Consumer Law

FTC Fines Debt Collection Company $1.75 Million

By M. Stan Herring

StarTribune.com has posted an article about the Federal Trade Commission cracking down on a Minnesota debt collection company, which is the 2nd largest civil penalty case the FTC has brought against a debt collection company.

Allied Interstate Inc. has had a history of consumer complaints and has been fined several times by the state. The company has been fined $1.75 million in order to settle on allegations that it broke the law when collecting on debts. The fine coincides with rising numbers of consumer complaints about debt collector abuse. This hefty fine is meant to show a message to other debt collection companies to show that illegal debt collection practices will not be tolerated.

The FTC also alleged that Allied debt collectors on numerous occasions spoke to neighbors, co-workers or others about a consumer's debts. The federal agency said Allied deceived consumers by threatening legal action it didn't intend to take. Both practices are illegal.

Many debt collectors are now using a repeat dialing system, called a "robo dialer", which calls the same person multiple times a day. With Allied, consumers were still be robo-dialed even after they insisted the company contacted the wrong person and the debt was not theirs. It appears that Allied also failed to follow up and make sure they had accurate information on alleged debtors.

In addition to paying a $1.75 million penalty to the U.S. government, Allied agreed to other measures, most of them already required by law. They include suspending collection efforts and conducting a reasonable investigation when consumers dispute a debt. The firm has also agreed to not use abusive language, another allegation in the FTC's lawsuit.

Predictably, Allied didn't admit any wrong doing, but did blame the robo-dialing on an "industry issue." They claim to have developed a system to reduce such errors.

"The fine levied for this relentless abuse of consumers is tiny compared to the profits this agency made over the years engaging in that abuse," said Peter Barry, a Minneapolis consumer attorney. "This lawsuit should send a strong signal to every debt collector in America: business as usual is over."

Even with the FTC's crackdown on enforcing debt collection tactics, actions are still rarely taken. In five years the FTC has only taken action and brought cases against 11 collection firms. Only 21 have been reprimanded in the past decade.

Last year, the FTC received 88,190 complaints about third-party debt collectors, up from 78,925 a year earlier. Nearly half of the complaints involved allegations that collectors harassed people by calling repeatedly, the FTC said in an annual report to Congress.

If you have had problems with debt collectors, or have been harassed by one, and have questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

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Full post as published by Alabama Consumer Blog on October 25, 2010 (boomark / email).