Collection deception

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On classic episodes of the Tonight Show, affable sidekick Ed McMahon sought guidance from Johnny Carson's all-knowing Carnac character.  But as demonstrated by a recent FTC law enforcement action — which involved a company's misleading reference to the late Mr. McMahon — you don't need a psychic to know that challenging deceptive debt collection practices remains a top priority.

According to the complaint, defendants Luebke Baker & Associates, CEO Kevin Luebke, and other corporate managers used illegal tactics to collect a variety of debts, including magazine subscription debts, many of which they knew or should have known weren't valid.  Some of the magazine debts traced back more than a decade to a company the FTC had successfully sued for deceptive marketing.  Despite the fact that the defendants had been notified of a 2003 federal court order that placed special restrictions on anyone attempting to collect payments related to that seller, the FTC alleged the defendants ignored those requirements and repeatedly told people the debts were due and payable.

The defendants' "rebuttal sheet" — attached as an exhibit to the FTC's court papers — offers insights into just how far the defendants went to try to collect debts.  For example, when people refused to pay, the defendants directed their representatives to illegally threaten to contact their employers:  "I am trying to help you out.  I definitely don't want be the bad guy but our client sent over your employment information and I would like to handle this with you on a voluntary basis before we have to get your employer involved.  Blah blah if getting nowhere."

If the consumer still balked at paying, the defendants read off the person's work address and threatened to get law enforcers involved:  "A sheriff will deliver a summons to either your place of employment or your home.  It depends on what we instruct the peace officer."

If people exercised their right to ask for documentation for the alleged debt, the defendants really turned up the heat: "Typically when someone requests proof and it's clear to us that this is their bill, you may possibly receive your requested credit card itemization stapled to a summons to appear in court."  In addition, the FTC says they falsely told people that magazine subscription debts are exempt from the statute of limitations and illegally threatened to garnish wages and take other actions with no intention of following through.

So how did Ed McMahon's name enter into the story?  According to the FTC, the defendants tried to hide their identity by sending untruthful Caller ID information — for example, by falsely posing as prize pitchman McMahon. 

But the illegalities didn't end there.  The FTC says that in addition to violating the Fair Debt Collection Practices Act and Section 5 of the FTC Act, the defendants marketed a "credit repair" CD in violation of the Telemarketing Sale Rule, which makes it illegal for companies to charge up-front fees for credit repair goods and services.  (Note to self:  A debt collection outfit charged with FDCPA violation?  Perhaps not the best source for information about "repairing" credit.)

The defendants entered into a settlement that bans illegal tactics in the future.  The order doesn't just apply to the corporate defendant and the CEO.  Also named individually are the Director of Operations, the General Manager, and a Collection Manager.  In addition, the settlement imposes monetary judgments against the defendants totaling $3.1 million — including a $420,000 judgment against Kevin Luebke's wife, Julissa Luebke.  Most of the judgments are suspended due to the defendants' inability to pay, but if it's later determined they gave false financial information, the full amount will become due.

Two message for debt collectors.  First, the law draws clear lines between lawful practices and illegal tactics — and debt-related abuses remain a top enforcement priority.  Second, should you conclude that even with an "Inc." after a company's name, defendants may be held individually liable for law violations?  In the words of Mr. McMahon, "You are correct, sir!" 




The illegal collection of fake debts is a common feature of fraudulent accounting practice. This should be stamped out completely. This is false accounting and is designed specifically to create a negative credit history prior to Phishing.
this really helps me with the compliance refresher.

I received a letter from Midland Credit Management (mcm) with a thank you note for an $88.00 that I never made or approved on a TIME BARRED account. I believe this is a fraudulent attempt on their end to restart the SOL clock and possibly sue me for the amount they claim that I owe.... Hopefully something is done about this company that is very well known for their deceptive collection practices.

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