One of the biggest debt collection companies in the country recently agreed to pay a $2.5 million civil penalty in a settlement with the FTC — part of an escalating effort by the agency to keep tabs on and, when necessary, rein in the burgeoning bad-debt industry. Asset Acceptance Capital Corp. agreed to pay the $2.5 million — the second-largest penalty a collection company has ever paid the FTC — to settle charges without admitting wrongdoing. Asset bought the pool of debt at the heart of the investigation for $1.07 billion, paying only 2.5 cents on the dollar for the portfolio.
The FTC’s complaint included a laundry list of violations committed by Asset, ranging from continually pestering people even in cases of mistaken identity to failing to verify information provided by companies that sell it portfolios of old debt to providing credit bureaus with false information.
But the bulk of the complaint pertains to debt on which the statute of limitations had expired. The length of these statutes vary by state, and consumer advocates say it’s a very good idea for anybody with old debts to look up their state’s detail if they’re being targeted with collection calls.
“You can’t just go out there and sue on debt that’s past the statute of limitations,” says Suzanne Martindale, staff attorney at nonprofit Consumers Union. Asset pursued debt repayment — sometimes with threats of lawsuits — it had no legal grounds to collect, a fact its agents withheld from debtors. It also engaged in other sneaky practices to trick consumers into “reanimating” debt, sometimes by talking them into making a small payment (a practice we’ve discussed before).
The FTC called the company out on this in its complaint, a portion of which reads:
If consumers knew, in connection with a past-statute debt, that Asset had no legal means to enforce collection of the debt, or understood that making a partial payment or a written to promise to pay would revive it, some consumers would likely choose not to make a payment or a written promise to pay.
Consumer complaints about debt collection companies spiked in 2010, according to the New York Times. Complaints about debt collectors are only eclipsed by complaints pertaining to identity theft. Because of the growth of this industry, and the increasing number of consumers who are hounded by its agents, the FTC indicated that it plans to keep the heat on debt collection firms in the future.