The Federal Trade Commission has leveled charges against Trans Continental Affiliates (TCA), a California debt-collection agency, and two of its principals, for using abusive and deceptive practices when attempting to collect debts from consumers, in violation of the Fair Debt Collection Practices Act (FDCPA). Another of TCA's former principals, and TCA's attorney, who engaged in debt collection activities, have agreed to settle related FTC charges under separate consent decrees that would prohibit them from engaging in similar practices in the future and require the attorney to pay a $2,000 civil penalty.
The FTC has asked a federal court to issue an order to permanently prohibit TCA, its president Stephen Lawrence, and its chief financial officer Effie Pappas from violating the FDCPA, and to assess civil penalties against them up to $10,000 for each violation. A hearing on the charges should be scheduled shortly. The settlements are with TCA's former senior vice president David Siebert, and a private attorney James R. Brown. All of the defendants have maintained offices in the San Francisco Bay area.
The FDCPA is the federal law that prohibits abusive, unfair or deceptive debt collection practices. Under the FDCPA, a debt collector may not discuss debts with anyone other than the consumers who owe them and certain other persons, such as the consumer's attorney or spouse; use obscene, abusive, or profane language; or contact a consumer at an inconvenient time. Also, debt collectors may not make false statements, use false names, or threaten a legal action they do not intend to take, under the FDCPA.
According to the three FTC complaints in this matter, the defendants and/or TCA collectors under their control, violated the FDCPA on numerous occasions by, among other things:
- using obscene and profane language or letting the telephone ring repeatedly with the intent to annoy or harass;
- misrepresenting that nonpayment of a debt would result in arrest or imprisonment, or that a consumer's wages would be garnished;
- falsely representing that they were attorneys, or threatening to take legal action such as filing a lawsuit, when they did not intend to do so;
- continuing to try to collect debts after consumers notified the defendants in writing that the debts were disputed, and before the defendants verified the debts;
- contacting consumers at times or places they knew or should have known to be inconvenient to the consumer, such as before 8 a.m. or after 9 p.m.;
- calling consumers at work when they knew, or had reason to know, the consumers' employers prohibited such calls;
- communicating with third parties for purposes other than acquiring location information about the consumer, without the consumer's express consent; and
- continuing to contact consumers after having received written requests to cease doing so.
In addition to asking the court to prohibit TCA, Lawrence and Pappas from further violating the FDCPA and to order them to pay civil penalties, the FTC has asked that they be required to include, in each collection letter to consumers in the future, the following disclosure:
"Collection agencies like us must comply with a federal law that grants you certain rights. One of these is the right to have us stop communicating with you about this debt. If you write to us asking us to stop, we will. But if you owe this debt, you will still owe it and your creditor may continue to collect it from you. This law is administered by the Division of Credit Practices, Federal Trade Commission, Washington, D.C., 20580. TCA, Inc.--05/17/95)
The FTC also has asked the court to require these defendants to provide each of their present and future employees a notice, and to retain a signed acknowledgement from each such employee. The notice would state:
Debt collectors must comply with the federal Fair Debt Collection Practices Act, which limits our activities in trying to collect money from consumers. Most importantly, Section 805(b) of the Act says that, unless the consumer consents, a debt collector may not discuss the debt with any person other than the consumer and a few other persons, such as the consumer's attorney or spouse. Individual debt collectors may be financially liable for their violations of the Act.
The proposed settlement agreements with Siebert and Brown would require them to make this same notification to employees for the next five years. Under his settlement, Siebert also would make the same consumer disclosure referenced above, for five years. When Brown acts as an attorney on behalf of debt collectors contacting consumers, his settlement would require him to ensure the collection letters include the following disclosure for the next five years:
- A law office doing debt collection like us must comply with a federal law that grants you certain rights. One of these is the right to have us stop communicating with you about this debt. If you write to us asking us to stop, we will. But if you owe this debt, you still owe it and your creditor may continue to collect it from you. This law is administered by the Division of Credit Practices, Federal Trade Commission, Washington, D.C., 20580.
- If you feel that the debt is being collected by unlawful means, you may contact the Division of Credit Practices, Federal Trade Commission, Washington, D.C. 20580.
The settlements also would prohibit Siebert and Brown from engaging in any of the alleged illegal debt-collection practices. Further, Siebert and Brown would be required to submit within three business days after the entry of the consent decree, sworn statements which attest to the truthfulness of financial dis- closures made to the FTC during settlement negotiations. If the court were to find that they omitted any information material to the case, the court could reopen the settlement to obtain a civil penalty. Brown's $2,000 civil penalty would be due five days after the court enters the settlement.
The Commission vote to authorize filing of the three complaints and two consent decrees was 4-0. The complaints and consent decrees were filed at the FTC's request by the Department of Justice in U.S. District Court for the Northern District of California, in San Francisco on May 15. The consent decrees are subject to court approval.
NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court. Consent decrees are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent decrees have the force of law when signed by the judge.
Consumers' rights and debt collectors' responsibilities under the FDCPA are outlined in a consumer brochure, "Fair Debt Collection," which is available free from the address below.
Copies of the complaints and consent decrees are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
(FTC File No. 942 3020)
(Civil Action Nos. not available at press time)