Debt collectors harassed consumers with violent threats, FTC says

Two California debt-collection firms used abusive tactics to harass financially distressed consumers, with one firm threatening to kill debtors’ pets or desecrate the bodies of their deceased children, according to recent Federal Trade Commission complaints.

The cases highlight an increase in complaints about the debt-collection industry as the economy has soured. Consumers lodged about 140,000 complaints with the FTC about debt collectors last year, more than any other industry, according to federal data.

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A few weeks ago, the FTC alleged that Rumson, Bolling & Associates in Van Nuys harassed a woman who was unable to fully pay for her daughter’s funeral. In telephone calls, the firm’s employees told her they would dig up her daughter’s body and hang it from a tree if she did not pay, the federal complaint said. They threatened to shoot and eat her dog. And they called her “white trash,” according to the complaint.

Christopher Pitet, a lawyer who represents all but one of the defendants in the Rumson case, said company officials disagree with the government’s allegations. When the evidence comes out, it will show that the firm invested a lot of resources in trying to comply with federal law, Pitet said, “and if there were violations, as the FTC alleges, they were done by employees against company policy.”

In another case, announced Wednesday, the FTC accused Rincon Debt Management of falsely telling consumers that they had been sued or could be arrested for not paying off debts. In making the “bogus threats,” Rincon employees posed as lawyers or process servers trying to deliver legal papers. This scheme allegedly generated at least $9.4 million in profits and harmed consumers in more than a dozen states, including Virginia.

In the Rincon case, many of the affected consumers did not owe money, the FTC said. Lawyers for Rincon did to respond to a request for comment.

These are among eight debt-collection cases that the FTC has brought since last year, and the agency continues to scour complaints to spot patterns and identify potential targets, federal officials said.

“We don’t tackle every single complaint . . . but we try to bring cases that will have the most significant impact for consumers,” said FTC Commissioner Edith Ramirez.

The FTC has yet to determine how many consumers were affected in the Rumson and Rincon cases, now pending in a federal district court in California. But at the agency’s request, the court has halted the alleged illegal activity at both firms, frozen the companies’ assets and assigned receivers to take them over. The FTC will seek monetary awards.

In the Rumson case, the receiver has determined that the business cannot operate in a lawful manner and has asked the judge for authority to sell the firm’s assets and close the business, said Tom Pahl, an assistant director at the FTC’s financial practices division.

Most of Rumson’s clients were mom-and-pop operations in Southern California that hired the company on a contingency basis, meaning that Rumson would charge a fee only if it collected the debt. Debts were collected from consumers nationwide.

But Rumson ripped off its clients, the FTC said. Sometimes the firm collected the money but did not pass any of it along to clients. Other times it charged clients “legal fees” that it said it would use to sue debtors. But it did not file the lawsuits or collect the debts.

At least two funeral homes were among Rumson’s clients. Rumson pursued a woman who was late on payments to one of them after her sons died within a week of each other, the FTC said. The defendants “called her a ‘deadbeat’ and asked how she would feel if her son’s body was dug up and dropped outside her door,” the FTC said.

The firm often told consumers that it would seize their assets, garnish their wages or sue them, the FTC said. It allegedly disclosed debts to the consumers’ co-workers, employers and neighbors.

Rincon, a Corona firm that purchased portfolios of debt, allegedly used similar tactics.

According to federal investigators, Rincon pressured consumers by reaching out to their employers or neighbors first. Working off prepared scripts, collectors would leave a “case number” and a call-back number and stress that consumers who did not call back immediately would have to appear in court.

The goal was to deceive consumers into believing that a lawsuit had been or would be filed, when in fact neither was true, the FTC complaint said. Consumers who called back would then be told that they could “settle” the case immediately if they paid off the entire debt — plus legal fees and court costs — on the phone.

Federal law bans debt collectors from demanding more debt than a consumer owes, making threats that they can’t or do not plan to carry out, and disclosing to a third party that a consumer owes debt, according to the FTC.

 
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