For the first time in its history, the Federal Trade Commission (“FTC”) recently initiated an action against a debt collector for its allegedly unlawful use of debt collection text messages. Almost a month after filing its complaint in the United States District Court for the Central District of California, the FTC settled with the debt collector. Among other provisions, the debt collector agreed to make a One Million Dollar payment to the FTC to settle its unlawful use of debt collection text message claims. The action and settlement should be a warning to debt collectors at large that the FTC is scrutinizing their use of text messages in performing collection services.
The FTC Action
According to the complaint, National Attorney Collection Services, Inc., National Attorney Services LLC and their principal, Archie Donovan, unlawfully sent debt collection text messages to consumers that failed to identify the sender as a debt collector (and instead implicitly misrepresented to consumers, based on their names, that the corporate entities were law firms) or disclose that any information obtained would be used to collect a debt. Instead, the FTC alleged that the text messages: 1) falsely identified the debt collector as a law firm; and 2) did not contain any of the disclaimers required by the Federal Trade Commission Act or the Fair Debt Collection Practices Act. The complaint further alleged that in its text messages, the debt collector “threaten[ed] to take legal action against consumers – including litigation, arrest and garnishment – without the intention or ability to take the action.” In addition, the FTC alleged that the debt collector failed to notify consumers of their right to dispute the subject debts.
The defendants never answered the complaint and chose instead to enter into a settlement agreement. The defendants agreed to pay a whopping One Million Dollars to settle the action. In addition, the defendants agreed that they would no longer use their company names or any other writing to deceive consumers into believing that they are a law firm, or anything other than debt collectors. Furthermore, the defendants agreed to cease making any threat of legal action against consumers, in text messages or otherwise, unless the threatened actions are lawful and/or the defendants have the authority and intention to take such actions. The defendants further agreed that they would no longer send debt collection text messages to consumers unless the defendants received prior consent to do so from the consumer.
Protect Yourself Against FTC Act and Fair Debt Collection Act Claims
The FTC has been vigorous in bringing enforcement actions against text message marketers. (see The FTC and State Attorneys General Cracking Down, FTC and Text Message Marketers). With this action and settlement, it appears that the FTC will expand its enforcement actions to include debt collectors as well.