Two separate cases involving collection agencies that allegedly violated federal debt collection laws were closed Thursday in settlements announced by the Federal Trade Commission.

In the first case, Regional Adjustment Bureau, a Memphis-based collection agency, agreed to pay a $1.5 million civil penalty and stop deceiving and harassing consumers. The FTC charged that the agency used illegal collection tactics, such as repeatedly calling consumers and accusing them of owing debts that they did not owe, contacting consumers at work while knowing that their employers did not allow the calls, making unauthorized withdrawals from consumers’ bank accounts and disclosing confidential information about debtors to third parties.

The company collects on about a million consumer accounts a year and was charged with violating the FTC Act and the Fair Debt Collection Practices Act. Company officials could not immediately be reached for comment.

Under terms of the settlement, Regional Adjustment Bureau is permanently banned from engaging in false, deceptive, unfair and harassing collection practices. The order requires the company to address specific problematic conduct alleged in the FTC's complaint. Whenever a consumer disputes the validity or the amount of a debt, for example, the company must either close the account and end its collection efforts or suspend collections until it has conducted an investigation and verified that the information is accurate and complete. The order also restricts situations where the company can leave voicemails that disclose the alleged debtor’s name and the fact that he or she may owe a debt.

In the second case, Credit Smart LLC, a debt collection operation headquartered outside New York City in Suffolk County, will pay $490,000 as a penalty to settle charges it used unfair and deceptive tactics, such as leaving pre-recorded messages for consumers that pretended to offer financial relief. The messages provided a number to call and promised to provide information about a "Tax Season Relief Program," a "stimulus relief package," or a "balance transfer program." In reality, there was no financial relief plan and the messages were merely a ruse to get consumers on the line with debt collectors, according to the FTC.

The Credit Smart complaint also alleges that when collectors spoke to consumers, they would falsely threaten to sue them or garnish their wages, which they could not do without a court order. Collectors sometimes threatened to arrest debtors, which they had no legal right to do.

The defendants also allegedly threatened to collect on old debts that were beyond the statute of limitations, refused to provide information about the debt that consumers were legally entitled to request, continued to attempt to collect on debts without a reasonable basis for telling consumers they owed the debt, told consumers they owed interest on debts when they didn’t and revealed the debt to consumers’ relatives, employers and coworkers. The FTC charges that Credit Smart’s tactics violated the FTC Act and the FDCPA.

The settlement imposes a $1.2 million civil penalty but because of the defendants’ inability to pay, however, all but $490,000 of the penalty is suspended. Company officials could not immediately be reached for comment.

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