Text messages from a debt collector? You might imagine:
Did u 4get?
I am w8ing 4 u 2 pay!
The actual texts sent by a California-based collection firm were
less pointed than that -- but they still broke federal law designed
to protect debtors, according to the Federal Trade Commission.
The FTC has brought its first case against a debt collector for
using text messages, sending a message of its own about what
collectors can and can't do as they go about the job of bringing in
overdue debts, which affect one in seven U.S. households.
"If collectors are going to communicate by text message, they
are going to have to find a way to do so that follows the law,"
said Rebecca Unruh, an attorney with the FTC bureau of consumer
On Wednesday the agency
announced an order
and $1 million fine against Glendale, Calif.-based National
Attorney Collection Services Inc. and National Attorney Services
LLC, both controlled by the same individual, Archie Donovan. The
companies collect debts on behalf of payday loan companies that
cater to Spanish-speaking customers.
Among other things, the companies sent about 1.8 million text
messages in an 18-month period -- and not just to debtors, the FTC
said. Relatives, friends and co-workers of the people being pursued
for unpaid bills also got messages.
"It is URGENT for you to call National Attorney Service
regarding a very sensitive matter," some of the texts said. The
messages also contained the debtor's name, a phone number to call
and a number that was labeled "case #." Other versions
included the same wording in Spanish, the FTC said.
According to the FTC's complaint, the texts failed to state that
they are attempts to collect a debt, and that any information
gained would be used for that purpose, as required by debt
collection law. Initial communications must contain that
disclosure, and follow-up communications must indicate that the
sender is a debt collector. The U.S.
Fair Debt Collection Practices Act
establishes numerous protections for consumers who are the subject
of debt collection action.
It's not known how widespread text collection is, but the
potential reach is large. About 15 percent of U.S. households have
at least one debt in collections, with the average amount being
$1,409, according to the Federal Reserve Bank of New York.
Cellphones with text messaging capability are even more ubiquitous,
with about 325 million devices in use last year, including tablets
and hot spots, according to the wireless industry association
However, the main trade association for collection companies
estimates that debt collection via text is rare -- at least as
practiced by its members.
"There is so much gray area out there as to the rules involving
[texts], we've been advising our members to use them with caution,"
said Mark Schiffman, director of public affairs for ACA
While debtor protection law requires collectors to say what the
call or message is about, it also penalizes collectors for
revealing the debt to third parties such as roommates or family
members. So if someone other than the debtor sees the text -- or
picks up a phone message -- the collector is liable. The situation
puts the collector in what Schiffman calls a Catch-22
Under a separate federal law, the Telephone Consumer Protection
Act, collectors using automated dialing equipment are supposed to
get your consent before communicating via cellphone or text,
Schiffman said. That limits texting to a narrow set of
circumstances -- such as an ongoing discussion about a debt in
which the consumer has said OK to communicating via text.
The protections are having unintended side effects, Schiffman
said. Wary of leaving messages, collectors instead are calling
multiple times in hopes of finding the debtor at home, without
leaving a message.
"We'd like to get clarity," he said. The association is hoping
that preapproved language for collection messages is part of an
expected regulatory overhaul, "so you could leave a voice mail
without getting nailed." The U.S. Consumer Financial Protection
Bureau is expected to roll out new regulations to update debt
collection rules before year end, although it's not known if
texting will be addressed.
Texting wasn't the only problem at National Attorney Collection
Services, according to the FTC, which charged the company under the
Federal Trade Commission Act as well as debtor protection law. The
company was also cited for falsely portraying itself as a law firm
and making empty threats about lawsuits and wage garnishment. There
was also the matter of an illustration on envelopes it sent to
collection targets, which depicted a man being held upside down and
shaken by a giant arm, while money falls out of his pockets.
"We don't want to interpret what it means," FTC spokeswoman
Betsy Lordan said, "but the consumers we talked to found it pretty
disturbing and embarrassing."
Debt collectors' use of social media raises