That “Inc.” after a company’s name can offer certain legal protections, but immunity from liability under the FTC Act isn’t necessarily one of them. If you’re a corporate officer or number them among your clients, a recent settlement with two people involved in a debt collection operation should underscore that message.
The FTC's lawsuit against California-based Rincon Debt Management, related companies, and principals Jason Begley and Wayne Lunsford alleges that the defendants falsely claimed that consumers had been sued or could be arrested for unpaid debts. Compounding the injury was that many of the people subjected to the abusive treatment didn’t even owe the money Rincon operatives claimed.
According to the FTC, the defendants, who collected debts nationwide, violated the Fair Debt Collection Practices Act and the FTC Act by calling consumers – and their employers, family members, friends, and neighbors – posing as process servers trying to deliver legal papers related to a supposed lawsuit. The callers often threatened consumers with arrest if they didn’t respond. The FTC says the defendants and people who worked for them also masqueraded as attorneys or law firm employees and demanded that consumers pony up “court costs” and “legal fees.” The trouble was that no lawsuits had been filed – and in many cases, people didn’t even owe the debts the defendants were haranguing them about.
The lawsuit against some of the corporate entities continues, but Begley and Lunsford have settled the case against them with terms that will boot them out of the business for good. In addition to a lifetime ban from the debt collection industry, they’re prohibiting from misrepresenting the features of any financial product of service, including lending, credit repair, debt relief, and mortgage assistance relief.
The order imposes a $23 million judgment against the Begley and Lunsford. Due to their current financial condition, most of the total will be suspended. But the receiver will turn over $3 million in frozen funds and the two defendants will surrender additional personal assets, including 3,500 silver and gold coins bought by Begley.
That’s not the only financial remedy in this case. Begley will pay a $176,115 contempt judgment for selling his house and other coins in violation of the court-ordered asset freeze. Lunsford will pay a $134,000 judgment for also selling his house in contempt of the freeze. What if it turns out the defendants gave untruthful financial information? The full $23 million judgment becomes due.
What can others in the industry take from this settlement?
Debt-ermine what the law allows. The Fair Debt Collection Practices Act offers straightforward dos and don’ts for debt collectors. Two courses of conduct that clearly cross the line: 1) falsely claiming you’re a process server, an attorney, or affiliated with a law firm; and 2) revealing the existence of a debt to anyone but the person who owes the money.
Watch your language. No, we’re not talking about the FDCPA’s ban on abusive terminology, although now’s a good time to brush up on what’s off limits. In this context, we’re referring to the fact that many of the people subjected to the defendants’ illegal practices were Spanish-speaking consumers. It’s a mistake – a big one – for debt collectors and others to think that violations targeting people who speak languages other than English will go unnoticed.
You’re liable to be liable. When it comes to violations of the consumer protection laws, corporate officers have a lot to lose: their livelihood in a specific industry and personal assets, to name just a few things. Decisions made for short-term profit can have far-reaching personal ramifications, which is why it’s critical to consider the consequences of your conduct.
Visit the FTC’s debt collection page to stay up on the latest.