The Federal Trade Commission on Thursday announced it has stopped illegal debt collection tactics of several debt collection operations. The crackdown includes four cases already highlighted in Collections & Credit Risk. The FTC issued a statement about the cases to point out the success of Operation Collection Protection, announced in November.

The cases include:

AFS Legal Services

In November, the FTC brought an action against National Payment Processing LLC; National Client Services LLC, also doing business as AFS Legal Services, AFS Services, Account Financial Services, and Account Financial Solutions; Omar Smith; and Ernest Smith. The operation allegedly called consumers and demanded payment of payday loan or other purported debt, even when consumers disputed the debt and the defendants failed to verify that money was owed.

According to the complaint, the defendants impersonated investigators and law enforcement and threatened to arrest or sue consumers if they didn't pay. Because they often had consumers’ personal information such as Social Security and bank account numbers, consumers believed the calls were legitimate and thought they would be arrested for check fraud or sued. The collectors also made harassing calls and contacted relatives, friends and co-workers about consumers’ debts. The defendants allegedly have caused around $4 million in consumer injury, using multiple corporate names and locations to avoid detection, and failing to identify themselves as debt collectors.

The defendants have agreed to be bound by a preliminary injunction, pending the litigation in which they are prohibited from using the illegal collection tactics described in the FTC’s complaint. They are also barred from activities that violate the FDCPA.

Samuel Sole and Associates

In May 2015, the FTC obtained court orders temporary halting the operations of Premier Debt Acquisitions LLC, also doing business as PDA Group LLC; Prizm Debt Solutions LLC, also d/b/a PDS LLC; Samuel Sole and Associates LLC, also d/b/a SSA Group LLC and Imperial Processing Solutions; Charles Glander; and Jacob E. Kirbis.  The FTC alleged that the defendants had impersonated law enforcement officials or process servers, threatened to have consumers arrested for nonpayment, falsely threatened consumers with lawsuits and wage garnishment, and withheld information consumers needed to confirm or dispute debts. 

The defendants since have agreed to a stipulated order for permanent injunction, that will ban them from debt collection activities, and prohibit them from misrepresenting material facts about financial-related products and services and from profiting from their former customers’ personal information. The order imposes a judgment of $2,229,756, representing the amount of the defendants’ debt collection revenue, which will be partially suspended upon surrender of certain personal assets, including real estate.

Warrant Enforcement Division

Defendants Municipal Recovery Services Corporation, d/b/a Warrant Enforcement Division, and its owner, Marcos Nieto, a/k/a Mark Nieto have agreed to settle FTC charges that they violated the FTC Act when they sent consumers letters and postcards that falsely implied that they had come from a municipal court and falsely threatened consumers with arrest if they did not pay while collecting overdue municipal utility bills, traffic tickets, court fines and other debts for local governments in Texas and Oklahoma. One letter, labeled “WARRANT FOR YOUR ARREST,” falsely threatened arrest at the consumer’s home or office, jail time, vehicle impoundment, and inability to renew a driver’s license. A “FINAL NOTICE BEFORE ARREST” letter followed, falsely stating that “WARRANT OFFICERS HAVE BEEN GIVEN YOUR CURRENT ADDRESS.” The defendants also mailed postcards to collect on past-due utility bills, stating “PAY YOUR FINE NOW—AVOID GOING TO JAIL.” According to the complaint, the defendants also failed to inform consumers of the amount of the debt and the creditor’s name, and their right to dispute the debt, as required by the Fair Debt Collection Practices Act.

Under a proposed stipulated order for permanent injunction, the defendants are prohibited from misrepresenting any material fact while collecting debts, including that a failure to pay a debt will result in the consumer being arrested or jailed, having their vehicle impounded, or being unable to renew their driver’s license. The order imposes a $194,888 judgment that is suspended based on the defendants’ inability to pay. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

Williams, Scott & Associates

The FTC has obtained a permanent injunction against the final defendant in its case against Williams, Scott & Associates LLC. On November 4, the court granted summary judgment in the FTC’s favor and banned Chris Lenyszyn from debt collection activities, and ordered him to pay more than $565,000 for using deception and threats to collect on phantom payday and other loan “debts” that consumers didn’t owe. An earlier order, in April 2015, banned John Williams, Williams, Scott & Associates LLC; and WSA LLC from debt collection and ordered them to pay $3.9 million.

Other federal and state law enforcement officials recently have taken 12 more actions as part of Operation Collection Protection. 

  • the Consumer Financial Protection Bureau has resolved four law enforcement actions and issued a compliance bulletin on in-person debt collection;
  • the Minnesota Department of Commerce signed consent orders that stopped Collect Pros and Service Investment Company from further law violations and imposed civil penalties totaling $33,000, and convinced a court to impose a receivership on CLX/Westwood Management Inc.;
  • the Colorado Department of Law denied Collect Pros’ renewal application and 4-Star Resolution’s license application and took action against PC Legal Services for engaging in collection practices without a license, resulting in a $613,500 civil penalty (details can be found here);
  • the Indiana Attorney General’s Office also took action against Collect Pros, entering into an assurance of voluntary compliance with Collect Pros; and
  • the Massachusetts Attorney General’s office sued one of the largest debt collection law firms in Massachusetts, Lustig, Glaser & Wilson PC and its owners, Ronald Lustig and Kenneth Wilson, who allegedly used illegal threats of lawsuits to obtain payments and sued consumers for debts they did not owe or for debts that were inaccurate.

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