A nationwide debt collector has agreed to pay a civil fine of more than $1 million to settle Federal Trade Commission charges that it violated federal law by inaccurately reporting credit information and pressing consumers to pay debts they often did not owe.
According to the FTC’s complaint, the company and two of its officers illegally tried to collect invalid debts and reported them to the credit reporting agencies without noting that consumers disputed them. In addition, even after receiving information from consumers that a debt was paid off or did not belong to the consumer, the company continued to assert, no longer with a reasonable basis, that the consumer owed the debt, without trying to confirm or dispute the consumer’s information, in violation of the FTC Act.
The FTC charged that the company, Credit Bureau Collection Services (CBCS), and two of its officers, Larry Ebert and Brian Striker, violated the FTC Act and the Fair Debt Collection Practices Act. The company also is charged with violating the Fair Credit Reporting Act by reporting information to credit agencies that consumers had proved was inaccurate, failing to inform to the credit agencies that consumers had disputed the debts, and failing to investigate after receiving a notice of dispute from a credit reporting agency.
In addition to imposing the $1.1 million civil penalty on the company, the settlement order:
- Bars the defendants from further violations;
- Prohibits them from making unsupported statements to collect a debt or obtain information about a consumer;
- Bars them from making claims that a debt is owed or about the amount, without a reasonable basis;
- Requires the defendants, when a debt is questionable or a consumer questions it, to either close the account and end collection efforts or investigate the dispute. If they cannot show that the consumer owes a debt, they cannot sell the debt or provide it to any business other than the original client; and
- Bars the company from re-reporting information to credit reporting agencies that it had voluntarily deleted from credit reporting before December 2008.
The Commission vote to authorize staff to refer the complaint and consent decree to the Department of Justice for filing was 4-0. The documents were filed in the U.S. District Court for the Southern District of Ohio, Eastern Division.
Facts from the complaint filed by the Federal Trade Commission:
Defendant Credit Bureau Collection Services, Inc. , also doing business as CBCS and CBCS National (“CBCS”) is a for-profit corporation organized, existing and doing business under the laws of the State of Ohio. Its principal place of business is 236 E. Town Street, Columbus, Ohio 43215. At all times relevant to this Complaint, Defendant CBCS has transacted business in this District.
Defendant Larry Ebert (“Ebert”) is an officer of CBCS, serving as the President of CBCS. Defendant Ebert plays an active role in the management of CBCS. Defendant Ebert, in his capacity as the President of CBCS, formulated, directed, controlled, had the authority to control, or participated in the debt collection acts and practices of CBCS, including the acts and practices alleged in this Complaint. At all times relevant to this Complaint, Defendant Ebert has resided in or transacted business in this District.
Defendant Brian Striker (“Striker”) is an officer of CBCS, serving as the Director and/or Vice President of Collections. Defendant Striker plays an active role in the management and/or supervision of CBCS’s National Office’s debt collection activities. Defendant Striker, in his capacity as the Director of Collections and/or Vice President of Collections, formulated, directed, controlled, had the authority to control, or participated in the debt collection acts and practices of CBCS, including the acts and practices alleged in this Complaint. At all times relevant to this Complaint, Defendant Striker has resided in or transacted business in this District.
Course of Conduct
CBCS provides collection services to regional and national credit grantors, attempting to recover both commercial and consumer debts, a substantial number of which have previously been placed in collection.
CBCS regularly attempts to collect debts by contacting the consumer by telephone.
CBCS is a person who regularly and in the ordinary course of business furnishes information to one or more CRAs about its transactions or experiences with its consumers.
CBCS routinely receives complaints from consumers who claim they do not owe the debt CBCS attempts to collect, either because CBCS has contacted the wrong person or the debt has been satisfied previously.
In numerous instances, consumers notify CBCS at the address specified for such disputes that CBCS is reporting inaccurate information concerning the consumers’ credit to the CRAs. These consumers typically also show mistaken identity or proof of payment as proof that the information reported by CBCS is inaccurate. CBCS has continued to report inaccurate information to the CRAs even after receiving such notice and accompanying proof.
In numerous instances, consumers dispute the information appearing on the consumers’ credit reports in writing to the CRA reporting the information. Defendant CBCS receives most notices of disputes from a CRA in electronic format, through automated consumer dispute verification (“ACDV”) forms.
Pursuant to Section 623(b)(1) of the FCRA, CBCS, as a furnisher of information to the CRAs, is required to conduct an investigation of the disputed information upon receipt of a notice of dispute from a CRA.
For certain types of disputes, such as those where the consumer claims the account is not his or hers or belongs to someone with a similar name, it is CBCS’s policy and practice only to compare the name, social security number, date of birth, and address in CBCS’s computer database with the information provided on ACDV forms. Where three of the four items match, CBCS will report to the CRA that it has verified the information it furnished as accurate. It is CBCS’s policy that only after the consumer has alleged the same type of account inaccuracy more than four times will the matter become assigned to a supervisor to do further “investigation.” Because CBCS collects accounts that are often old, information in its computer files may not be accurate for a variety of reasons, including incorrect updating of addresses, errors in recording names and information, and problems with the original creditor’s records.
In disputes involving identity theft or fraud allegations, CBCS’s policies provide that if the existing account codes and notes in its records do not contain any reference to a prior claim of fraud, CBCS will verify the previously reported information without conducting any investigation prior to such verification.
In numerous instances, despite written notification from consumers disputing the accuracy or completeness of alleged debts, and proof from the consumer demonstrating that the consumer does not owe the debt, CBCS has continued to characterize the debt as owed by the consumer in its collection efforts.
In numerous instances, despite written or oral notification from consumers disputing the accuracy or completeness of alleged debts, Defendant CBCS continued to furnish the information to the CRAs without communicating that the information was disputed by the consumer.
Defendant Ebert and Defendant Striker each had the authority to control and direct the debt collection activities of CBCS, or has participated in the misrepresentations and other misconduct of CBCS in connection with the collection of debts, and knew or should have known of the misrepresentations and other misconduct of CBCS. – Source
CBCS, Striker and Ebert then entered into a consent decree that they have a duty to conduct reasonable investigations into collection accounts disputed by consumers.
Defendants shall either close the account and permanently terminate collection efforts or conduct a reasonable investigation into the accuracy or completeness of such information. If such disputes are raised during a telephone call with the consumer, Defendants may reasonably provide responsive information or pose reasonable questions to the consumer, in a manner that complies with applicable law, in an effort to resolve any such disputes raised by the consumer. If the consumer continues to question, dispute, or challenge the debt, Defendants shall make no further attempt to collect the debt or report it to a consumer reporting agency (CRA) until they have completed an investigation and have reasonably concluded that the information is accurate and complete. – Source