Late last year, the Federal Trade Commission (FTC) revealed an ongoing nationwide enforcement initiative targeting debt collectors, called Operation Protection Collection. The initiative is the first of its kind coordinated crackdown by state and federal enforcers targeting abusive and deceptive debt collection practices. According to statements by the FTC, the operation “sends the unmistakable message that law enforcers have locked arms in the fight against debt collection gone bad.” Debt Collectors were the top industry complained about by consumers to federal agencies in 2014, with over 280,000 complaints, which spurred the initiative.
Operation Protection Collection involves over 70 federal and state law enforcement agencies, including the Consumer Financial Protection Bureau (CFPB), the Department of Justice’s Consumer Protection Branch, 17 state regulatory agencies, state attorneys general, and one Canadian agency. At the time of the announcement, Operation Protection Collection had already resulted in 115 federal and state enforcement actions dating back to the beginning of 2015. Even more enforcement actions have been announced in the new year, bringing the total number of actions to over 130. This includes an announcement last week of four more coordinated actions between the FTC and state attorneys general.
According to the FTC, the operation is pursuing “violations of pretty much every provision of the Fair Debt Collection Practices Act.” For example, in one recent lawsuit filed in federal court by the FTC and the Florida attorney general, the complaint alleges that the defendant collected upwards of $20 million in illegal upfront fees by engaging in a telemarketing scam promising to aid consumers in reducing their credit card debts. The operation also targets illegal debt collection of phantom debts (debts that consumers do not owe), harassing phone calls, false threats of lawsuits and arrest, failure to provide consumers with required disclosures, and noncompliance with state licensing agreements.
The operation pursues all available penalties, remedies and charges, including criminal penalties and jail time. Initial statistics reveal that through coordinated efforts, over 250 debt collectors were sued, at least 86 debt collectors were barred from engaging in future debt collection, and that enforcers had obtained nearly $350 million in judgments.
The operation is another example of increasing coordination between federal and state law enforcement agencies targeting the consumer finance industry. This coordination allows federal enforcers to access state and local knowledge and complaint databases that my otherwise be inaccessible or opaque at the federal level. At the same time, states benefit by the larger resources, expertise and national knowledge that federal enforcers can bring to bear on targets. It also allows states to pursue enforcement under federal statutes, including the Federal Trade Commission Act, the Fair Debt Collection Practices Act, and the full toolshed of the CFPB. Somewhat surprisingly, the FTC also credits members within the debt collection industry with assisting their efforts to identify potential targets and to root out illegal debt collection conduct.
Debt collectors and consumer finance companies engaged in related debt collection practices should be aware of these ongoing efforts. In particular, a close examination of the type of conduct drawing scrutiny by Operation Protection Collection will allow industry participants to audit their own practices and whether they may be at risk of facing a future enforcement action. LenderLaw Watch will continue to monitor significant developments by the initiative, and for daily updates on new actions readers can follow Goodwin Procter’s Consumer Finance Enforcement Watch blog.