FTC acts against phantom debt collector

I wrote a column a few years ago about joint enforcement actions by the FTC and 50 other state and federal government agencies against crooked debt collectors. The initiative was dubbed Operation Corrupt Collector and in one case alone the crooks took in more than $12 million from consumers through illegal practices.

It wasn’t the FTC’s first action against debt collectors and it wouldn’t be the last. The FTC reached a settlement in May with a company called Global Circulation, Inc. (GCI) that took in more than $7.6 million in bogus debt payments by threatening victims with jail time, harassing their family members, and through other unlawful actions. 

The FTC said GCI:

• Operated under a variety of fictitious names, including Total Mediation Solutions, Total Consumer Solutions, and Consumer Impact Recovery.
• Called consumers out of the blue and threatened them with arrest, wage garnishment, and lawsuits if they didn’t pay a debt that didn’t exist at all or that GCI couldn’t legally collect.
• Called consumers multiple times a day.
• Failed to identify themselves as debt collectors as required by the Fair Debt Collection Practices Act.
• Used the same illegal tactics against consumers’ family members.

The proposed settlement order with the FTC bans GCI and its owner from debt collection and debt brokering activities and imposes a $9.7 million judgment, most of it suspended because of the defendants’ inability to pay the full amount. In announcing the order, the Director of the FTC’s Bureau of Consumer Protection said, “Using a playbook of intimidation and threats of jail time to coerce consumers into paying debts that they don’t owe is beyond the pale. The FTC will not hesitate to act against phantom debt collectors to shut down their operations.”

If you get a collection call about a debt you don’t recognize, the FTC and BBB recommend you stay calm and follow these steps:

• Don’t respond to threats. You can’t be arrested or jailed for not paying your bills and there’s a legal process for garnishing your wages to repay a debt.
• Find out who’s calling. Get the name of the collector and the company, its address, and the phone number. The collector’s refusal to provide the information is a red flag it’s a scam.
• Get “validation” information about the debt. Within 5 days of first contacting you, debt collectors must “validate” or tell you the amount of the debt, the name of the current creditor, and how to get the name of the original creditor. A refusal to provide this information is another red flag. 
• Do your own detective work. Check with the original creditor. Is the debt yours? Is it their collector calling you? Or did they sell your debt or hire a company to collect it?
• Dispute the debt. If you think you don’t owe part or all of the debt, dispute it with the collector by mail or online. Even if you got validation information.

I managed collection departments for many years during my banking career and can attest that most collectors are honest and compassionate. Collecting a debt is never a pleasant experience for either party, but if you get a call about a debt you legitimately owe, do your best to work out payment arrangements.