We try to keep a sense of humor about lawyer jokes, but given the harm to consumers, it's no laughing matter when debt collectors mimic attorneys. The Fair Debt Collection Practices Act and the FTC Act establish that it's illegal for debt collectors to falsely claim to be attorneys or to suggest a bogus connection to law enforcement. An FTC settlement with an outfit called Goldman Schwartz and related companies puts the whole kit and kaboodle out of the debt collection business from now until, well, forever.
The Houston-based companies did business nationwide, collecting primarily on payday loans. In some cases, they owned the debt; in others, they acted as third-party collectors. The FTC complaint alleged an unsavory all-you-can-eat salad bar of law violations: using obscene language; placing harassing calls at all hours; falsely claiming that people would get locked up, lose their disability payments, or forfeit their drivers’ licenses; illegally telling employers and military superiors about debts; threatening that people’s kids would be taken into custody – and that’s just for starters.
Then there were the false claims about being attorneys. Maybe just an isolated overreach by a rogue employee? No chance. To solicit business, here’s what the defendants flat-out said on their website:
The last call your debtor wants is from a lawyer's office giving them the legal alternatives if they don’t pay you! Our legal staff will remind the debtor of the ramifications a lawsuit may involve, such as depositions, liens, writs of execution, and the waste of time and money spent on their attorney’s hourly billing. Specializing in commercial collections, the legal staff of our legal collection office will approach your debtor from the legal point of view not allowed to traditional collection agencies. GOLDMAN SCHWARTZ has the legal muscle relationships to get you paid, typically with forty percent more bottom line than traditional agencies.
The all caps were the company's, by the way. The defendants often used the name "Goldman Schwartz" or "Goldman Schwartz Lieberman & Stein" despite that fact that no one who worked for the company was named Goldman, Schwartz, Lieberman, or Stein. Hmmm.
The FTC says the defendants went a step further and squeezed people for unauthorized fees. They even had an in-house nickname for it: “Juice.” Cute.
The good news for consumers is that the whole crowd is banned for life from debt collection and a court-appointed Receiver is winding down the business. The owner of the operation – a guy named Gerald Wright who sometimes claimed to be an attorney named Barry Goldman – will surrender his assets, estimated to be worth $550,000, to pay restitution to people who were charged unauthorized fees. The rest of the $1.4 million judgment against Wright is suspended based on his inability to pay, as is the financial judgment against managers Starlette Foster and Jennifer Zamora. Of course, if it turns out the defendants gave false information about their finances, the remaining amount will come due.
The message for debt collectors: The terms of the FDCPA and a long list of FTC actions establish clear lines separating lawful activity from sleazy tactics. Don’t say you haven’t been warned.