The Federal Trade Commission (FTC) yesterday announced its new coordinated effort against unlawful debt collection practices, “Operation Collection Protection.” The FTC also announced that federal, state and local law enforcement agencies have brought 30 new actions against debt collectors nationwide.

FTC Chairwoman Edith Ramirez and Illinois Attorney General Lisa Madigan claimed that the FTC and the Illinois Attorney General’s office receive more complaints regarding debt collection practices than any other industry. Chairwoman Ramirez asserted that the FTC received 280,000 complaints related to debt collection practices in the last year alone. The Consumer Financial Protection Bureau (CFPB) made similar claims regarding debt collection complaints. In the CFPB’s Monthly Complaint Report for September 2014 (which was discussed in the CFPB Monitor here), the CFPB claimed it received more complaints about debt collection than any other type of complaint for the 25th consecutive month.

Chairwoman Ramirez, Attorney General Madigan, and Minnesota Commerce Commissioner Mike Rothman announced that Operation Collection Protection was formed to address this wave of consumer complaints by curbing abusive or deceptive collection calls, deceptive debt buying tactics, phantom or “zombie” debt scams (i.e. collecting debts that have been paid or were never owed), and other violations of law, including violations of the Fair Debt Collection Practices Act.

Besides pursuing enforcement actions against debt collectors, enforcement efforts will also focus on debt sellers and practices that allegedly contribute to downstream collection abuses, such as selling debts multiple times or selling them with poor documentation. In addition to restitution and prohibition on abusive or unlawful practices, Operation Collection Protection is intended to force unethical collection companies out of business and ban individuals from returning to the debt collection industry.

Because these practices frequently cross state lines, the FTC has partnered with the Department of Justice, the CFPB, 47 state attorneys general, 17 state regulatory agencies, one Canadian provincial regulator, and a number of local authorities. “Illegal and abusive tactics by debt collectors are a nationwide problem that requires a nationwide response. By working together in this new federal-state collaboration, we are joining our forces to stop these abusive practices and protect the public,” said Rothman.

As part of its announcement, the FTC issued a press release that identified three new enforcement actions against debt collectors and announced two settlements in pending cases. The two new actions, against BAM Financial and Delaware Solutions, alleged unlawful and intimidating collection tactics and attempts to collect phantom debts, respectively. The complaint against Delaware Solutions is a joint action between the FTC and the New York Attorney General. The settlements resolved pending litigation against K.I.P., LLC, for an alleged phantom debt collection scheme and against National Check Registry for allegedly engaging in deceptive and threatening conduct. These two settlements resulted in judgments totaling more than $6 million and bans on working in any debt collection business. The other new action was filed under seal and the details have not been disclosed.

The announcement of Operation Collection Protection is the most recent development in a year that has seen intense focus on the debt collection industry. Including the new actions announced yesterday, participants in Operation Collection Protection have filed 115 actions against debt collectors nationwide. And the FTC is not the only federal agency targeting debt collection practices—the CFPB has made debt collection practices a primary focus over the last two years, including bringing several enforcement actions and engaging in pre-rulemaking activity in anticipation of new debt collection regulations.

For more information, please contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky, Practice Leader Jeremy T. Rosenblum, John L. Culhane, Jr., Christopher J. Willis, Stefanie H. Jackman, or Sarah T. Reise.

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