FTC Files Complaints Against Debt Collection Agencies

Oct. 27, 2011— -- The Federal Trade Commission filed complaints against seven debt collection companies in California for making fake threats to consumers who owed money that they had been sued or could be arrested if they did not pay, at times threatening their employers and family members.

The complaints are part of a crackdown on debt collectors, including one company that allegedly threatened one woman in Illinois who could not pay for her daughter's funeral to "dig her daughter up" and made threats to "eat" her dog.

Debt collectors generate more complaints to the FTC than any other industry, according to government agency. Last year, there were 144,159 filings against collection companies, the second largest category of complaints to the FTC. There were 250,854 identity theft related complaints last year, or 19 percent of all complaints.

Last month, the FTC filed a complaint against Rumson, Bolling & Associates, based in Van Nuys, Calif., for allegedly making abusive calls to debtors, including the Illinois woman who reportedly owed money after her daughter's funeral. The company also threatened to use "violence or other criminal means" to harm the alleged debtors, including calling them "deadbeat," "white trash," "piece of crap," "crackerhead," "scumbag," and "lowlife."

The Central district court in California granted a temporary restraining order which became a preliminary injunction against the business.

Christopher Pitet, an attorney for all but one of the defendants listed in the complaint, said when given the opportunity to provide court with evidence, they will show that they committed a "substantial amount of resources" to comply with the Federal Debt Collection Practices Act.

"If there are instances where employees did not comply with the Act and mistreated debtors or did the things alleged in the FTC's complaint, I will be the first to say to say those things never should have happened under any circumstance," Pitet said.

Regarding the incident in which a caller threatened the woman in Missouri, Pitet said, "if it happened it's certainly outrageous."

"My understanding is the individual who is alleged to have done that specific incident was terminated immediately," he said.

The filing states that during the calls to the woman, associates told her they were going to dig her daughter up and hang her from a tree, if she did not pay the debt. The filing also states they threatened to have her "dog arrested...shoot him up...and eat him."

They also allegedly said to her, "are you going to pay this bill right now...or am I going to have to kill you?"

The filing states the defendants attempted to collect money from a woman who fell behind on her debt to a funeral home after both her sons died within a week of each other, allegedly calling her a "deadbeat" and asking how she would feel if her son's body was dug up and dropped outside her door.

Pitet said a receiver has asked the court for permission to shut down the business, which the defendants have opposed. The defendants are awaiting a ruling from the court.

The most recent filing from Oct. 11 is against the seven companies and two individuals. The U.S. district court for the Central district of California granted the Federal Trade Commission's (FTC) request for a temporary restraining order against the companies and two individuals.

Rincon Management Services, based in Corona, Calif., and six other companies together operated a collection scheme in which a "key element" was to "make the consumer believe that a lawsuit has been filed, or will soon be filed against him," according to the suit. When calling debtors, their family members, neighbors, friends or employers, a collector often posed as a process server, a lawyer, or an employee of a law office handling a lawsuit against the person. The companies instructed their collectors not to call the consumer directly, "but to call the consumer's current employer or a family member" to "apply pressure and create a sense of urgency."