Federal Court Freezes Assets of Debt Collectors By Injunction in FTC’s Favor
On July 24, 2013, a U.S. District Court, at the request of the Federal Trade Commission (FTC), entered an ex parte temporary restraining order against a group of debt collectors that allegedly extorted payments from consumers by using false threats of lawsuits and communications with their family members, friends and coworkers. The FTC filed the case, styled FTC v. Asset & Capital Management Group, et al., just two days prior (see complaint here), alleging that the defendants – four individuals and seven companies – violated Section 814 of the FDCPA and Section 13(b) of the FTC Act by committing a variety of abusive and deceptive debt collection practices.
Those alleged practices included posing as process servers or law office employees during telephone calls with consumers or their employers or family members. The callers would claim that they were seeking to serve legal papers pursuant to some lawsuit in hopes of intimidating or embarrassing the consumers. Furthermore, the complaint alleges that the defendants violated the FDCPA by: (1) improperly contacting third parties about consumers’ debts; (2) failing to disclose the name of the company they represented, or the fact that they were attempting to collect a debt, during telephone calls to consumers; and (3) failing to notify consumers of their right to dispute and obtain verification of their debts.
Aside from halting the alleged conduct, the federal district court order also froze the defendants’ business assets and appointed a temporary receiver to oversee their operations while the case proceeds.
Practical Impact
The Consumer Financial Protection Bureau (CFPB) has been garnering much attention with its aggressive use of its broad powers. The bottom line of the FTC’s action is to serve as a reminder of the FTC’s broad and diverse powers – that the FTC intends to continue to use – up to and including the power to shut-down businesses within its purview. Indeed, the agency’s choice to seek an injunction from a federal district court illustrates the FTC’s aggressive tendencies in the FDCPA space. Ultimately, the action serves as another indicator that the FTC and its sister agencies, like the CFPB, will continue to vigorously target companies that interact with financially distressed individuals.
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