FTC says :( to debt collection text messages
Coll-exting cited as part of $1M fine on Calif. debt collector
Text messages from a debt collector? You might imagine:
Did u 4get?
I am w8ing 4 u 2 pay!
The actual texts sent by a California-based collection firm
were less pointed than that -- but they still broke federal law designed to
protect debtors, according to the Federal Trade Commission.
The FTC has brought its first case against a debt collector
for using text messages, sending a message of its own about what collectors can
and can't do as they go about the job of bringing in overdue debts, which affect
one in seven U.S. households.
"If collectors are going to communicate by text
message, they are going to have to find a way to do so that follows the law,"
said Rebecca Unruh, an attorney with the FTC bureau of consumer protection.
On Wednesday the agency announced an order and $1 million
fine against Glendale, Calif.-based National Attorney Collection Services Inc.
and National Attorney Services LLC, both controlled by the same individual, Archie
Donovan. The companies collect debts on behalf of payday loan companies that
cater to Spanish-speaking customers.
Among other things, the companies sent about 1.8 million
text messages in an 18-month period -- and not just to debtors, the FTC said. Relatives,
friends and co-workers of the people being pursued for unpaid bills also got
"It is URGENT for you to call National Attorney Service
regarding a very sensitive matter," some of the texts said. The messages
also contained the debtor's name, a phone number to call and a number that was
labeled "case #." Other
versions included the same wording in Spanish, the FTC said.
According to the FTC's complaint, the texts failed to state
that they are attempts to collect a debt, and that any information gained would
be used for that purpose, as required by debt collection law. Initial communications must contain that
disclosure, and follow-up communications must indicate that the sender is a
debt collector. The U.S. Fair Debt Collection Practices Act establishes
numerous protections for consumers who are the subject of debt collection
It's not known how widespread text collection is, but the
potential reach is large. About 15
percent of U.S. households have at least one debt in collections, with the
average amount being $1,409, according to the Federal Reserve Bank of New York.
Cellphones with text messaging capability are even more ubiquitous, with about
325 million devices in use last year, including tablets and hot spots, according
to the wireless industry association CTIA.
However, the main trade association for collection companies
estimates that debt collection via text is rare -- at least as practiced by its
"There is so much gray area out there as to the rules
involving [texts], we've been advising our members to use them with caution,"
said Mark Schiffman, director of public affairs for ACA International.
Void where prohibited
While debtor protection law requires collectors to say what the call or
message is about, it also penalizes collectors for revealing the debt to third
parties such as roommates or family members. So if someone other than the
debtor sees the text -- or picks up a phone message -- the collector is liable.
The situation puts the collector in what Schiffman calls a Catch-22 situation.
Under a separate federal law, the Telephone Consumer
Protection Act, collectors using automated dialing equipment are supposed to get
your consent before communicating via cellphone or text, Schiffman said. That
limits texting to a narrow set of circumstances -- such as an ongoing
discussion about a debt in which the consumer has said OK to communicating via
The protections are having unintended side effects, Schiffman
said. Wary of leaving messages,
collectors instead are calling multiple times in hopes of finding the debtor at
home, without leaving a message.
"We'd like to get clarity," he said. The
association is hoping that preapproved language for collection messages is part of an expected regulatory overhaul, "so you could leave a voice mail without
getting nailed." The U.S. Consumer Financial Protection Bureau is expected
to roll out new regulations to update debt collection rules before year end,
although it's not known if texting will be addressed.
Texting wasn't the only problem at National Attorney
Collection Services, according to the FTC, which charged the company under the
Federal Trade Commission Act as well as debtor protection law. The company was
also cited for falsely portraying itself as a law firm and making empty threats
about lawsuits and wage garnishment. There was also the matter of an illustration on envelopes it sent to collection
targets, which depicted a man being held upside down and shaken by a giant arm,
while money falls out of his pockets.
"We don't want to interpret what it means," FTC
spokeswoman Betsy Lordan said, "but the consumers we talked to found it
pretty disturbing and embarrassing."
See related: Debt collectors' use of social media raises concerns
Published: September 26, 2013