The Federal Trade Commission has won a $10.2 million court judgment against a debt-collection operation, National Check Control, for intimidating consumers into paying debts by threatening lawsuits, jail or seizure of property or wages.
The judgment, issued July 15 but not announced until yesterday by the agency, is the largest that the FTC has ever won for violations of national debt-collection laws.
John W. Bissell chief judge of the U.S. District Court in New Jersey, said National Check Control "used intimidating, demeaning and insulting language towards consumers in attempting to secure payment of purported debts." In many cases, the FTC alleged, consumers did not owe the money -- or owed far less than the collector claimed.
Stephen R. LaCheen, an attorney for National Check Control, said the company would probably appeal the court order. LaCheen said the company, which also operated under the names Check Investors Inc., Check Enforcement Inc., Jaredco Inc. and Goldman & Co., was not going after bad debt but pursuing money to cover bounced checks that consumers had intentionally refused to make good for at least two years. He said that in many states if a person is notified of a bad check and fails to make good on it within a specified period of time, it may be treated as a crime.
Bissell disagreed in his order, saying a company "cannot simply assume every check writer from whom they seek to collect a debt intended to commit a crime." Check writers, he added, "may not even know that they had insufficient funds in their accounts at the time of the consumer transaction."
The FTC receives more complaints about debt collectors than any other industry, and over the past few years these complaints have been growing rapidly, reaching 58,687 last year, up from 13,950 in 2000. The collection industry attributes the increase to the growing volume of consumer debt and to the Internet, which has made it easy for consumers to complain. However, government regulators and plaintiff attorneys say part of the increase comes from a new kind of collector who buys unpaid debt from credit card firms for pennies on the dollar and then tries to collect. Known as debt buyers, they have grown from about 13 a decade ago to more than 500 today.
According to the judge's order, NCC purchased over 2.2 million unpaid checks, which were usually more than two years old. Companies had tried, unsuccessfully, to collect on these bounced checks. The checks had an estimated $348 million in face value. The FTC said the company collected at least $10.2 million from 42,100 consumers through practices that violated debt-collection laws. For example, the commission said, the company charged about $125 for every bounced check, violating state laws that usually limit such fees to around $25.
The company ceased operation in August 2003, after the FTC won a freeze on assets and a preliminary injunction requiring it to abide by debt-collection laws.
Agency officials said that although the judgment will be used to refund affected consumers, it is unclear how much money will actually be available for redress.