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Feds crack down on abusive debt collection practices

The FTC has received more than 85,000 debt collection practices reports in 2020 alone


The FTC, CFPB and multiple state and federal law enforcement agencies have launched “operation corrupt collector” to tackle abusive debt collection.


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In an effort to tackle abusive debt collection practices, which there is more scope for as consumers fall behind on their bills during the coronavirus pandemic, several federal and state agencies have taken action against debt collectors who have violated the law.

The FTC reports that it has received more than 85,000 consumer reports about debt collection in 2020 alone through the end of September, with about 45% of them relating to phantom debt and abusive debt collection practices.

The Consumer Financial Protection Bureau, the Federal Trade Commission and more than 50 state and federal law enforcement agencies have launched “Operation Corrupt Collector,” with the FTC filing two new cases against debt collectors, and settling three prior cases.

The CFPB has also filed two cases as part of this operation, and the U.S. Department of Justice and U.S. Postal Inspection Service have filed three criminal cases.

Various states have also taken action in this operation, including Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Massachusetts, New Mexico, North Carolina, North Dakota, New York, Ohio, South Carolina and Washington.

“For many years, we’ve been working with our law enforcement partners to crack down on illegal and abusive debt collectors,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection, in a news release. “At a time when many are under financial stress, our coordinated actions today show that we’re continuing the fight against collectors who threaten people and try to collect debts they don’t owe.”

See related: What happens if you ignore debt collectors? 

FTC files cases alleging phantom debt collection

The two cases the FTC has filed as part of this operation allege that the defendants engaged in abusive phantom debt collection practices. In a case against National Landmark Logistics, filed in South Carolina, the FTC charges it with illegally collecting more than $12 million from consumers.

The FTC alleges that the defendant used robocalls to leave messages for consumers saying that they faced legal action relating to their debts. And when consumers returned these calls, NLL falsely represented itself as a mediation firm or a law firm and used the consumers’ personal information to make its threat of legal action appear legitimate.

According to the FTC, in a lot of these cases, the consumers either did not owe the money or the defendant did not have the right to collect the debt.

In another South Carolina case, the FTC alleges that Absolute Financial Services illegally collected more than $5 million from consumers.

According to the federal agency, AFS used the services of NLL to place deceptive robocalls to consumers to collect on debt and threaten legal action. And it would claim to represent a law firm, or threaten to have consumers arrested, if they did not pay back the debt immediately, using their personal information to convince them the claim was genuine.

The FTC has also resolved cases it previously filed – against Global Asset Financial Services Group, Hylan Asset Management and Campbell Capital – involving phantom and illegal debt collection practices.

The CFPB’s illegal debt collection lawsuits, filed together with the New York attorney general, are against JPL Recovery Solutions; Regency One Capital; ROC Asset Solutions; Check Security Associates; and Keystone Recovery Group.

See related: How to deal with debt collectors during the coronavirus crisis

More consumer education during economic downturn

The CFPB and the FTC, as well as various state and local consumer protection agencies, are making efforts to provide consumers with more information on how to deal with illegal debt collection attempts.

Consumer education tips the CFPB provides include:

  • Samples of letters to send debt collectors
  • Education on what might happen if you avoid a debt collector
  • Input on what constitutes unfair debt collection practices
  • Education on consumer rights when contacted by a debt collector
  • A primer on what sorts of action to take when a debt collector contacts you
  • Input on how to submit a consumer complaint (the FTC also accepts consumer complaints)

“The CFPB is actively working to protect consumers from illegal actions of debt collectors,” said CFPB director Kathleen L. Kraninger. “We will continue to monitor the financial marketplace, as well as consumer complaints received, in order to ensure that we identify and take action against debt collectors who are violating the law. Lastly, consumers should know that the bureau’s consumer complaint system is a resource for them to submit any complaints they may have on their experiences with financial services providers.”

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