At the request of the Federal Trade Commission, a U.S. district court shut down a Houston-based debt collection operation that allegedly illegally used insults, lies, and false threats to collect on payday loans – including telling a Virginia woman that she would be arrested and jailed for three years, and would lose her disability payments if she did not pay a $980 debt.
The court also froze the operation’s assets, banned the defendants from engaging in debt collection, and appointed a receiver to take control of the business while the FTC moves forward with the case.
In addition to using false threats of arrest and imprisonment, the operation allegedly told some consumers their minor children would be taken into government custody; disclosed debts to family members and military superiors; falsely claimed to work hand-in-hand with local sheriff’s offices; and collected bogus late fees and attorneys’ fees, the FTC complaint alleged.
As part of its continuing crackdown on scams that target consumers in financial distress, the FTC filed a complaint against Goldman Schwartz, Inc., three affiliated companies, and three individuals who own or manage them. The operation did business nationwide collecting debts for numerous payday loan companies, including Ace Cash Express, Advance America, Allied Cash Advance, Checkmate, First Cash Advance, and MoneyMart.
The complaint charges the defendants with multiple violations of the FTC Act and the Fair Debt Collection Practices Act (FDCPA), including:
falsely representing that Goldman Schwartz is a law firm and owner Gerald Wright is an attorney named Barry Schwartz.
falsely claiming that consumers have committed crimes by not paying their debts, will be arrested or jailed, and will lose custody of their minor children.
falsely claiming to be affiliated with or work in conjunction with law enforcement agencies.
harassing and abusing consumers by using obscene or profane language, calling repeatedly or continuously, and calling late in the evening or early in the morning.
adding unauthorized late fees and attorney’s fees to the amount consumers owe on their debts, and
failing to inform consumers of their rights to dispute the debts, have the debts verified, and obtain the names of the original creditors.
The FTC would like to thank the Harris County (Texas) Constable Precinct 5, the Harris County District Attorney’s Office, and the Better Business Bureau of Greater Houston and South Texas for their invaluable assistance in this investigation.
The Commission vote authorizing the staff to file the complaint was 4-0-1, with former Commissioner J. Thomas Rosch not participating. The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Southern District of Texas, Houston Division. On January 16, 2013, the court granted the FTC’s request for a temporary restraining order with an asset freeze and the appointment of a monitor. Following a hearing on January 28, 2013, the court entered a preliminary injunction against all defendants that continued the asset freeze, banned collection activity, and appointed a receiver.
The complaint names as defendants Goldman Schwartz Inc, also doing business as Goldman, Schwartz, Lieberman & Stein; Debtcom, Inc., also doing business as Cole, Tanner, & Wright; Harris County Check Recovery Inc.; The G. Wright Group Inc., also doing business as The Wright Group; Gerald Wright, also known as Barry Schwartz; Starlette Foster, also known as Star Foster; and Jennifer Zamora.