California debt collector to pay $1 million to settle FTC charges

160px-US-CFTC-Seal.svgA California-based debt collector agreed last week to pay $1 million to the FTC to settle allegations that the companies involved in the operation failed to disclose that they were debt collectors in calls and text messages to consumers.

The FTC alleges that Archie Donovan and two of his companies — National Attorney Collection Services and National Attorney Services — used English- and Spanish-language text messages to falsely portray themselves as law firms and threatened to garnish consumers’ wages or to sue them for not paying their debts.

The FTC also alleges in its complaint that Donovan and the companies illegally revealed consumers’ debts to family members, co-workers and friends, and that the companies used mailing envelopes with a picture of an arm shaking money from a consumer being hung upside down.

Under federal law, debt collectors are prohibited from publicly disclosing a person’s debts as doing so could put the consumer’s job and reputation at risk. Mailing envelopes cannot indicate that a 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,” Jessica Rich, the director of the FTC’s Bureau of Consumer Protection, said. “The FTC has a zero tolerance policy for deception.”

In addition to the settlement charges, the defendants are prohibited from sending text messages that do not include federally required disclosures and are required to obtain a consumer’s express consent before contacting them via text message. The companies are also prohibited from falsely claiming to be law firms and from falsely threatening to take any action that they do not actually intend to take.

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