The owner of a Houston-based debt collection operation that the Federal Trade Commission charged with using insults, lies and false threats of jail time to collect on payday loans will surrender his assets, estimated to be worth $550,000, to pay restitution to consumers who were charged unauthorized fees.

Gerald Wright and co-defendants and company managers Starlette Foster and Jennifer Zamora all are permanently banned from debt collection work. 

The defendants were charged with multiple violations of the FTC Act and the Fair Debt Collection Practices Act, including making false threats of pending arrest and that consumers' children would be taken into custody and falsely claiming to be attorneys or to work jointly with local law enforcement.

Among the examples cited in the case against Goldman Schwartz includes allegedly telling a Virginia woman she would be arrested and jailed for three years and would lose her disability payments if she did not pay a $980 debt.

The defendants also were charged with disclosing debts to consumers’ employers and military superiors, collecting wrongful late fees and attorneys’ fees and harassing and abusing consumers by using obscene language and calling at odd hours, according to the complaint. They further failed to inform consumers of their rights to dispute debts, have the debts verified and obtain the names of the original creditors, the complaint alleged.

A U.S. district court in February 2013 shut down Goldman Schwartz, froze its assets and appointed a receiver to take control of the business while the case was in litigation. The operation conducted business nationwide, mostly pursuing unpaid payday loans. In some cases it owned the debt, and in others, it acted as a third-party collector.

The settlement requires Wright to surrender his assets, estimated at $550,000, which include funds from personal and business accounts and proceeds from the sale of realty. The remainder of a $1.4 million judgment against Wright is suspended based on inability to pay.

The judgment against Foster and Zamora also is suspended because of their inability to pay. If it is later determined that the financial information the defendants provided the FTC was false, the full amount of the judgment will become due. The defendants could not immediately be reached for comment.

The complaint named as defendants Goldman Schwartz, doing business as Goldman, Schwartz, Lieberman & Stein; Debtcom Inc., doing business as Cole, Tanner & Wright; Harris County Check Recovery Inc.; and The G. Wright Group Inc., doing business as The Wright Group. Under the terms of the order, these companies will be dissolved.

The monetary judgment will be used to pay restitution to consumers who were charged unauthorized late fees and attorneys’ fees, often in the hundreds of dollars. The defendants privately referred to these bogus fees as "juice" and used them to inflate the cost to consumers who wished to settle their debts, the complaint alleged.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.