Nationwide Debt Collector Will Pay $2.25 Million to Settle FTC Charges
November 21, 2008
Academy Collection Service, Inc. and its owner, Keith Dickstein, have agreed to pay $2.25 million to settle Federal Trade Commission charges that Academy and its collectors misled, threatened, and harassed consumers; disclosed their debts to third parties; and deposited postdated checks early, in violation of federal law. This is the largest civil penalty the FTC has obtained in a debt collection case.
“These defendants are responsible for their debt collectors’ abusive practices,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “They ignored people’s complaints and rewarded the collectors who broke the law. This is not a business model that the FTC tolerates.”
According to a complaint filed by the Department of Justice on the FTC’s behalf, Academy collectors violated the FTC Act and the Fair Debt Collection Practices Act (FDCPA) while collecting debts, and Dickstein failed to stop the violations. The complaint also names Edward L. Hurt III and Albert S. Bastian, who oversaw Academy’s Las Vegas collection center and who are not part of the settlement with Academy and Dickstein.
The individual defendants allegedly participated in, or had the authority to control, Academy’s practices. Academy’s collectors allegedly engaged in false or deceptive threats of garnishment, arrest, and legal action; communication with third parties about consumers’ debts; and calls to consumers at their workplace when the employer prohibits such calls. Other practices included frequent, harassing, threatening, and abusive calls; unfair and unauthorized withdrawals from consumers’ bank accounts; and early deposit of postdated checks consumers submitted for debt payment.
More than 1,000 complaints against the company were filed with the FTC, various state attorneys general, the Nevada and Pennsylvania Better Business Bureaus, and the company itself. The FTC alleges that, without sufficient investigation, the defendants dismissed consumer complaints or did not properly discipline collectors, and that collectors who were terminated for FDCPA violations often returned to work within a few weeks or months.
Under the settlement, Academy and Dickstein will pay a $2.25 million civil penalty. The consent decree bars them from misrepresenting to consumers that nonpayment of a debt will result in the garnishment of wages, seizure or attachment of property, or lawsuits, or misrepresenting that Academy representatives are attorneys. The settling defendants are also prohibited from improperly communicating with third parties about a debt; using false, deceptive, or misleading representations in debt collection efforts; communicating with a consumer at any unusual time or place, including the workplace; or harassing, oppressing, or abusing any person in connection with debt collection. The settling defendants are also barred from making any withdrawals from consumers’ bank accounts without obtaining the consumers’ express informed consent, and they cannot deposit or threaten to deposit any postdated check or other postdated payment instrument prior to the date on the check or instrument.
In addition, the consent decree requires the settling defendants to clearly and conspicuously disclose to consumers that they may stop Academy from contacting them about the debt. They also must notify consumers that they may contact an Academy physical address, e-mail address, or toll-free phone number if they have a complaint about the way the company is collecting the debt.
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Concluding a case that drew the largest civil penalty ever imposed on a debt collection business, the Federal Trade Commission settled with the two remaining individual defendants who allegedly misled, threatened, and harassed consumers; disclosed their debts to third parties; and deposited postdated checks early, in violation of federal law. The settlement order requires each of these senior managers to pay a civil penalty and bars them from future violations.
“The FTC wants to remind debt collectors of their responsibilities and obligations under the law. Abusive collection actions are illegal, and if debt collectors use abusive tactics they could face legal action,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “At the same time, we want consumers to understand their rights if their debts go into collection. Money matters, and the more people know about managing their debt and dealing with debt collectors, the better off they will be.”
According to the FTC’s complaint, filed by the Department of Justice on the FTC’s behalf, the defendants participated in, or controlled, the actions of debt collectors whose unlawful practices included false or deceptive threats of garnishment, arrest, and legal action; improper calls to consumers; frequent, harassing, threatening, and abusive calls; and unfair and unauthorized withdrawals from consumers’ bank accounts. The complaint also alleged that the defendants failed to adequately investigate consumer complaints or discipline collectors, and collectors who were terminated for violating the Fair Debt Collection Practices Act (FDCPA) often were rehired within a few months.
In 2008, Academy Collection Service, Inc. and its owner, Keith Dickstein, paid $2.25 million to settle FTC charges that Academy collectors violated the FTC Act and the FDCPA while collecting debts, and that Dickstein failed to stop the violations. The settlement order announced today, negotiated by DOJ and the FTC, imposed civil penalties of $375,000 and $300,000, respectively, on Albert S. Bastian and Edward Hurt, who oversaw Academy’s Las Vegas collection center. The judgments were suspended upon payment of $7,500 each, based on their ability to pay. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.
The order bars Bastian and Hurt from making false, deceptive, or misleading representations in debt collection efforts, such as that nonpayment will result in garnishment of wages, seizure of property, or lawsuits, or that they or their agents are attorneys. They also are prohibited from withdrawing money from consumers’ bank accounts without their express informed consent, and from depositing or threatening to deposit postdated checks before the date on the check. In addition, the pair are barred from improperly communicating with third parties about a debt; communicating with a consumer at any unusual time or place; and harassing, oppressing, or abusing any person in connection with debt collection.