case represents its first enforcement action against a debt collector that used text messaging to collect debts in an unlawful manner.

The FTC’s complaint alleged that Archie Donovan and his two companies—National Collection Services, Inc. and National Attorney Services LLC—sent communications to consumers, including text messages, phone calls, and mailings, that falsely represented or implied that they were law firms—by using the names National Attorney Services, National Attorney Service, National Attorney, and Abogados Nacionales—and failed to disclose that that they were debt collectors. They allegedly would also threaten to take legal action against the consumers without the intent or ability to do so.

The complaint also alleged that Donovan and his companies sent communications to third parties—such as family members, friends, and co-workers of a putative debtor—that illegally revealed debts, including a mailing envelope picturing a large arm shaking money from a consumer hanging upside down. They would also represent to the third parties that they would sue the consumer, that the consumer had committed fraud, that the third parties could be brought into court if the consumer did not make a payment, or that they would not cease communications with the third parties until the debt had been paid, according to the FTC. They allegedly also failed to disclose to consumers their right to dispute a debt.

The stipulated order imposes a $1 million dollar civil penalty on Donovan and his companies jointly and severally. In addition, the order bars the defendants from making misrepresentations in connection with the collection of a debt and from using unfair means to collect on debts, including failing to provide an accurate mailing address on request; using language, symbols, or a business name on envelopes indicating that they are in the debt collection business; communicating with most third parties, other than with consent of the debtor or for location information; or failing to provide information about the debt and the right to dispute it.

The order also prohibits the defendants from sending debt collection text messages to consumers without consent; from using business names containing terms such as “attorney,” “law,” or “legal” that would imply that they are law firms or collect debts on behalf of attorneys; and from falsely threatening to sue take other actions that they do not actually intend to take. The order also contains provisions for notice, compliance monitoring and reporting, and record keeping, among other provisions.

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.

Companies: National Attorney Collection Services, Inc.; National Attorney Services LLC

News: ConsumerProtection FederalTradeCommissionNews