What’s a 4-letter word for “FTC advice for derelict debt collectors”?

Share This Page

We like solving puzzles – from crosswords and anagrams to that byzantine conspiracy wall constructed by Claire Danes' character on "Homeland."  So it doesn't faze FTC staff when companies use complicated corporate structures to hide what they're up to.  Those skills came in handy in unraveling how debt collector Asset & Capital Management Group and its host of related businesses were violating Section 5 of the FTC Act and the Fair Debt Collection Practices Act.  The prize for untangling this puzzle: judgments with more than $4 million in consumer redress and lifetime bans on collecting debts.

California-based Asset & Capital Management Group was a third-party debt collector that bought portfolios of past-due consumer credit card debt.  Through dozens of businesses and a web of U.S. and foreign shell companies, the defendants created a sprawling organization the FTC says subjected consumers to an illegal onslaught of intimidation.

One interesting idiosyncrasy:  The defendants had a practice of setting up companies with three- or four-letter names – for example, PFG, WRA, SCG, ERA, LMR, AFGA, CMP, and WPG.  Once an entity had been hauled into court for violations of the law or had earned notoriety for egregious practices, the defendants, in effect, shook the Boggle cube to rename the outfit and continue the campaign of harassment.  Among the tools in their dubious arsenal:  improperly calling family, friends, and co-workers about a person's debts; impersonating process servers or law firm employees; and falsely threatening arrest, wage garnishment, or seizure of property.

The complaint named four individuals and seven corporations.  Last year, at the FTC's request, a federal court in California halted the defendants' activities and appointed a Receiver to take over while the lawsuit proceeded.  The settlements just announced by the FTC impose judgments of more than $90 million, which will be partially suspended when certain defendants turn over their personal assets.  The proceeds from those assets, combined with corporate assets held by the Receiver, total more than $4 million.  Besides the monetary remedies, the judgments ban the defendants for life from debt collection.

What should other debt collectors take from the settlement?  If you're violating the law, here's the answer to (Section) 5 Down:  S-T-O-P.




I'm just wondering what they are going to do with monies that were received through these methods? I thought it said they were going to repay the consumers or debtors back. Why wouldn't this money go to the creditors? These people due owe it why not apply to what they owe?

It may seem like it should be that way but it's not because in these cases the collection agency IS creditor. The original creditors were already paid when they sold the debts to the collection agency. This is standard practice in the industry - the credit lenders for example let's say Capital One or GMAC or any of them - once an account becomes delinquent they will usually try themselves through in-house collections to collect the amount past due plus late fees and interest (that amount keeps growing even after default) for a certain period of time, usually about six months. After that point, if the lender has been unable to collect they simply charge it off, which means that they can A) write it off as a loss and B) then they can sell it. Large lenders will have lots and lots of these charged off accounts so they bundle them together and sell them off to the bottom feeders - the collection agencies who buy them up for pennies on the dollar, knowing that a lot of them will be uncollectable but of the ones they can collect on, they keep whatever monies they collect because they own the debt - they bought it.

Because the FTC actions are against the collection agency for violations committed against consumers i.e. debtors, who were subjected to the unfair or illegal actions of the collection agency, any redress is going to be to the victims, in this case the debtors. Realistically though, the bulk of the money goes to the lawyers, the FTC and various other government agencies. Just like in a class action lawsuit, the individual members of the suit see very little $ each but added together it's a wallop to the offending organization and a huge payday for the lawyers. Because the FTC is a government entity however they may - I'm not certain of this but I think they might - withhold payments to individuals who owe back taxes or federally insured student loans and apply it where it is owed. Again, I am not 100% sure of that but believe it is a strong possibility if that make you feel any better.

Because the "debtors" may not even owe the money after all. Some of the accounts were never good accounts to begin with. So, it's the debtors who have been harmed, and at least THAT can be a starting point. Don't assume just because a debt collector says that they owe it--that they actually owe it.

There should be a requirement that all collection agencies have a federal authorization identification collection number (FAICN), allowing for easier tracking of non-compliant companies. In essence, we could eradicate such behavior quite easily by adapting a FAICN requirement to all collection agencies and debt buyers.
It is good to hear that these predators were caught, but they need to be exposed to the public as the individual at locations they are. There isn't any retribution in the keeping secret who and where these criminals are. Publish the whole truth if you want the public's trusts. Too many go aroind saying the government is doing nothing or not enough. Stop giving them ammonition.
This is a great accomplishment! Kudos to you FTC!

Add new comment

Comment Policy

Privacy Act Statement

It is your choice whether to submit a comment. If you do, you must create a user name, or we will not post your comment. The Federal Trade Commission Act authorizes this information collection for purposes of managing online comments. Comments and user names are part of the Federal Trade Commission’s (FTC) public records system (PDF), and user names also are part of the FTC’s computer user records system (PDF). We may routinely use these records as described in the FTC’s Privacy Act system notices. For more information on how the FTC handles information that we collect, please read our privacy policy.