A U.S. district court halted a collection operation that allegedly deceived and abused consumers, including making bogus threats that consumers had been sued or could be arrested over debts they often did not owe.
The Federal Trade Commission charged two individuals and seven companies in a Corona, Calif.-based collection operation doing business as Rincon Debt Management. The court's order stops the illegal conduct, freezes the operation's assets and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.
Operating since March 2009, the defendants have taken in at least $9.4 million, according to documents the FTC filed with the court.
The FTC complaint alleges that the defendants targeted both English- and Spanish-speaking consumers.
The defendants called consumers and their employers, family, friends, and neighbors, posing as process servers seeking to deliver legal papers that purportedly related to a lawsuit.
In some cases, the defendants threatened that consumers would be arrested if they did not respond to the calls. The defendants also posed as attorneys or employees of a law office, and demanded that consumers pay “court costs” and “legal fees.”
However, according to the FTC, the debt collectors making calls to consumers were not actually process servers, attorneys, or their employees, and the defendants did not file lawsuits against consumers. In addition, in many instances, consumers did not even owe the debt the defendants were trying to collect.
The FTC charged that the defendants’ false and misleading claims that they were process servers or attorneys who had filed – or were about to file – a lawsuit against a consumer violated the FTC Act. In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:
• improperly contacting third parties about consumers’ debts;
• failing to disclose the name of the company they represented, or the fact that they were attempting to collect on a debt, during telephone calls to consumers;
• misrepresenting the existence of a debt, the amount, and other facts about the debt; and
• failing to notify consumers of their right to dispute and obtain verification of their debts.
