Federal Crackdown on Illicit Debt Collecting Practices

In response to widespread complaints and concerns regarding illegal debt collection tactics, federal, state, and international partners have teamed up to better protect consumers. Operation Collection Protection consists of coordinated actions taken by the Federal Trade Commission, Department of Justice, Consumer Financial Protection Bureau, 47 state AGs, 17 state regulators, local authorities, and one Canadian agency. Illinois Attorney General Lisa Madigan commented on this effort stating, “Through our partnership with the Federal Trade Commission and states across the country, we are putting scam operations out of business and protecting consumers from abusive practices by legitimate creditors.”

In 2014, consumers filed more than 280,000 complaints with federal agencies related to debt collection. This year the total number of actions has increased to 115 this year as opposed to 70 last year. The illegal practices that Operation Collection Protection aims to prevent includes the collection of phantom debt, failure to give consumers proper notice and legally required disclosures, and failure to follow state and local licensing requirements. This operation is unique due to its size and the amount of players involved. Remedies offered by Operation Collection Protection include asset freezing, injunctions, and millions in redress and civil penalties. Settlements in the cases brought by the regulatory agencies often require the payment of millions of dollars in damages and require the company to submit to monitoring agreements. In regards to this effort, Minnesota Commerce Commissioner Mike Rothman stated, “Illegal and abusive tactics and debt collectors are a nationwide problem that requires a nationwide response. By working together in this new federal-state collaboration, we are joining our forces to stop these abusive practices and protect the public.”

Since 2010, the Federal Trade Commission has sued more than 250 debt collectors and secured judgments of almost $350 million. Additionally, the Federal Trade Commission has also banned 86 companies from the debt collecting business. Illegal debt collection practices can also result in jail time for collectors. As part of Operation Collection Protection, 19 individuals face indictment, have pleaded guilty, or have been convicted of criminal charges. In one instance, a collector was sentenced to more than 17 years in prison for actions stemming from a phantom debt collection operation that targeted Spanish-speaking consumers. In a related instance, a federal judge sentenced the defendant with 13 years of prison. Companies operating as debt collecting agencies have been encouraged to review and update their compliance programs to avoid penalties under this enforcement action.

In early November, five enforcement actions against debt collectors were announced by the FTC as part of this extensive effort. More on these actions can be found here.

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