FTC Settles with Debt Collector for $1 million in its First Text Messaging Case

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A Glendale, Calif. debt collector will pay $1 million to settle Federal Trade Commission charges that the defendants violated federal law. This is the first FTC action against a debt collector who used text messaging to attempt to collect debts in an unlawful manner.

The FTC alleged that Archie Donovan and two companies he controls — National Attorney Collection Services, Inc. and National Attorney Services LLC — used English- and Spanish-language text messages and phone calls in which they unlawfully failed to disclose that they were debt collectors. The FTC charged the defendants with violating both the Fair Debt Collection Practices Act (FDCPA) and the FTC Act.

In their text messages, phone calls, and mailings, the defendants also falsely portrayed themselves as law firms by using the names National Attorney Services, National Attorney Service, National Attorney, and Abogados Nacionales. Building on their deceptive company name, the defendants falsely threatened to sue consumers for not paying their debts or to garnish their wages.

Example of envelope allegedly used by defendants to contact consumers’ family members, friends and co-workers about their debts. (Image from FTC)

Example of envelope allegedly used by defendants to contact consumers’ family members, friends and co-workers about their debts. (Image from FTC)

The FTC also alleged that Donovan and his companies illegally revealed debts to the consumers’ family members, friends and co-workers. Among other tactics, the defendants used mailing envelopes picturing a large arm shaking money from a consumer who is strung upside down. The law does not allow debt collectors to disclose publicly someone’s private debts, because doing so could endanger their jobs and reputations. Mailing envelopes can include only the name and address of the company, and cannot indicate that the consumer may owe a debt.

“No matter how debt collectors communicate with consumers – by mail, by phone, by text or some other way – they have to follow the law,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The FTC has a zero tolerance policy for deception.”

The FTC held a workshop in 2011 and issued a report in 2009 that addressed how debt collectors can use text messages to collect debts in a lawful manner while maintaining consumers’ privacy.

In addition to the $1 million civil penalty, the settlement requires the defendants to stop sending text messages that do not include the disclosures required by law, and to obtain a consumer’s express consent before contacting them by text message. The defendants also are barred from falsely claiming to be law firms, and from falsely threatening to sue or take any action – such as seizure of property or garnishment – that they do not actually intend to take.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0.  The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Central District of California on August 23, 2013. The proposed consent decree is subject to court approval.

Continuing the Discussion

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  • avatar Commercial Guy says:

    Did they really use that envelope? That has to be the stupidest thing I’ve ever seen.

    I seems to me that the text messaging portion of the accusations is fairly minor; something the DOJ threw in because they were using texts, not so much that the texts were the primary violations.

  • avatar john -hilsmeyer says:

    Read the complaint here.
    Pretty hilarious!

    http://www.ftc.gov/os/caselist/1223032/130925naccmpt.pdf

  • avatar ryon gambill says:

    Does anyone know of a fool proof text message format? We’ve been mulling this over for years.

    Provided with application
    No 3rd party disclosure
    No costing consumer money

    I’ve always preferred acronym+ phone#+a message to call us before we disclose anything. It’s probably not the way I should try though.

  • avatar john -hilsmeyer says:

    You need prior consent before sending text messages, Gambill.
    15 USC § f(5): Causing any charges to be made to the consumer. The “unlimted text plan” argument doesn’t work.
    Acronym is also using ” Any name other than the true name of the debt collectors business”
    - § 1692e(14).

    If you do it anyway, don’t forget to throw that mini-miranda in there. That’s a long text.

  • avatar Raymond says:

    Makes absolutely no sense to use any text messaging. By the time all disclosures would be met, the cost of typing them would be out of the ball park by both the sender and recipient. As to “prior consent” I do not believe that would work at all. Court decisions are north and south on calling cell phones using a prior consent from the initial application.

    So much for compliance and training, plus policies and procedures. When will the small number of agencies wise up. Where and how will the FTC collect the $1M
    and by the way, more is coming from State Attorney Generals so don’t close the bank account right now Archie.

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