Research and Statistics

FTC says :( to debt collection text messages


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

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

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.

FTC says :( to debt collection text messages

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 messages.

“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 action.

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 members.

“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

Collection Catch-22
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 text.

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

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Research and Statistics

Are squiggly finger signatures legally binding?

As more retailers move to hand-held payment systems, signing with your finger is the new norm. But is that squiggly, often illegible, scribble really legally binding?

See more stories
Credit Card Rate Report
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more