The Federal Trade Commission (FTC) has announced new developments in ''Operation Collection Protection,'' its new coordinated federal-state enforcement initiative targeting unlawful debt collection practices. The U.S. Department of Justice, the Consumer Financial Protection Bureau (CFPB), and state attorneys general are among the other enforcement authorities participating in the initiative. The FTC's announcement kicks off what is likely to be another year of intense focus on the debt collection industry.

New developments in pending FTC actions are: 

  • An agreement by defendants National Payment Processing LLC, National Client Services LLC, and two individual owners of the companies to entry of a preliminary injunction in an action for a permanent injunction and other equitable relief filed in October 2015 in a federal district court. The defendants were alleged to have engaged in deceptive practices that violated the Fair Debt Collection Practices Act (FDCPA) and FTC Act such as impersonating or falsely claiming to be investigators or affiliated with law enforcement authorities and threatening consumers with arrest, imprisonment or seizure, garnishment and other actions for nonpayment.

They were also alleged to have engaged in other practices that violated the FDCPA, such as calling consumers at times or places that the defendants knew or should have known were inconvenient, communicating with third parties for purposes other than acquiring location information without the requisite consent, and failing to provide required notices. The stipulated preliminary injunction provides for an asset freeze and appointment of a receiver, and prohibits the defendants from taking various actions, including continuing to engage in the collection practices alleged in the complaint

  • An agreement by defendants Premier Debt Acquisitions LLC, Prizm Debt Solutions LLC, Samuel Sole and Associates LLC, and two individual principals to entry of a permanent injunction to settle an action filed in May 2015 in a federal district court alleging that the defendants violated the FDCPA and FTC Act by engaging in deceptive practices such as falsely representing they were attorneys or representatives of attorneys, falsely threatening to take legal action such as litigation, arrest, or garnishment of wages, and falsely representing the effect of payment on a consumer's credit report, and engaged in other practices that violated the FDCPA, such as failing to provide required notices. (The court had previously entered a temporary restraining order providing for an asset freeze and appointment of a receiver.) The stipulated final order for permanent injunction permanently bans the defendants from participating in debt collection activities and imposes a judgment of $2,229,756, the balance of which is suspended after the FTC's receipt of certain payments and the proceeds of certain assets to be liquidated by the receiver.

  • An agreement by defendants Municipal Recovery Services Corporation and its individual owner to entry of a permanent injunction to settle an action filed in December 2015 in a federal district court. The defendants were alleged to have violated the FDCPA and FTC Act by engaging in deceptive practices that included sending letters and postcards to consumers to collect utility bills, traffic tickets, and other debts owed to municipalities that falsely represented or implied the communications were from a municipal court and consumers would be arrested or jailed for nonpayment. They were also alleged to have engaged in other practices that violated the FDCPA, such as communicating about a debt by postcard and failing to give required notices. The proposed stipulated order for permanent injunction permanently enjoins the defendants from engaging in the practices alleged in the FTC's complaint and imposes a judgment of $194,888.22, which is suspended based on the defendants' inability to pay. 

  • The entry of summary judgment against Chris Lenyszyn, the remaining defendant in an action filed in May 2014 in a federal district court, alleging that Mr. Lenyszyn and three other defendants (John Williams, Williams, Scott & Associates, LLC, and WSA, LLC) violated the FDCPA and FTC Act by engaging in deceptive practices. These practices included falsely claiming that consumers were delinquent on payday loans that the defendants were authorized to collect and that defendants were affiliated with law enforcement authorities or attorneys or working for attorneys, and falsely threatening consumers with arrest or imprisonment. The defendants were also alleged to have engaged in other practices that violated the FDCPA, such as improperly communicating with third parties and failing to provide required notices. The court's final order permanently bans Mr. Lenyszyn from participating in debt collection activities and imposes a judgment of $565,816.71. (In April 2015, the FTC obtained a default judgment and permanent injunction against the three other defendants which also included a permanent ban on participating in debt collection activities and imposed a judgment of $3,935,246.51.)

The FTC's press release also describes recent actions against debt collectors taken by the Colorado, Indiana, and Massachusetts attorneys general and the Minnesota Department of Commerce. The FTC states that 130 actions have been filed nationwide over the past year by participants in Operation Collection Protection.

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, bringing enforcement actions and engaging in pre-rulemaking activity in anticipation of new debt collection regulations. The FTC's press release noted that since Operation Collection Protection was announced in November 2015, the CFPB has resolved four enforcement actions involving debt collection practices.

Attorneys in Ballard Spahr's Consumer Financial Services Group regularly advise clients on compliance with the FDCPA, the FTC Act, and state debt collection laws, and defend clients in individual and class action litigation brought in state and federal courts, as well as in enforcement actions brought by federal and state regulators. They also prepare clients for CFPB examinations.


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