At the request of the Federal Trade Commission, a U.S. district court has halted an operation that allegedly subjected consumers to abusive debt-collection practices and deceived the small-business clients for whom it collects.
The order also freezes the operation's assets and appoints a permanent receiver to run it while the FTC moves forward with the case.
As part of its continuing crackdown on scams that target consumers in financial distress, the FTC filed a complaint against six individuals and three companies involved in a Van Nuys, California-based debt-collection operation doing business as Rumson, Bolling & Associates.
The FTC complaint charges that the defendants, in collecting debts on behalf of their clients:
- harassed and abused consumers by threatening physical harm and death to them and their pets, threatened to desecrate the bodies of deceased relatives, and used obscene and profane language;
- improperly revealed consumers' debts to third parties, such as the consumers' employers, co-workers, neighbors, and family members;
- falsely threatened consumers with lawsuits, arrest, seizure of their assets, or wage garnishment; and
- falsely claimed that consumers would be liable for legal fees incurred in the collection of the debt.
According to the FTC complaint, using the slogan “no recovery, no fee,” the defendants promised small businesses and other potential clients that they would collect debts on contingency, charging a fee only when they successfully collected a debt.
But in many cases, the defendants allegedly collected money from consumers on a client’s behalf and then kept more than they were entitled to, sometimes keeping all the money for themselves, instead of forwarding what was owed to the client.
In some cases, the defendants asked clients for additional fees, purportedly for legal expenses in filing a lawsuit that would “guarantee” the successful collection of a debt. Many clients paid these fees, but the defendants failed to file the promised lawsuits and the clients never received any money in satisfaction of the debt in question.
The FTC charges that these practices violate the Federal Trade Commission Act and the Fair Debt Collection Practices Act.