On July 18, 2005, the United States District Court for the District of New Jersey found that the Federal Trade Commission
was entitled to summary judgment in an action brought against a number of debt collectors for violating the federal Fair Debt Collection Practices Act (“FDCPA”) and Section 5 of the Federal Trade Commission Act (“FTCA”). FTC v. Check Enforcement, No. Civ. A 03-2115(JWB), 2005 WL 1677480 (D.N.J. July 18, 2005). The debt collectors were in the business of purchasing and collecting large amounts of dishonored checks that originally were issued to merchants across the United States. The district court found that the debt collectors violated the FDCPA by:

  • Harassing third parties in order to obtain payment and
    leaving messages on home answering machines
    regarding debts that were overheard by third parties;
  • Using intimidating, demeaning and insulting language
    when attempting to collect debts;
  • Using false, deceptive and misleading representations
    when collecting debts, including representing that the
    debts to be collected were greater than the debts actually
    owed and representing that collection letters were from an
    attorney when they were not;
  • Making threats of arrest and seizure of property or wages
    when the debt collectors had neither filed civil or criminal
    complaints nor levied upon a debtor’s wages or property;
  • Making false threats to file civil or criminal suits;
  • Claiming that criminal proceedings against debtors were
    imminent when they were not;
  • Adding a charge of $125 or $130 to the amount of checks
    to be collected when such amounts were not permitted by
    law; and
  • Failing to send required FDCPA notices to debtors.

The district court also indicated that the debt collectors violated Section 5 of the FTCA by making express and false misrepresentations when collecting debts.

Because of the statutory violations, the district court enjoined the debt collectors from engaging in various debt collection activities and barred them from selling or transferring consumer accounts. In addition, the district court ordered the debt collectors to repay over $10 million in payments that they procured through their illegal activities. The monetary award is the largest judgment that the FTC ever has obtained for violations of the FDCPA.

􀂗 Margaret Stolar and Chuck Gall