Archive for the ‘FTC Updates’ category

Biggest FTC crackdown on collection agency ever. 2.25 million

December 6th, 2008

This latest action should send a very strong message to collection agency owners. Was it worth it? 2.25 million for violating the FDCPA and the FTC Act.

The release below from the FTC states the details of the collection agency who received over 1,000 complaints for depositing post dated checks early, misleading debtors, harassing consumers and telling others about the debts. Is there anything they didn’t do? This is exactly the kind of abuse that sticks in my craw. Total disregard for peoples’ basic rights.

If you have an outstanding debt with Academy Collection Services, now is the time to review that debt for any possible violations. You have an opportunity here to make the best of this issue since the case with them is fresh on the FTC’s most wanted list.Consumer outcry is a powerful weapon. Because of all the complaints that people went to the trouble of filing, these actions were possible. I wonder how many were abused that didn’t complain?

Nationwide Debt Collector Will Pay $2.25 Million to Settle FTC Charges

Academy Collection Service, Inc. and its owner, Keith Dickstein, have agreed to pay $2.25 million to settle Federal Trade Commission charges that Academy and its collectors misled, threatened, and harassed consumers; disclosed their debts to third parties; and deposited postdated checks early, in violation of federal law. This is the largest civil penalty the FTC has obtained in a debt collection case.

“These defendants are responsible for their debt collectors’ abusive practices,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “They ignored people’s complaints and rewarded the collectors who broke the law. This is not a business model that the FTC tolerates.”

According to a complaint filed by the Department of Justice on the FTC’s behalf, Academy collectors violated the FTC Act and the Fair Debt Collection Practices Act (FDCPA) while collecting debts, and Dickstein failed to stop the violations. The complaint also names Edward L. Hurt III and Albert S. Bastian, who oversaw Academy’s Las Vegas collection center and who are not part of the settlement with Academy and Dickstein.

The individual defendants allegedly participated in, or had the authority to control, Academy’s practices. Academy’s collectors allegedly engaged in false or deceptive threats of garnishment, arrest, and legal action; communication with third parties about consumers’ debts; and calls to consumers at their workplace when the employer prohibits such calls. Other practices included frequent, harassing, threatening, and abusive calls; unfair and unauthorized withdrawals from consumers’ bank accounts; and early deposit of postdated checks consumers submitted for debt payment.

More than 1,000 complaints against the company were filed with the FTC, various state attorneys general, the Nevada and Pennsylvania Better Business Bureaus, and the company itself. The FTC alleges that, without sufficient investigation, the defendants dismissed consumer complaints or did not properly discipline collectors, and that collectors who were terminated for FDCPA violations often returned to work within a few weeks or months.

Under the settlement, Academy and Dickstein will pay a $2.25 million civil penalty. The consent decree bars them from misrepresenting to consumers that nonpayment of a debt will result in the garnishment of wages, seizure or attachment of property, or lawsuits, or misrepresenting that Academy representatives are attorneys.

The settling defendants are also prohibited from improperly communicating with third parties about a debt; using false, deceptive, or misleading representations in debt collection efforts; communicating with a consumer at any unusual time or place, including the workplace; or harassing, oppressing, or abusing any person in connection with debt collection. The settling defendants are also barred from making any withdrawals from consumers’ bank accounts without obtaining the consumers’ express informed consent, and they cannot deposit or threaten to deposit any postdated check or other postdated payment instrument prior to the date on the check or instrument.

In addition, the consent decree requires the settling defendants to clearly and conspicuously disclose to consumers that they may stop Academy from contacting them about the debt. They also must notify consumers that they may contact an Academy physical address, e-mail address, or toll-free phone number if they have a complaint about the way the company is collecting the debt. -FTC

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FTC targets payday lenders for abusive debt collections

November 14th, 2008

FTC Charges Internet Payday Lenders with Failing to Disclose Key Loan Terms and Using Abusive and Deceptive Collection Tactics

It’s cases like this that are so alarming because the consumer is literally helpless against these tactics and solving them is a tedious task. Can you imagine basically having your checking account held hostage when you have bills and living expenses to pay?

Alleged below, is the case of such tactics, wherein the debtors claim that certain payday loan companies operating online, did not disclose terms of loan repayment, called them at their jobs, told others of their debts and threatened lawsuits and arrest. Shocking yes, uncommon no. Debt collectors often tell others about your debt, threaten you to coerce payment and make harassing phone calls.

This case seems extreme in that the debtors were not only called and harassed but were refused the agreements in writing and told the loans were “verbal’. I’ve never heard of just an oral loan from a legitimate lender.

Here is the release below on the alleged abuse.

The Federal Trade Commission and the State of Nevada have charged 10 related Internet payday lenders and their principals, based mainly in the United Kingdom, with violating federal and state law by not disclosing key loan terms to U.S. consumers and using abusive and deceptive collection tactics.

According to the complaint filed by the FTC and the State of Nevada, through Web sites such as www.cash2day4u.com, the defendants offered consumers loans of $500 or less within 24 hours without requiring a credit check, proof of income, or documentation. Consumers who applied for a loan on the defendants’ Web site were required to provide their bank account and Social Security numbers.

As stated in the complaint, the defendants’ representatives called applicants and told them that they qualified for a loan, typically around $200, that had to be repaid by their next payday with a fee ranging from $35 to $80. They explained that if the loan was not repaid by then, it would be extended automatically for an extra fee that would be debited from the consumer’s bank account “until the loan is repaid.” Consumers were required to give the defendants access to their accounts for payment of the fees. Some consumers were told to call the defendants before their payday to ask them to debit the full loan amount from their accounts.

The complaint states that the defendants did not disclose key loan terms in writing, including the annual percentage rate, the payment schedule, the amount financed, the total number of payments, and any late payment fees. Consumers who asked for written disclosures were told that the transaction was oral only.

According to the complaint, the defendants told consumers that they would send written disclosures after the phone call, but consumers never received them. After paying the defendants – sometimes hundreds of dollars above the loan amounts – many consumers concluded that they had more than repaid their loans and terminated the defendants’ access to their bank accounts, often by closing the accounts. Many consumers then received abusive and deceptive collection calls from the defendants aimed at regaining access to their accounts.

According to the complaint, the defendants falsely claimed that consumers were legally obligated to repay the loans, even though the loans did not comply with payday lending laws in many consumers’ states and the defendants were not licensed to make consumer loans in those states. The defendants falsely threatened consumers with arrest, lawsuits, property seizure, or wage garnishment, and repeatedly called consumers, coworkers, and employers at their workplace, using abusive language and disclosing consumers’ purported debts.

The corporate defendants are Cash Today, Ltd., The Heathmill Village, Ltd., Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Lotus Leads, Inc., First4Leads, Inc., Rovinge International, Inc., and The Harris Holdings, Ltd., each also doing business as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., Interim Cash, Ltd., and BIG-INT, Ltd. The individual defendants are Aaron Gershfield, Ivor Gershfield, and Jim Harris.

The defendants are charged with violating the FTC Act by using unfair and deceptive collection tactics, including falsely threatening consumers with arrest or imprisonment, falsely claiming that consumers are legally obligated to pay the debts; making false threats to take legal action that they cannot take; and repeatedly calling consumers at work and using abusive and profane language and disclosing consumers’ purported debts to coworkers, employers, and other third parties.

The defendants are also charged with violating the Truth in Lending Act and Regulation Z by failing to make required written disclosures, clearly and conspicuously, before consummating a consumer credit transaction, including the amount financed, itemization of the amount financed, the finance charge, the annual percentage rate, the payment schedule, the total number of payments, and any late payment fees. In addition, they are charged with violating Nevada’s Deceptive Trade Act by not disclosing loan terms, making false representations in collecting debts, and selling loans to consumers without licenses.

The Commission vote to approve the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Nevada.

NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. These complaints are not a finding or ruling that the respondents have actually violated the law. The consent agreements are for settlement purposes only and do not constitute admissions by the respondents of a law violation. FTC immediate release.

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Holiday Shopping Tips

November 9th, 2008

If you’ve ever heard the advice, “Never go to the grocery store without a list or when you’re hungry,” chances are you know why: you’re likely to buy more than you need and spend more, too. The same advice applies when you’re shopping for the holidays. Whether you’re shopping at the mall, online, or by phone or mail, the Federal Trade Commission (FTC), the nation’s consumer protection agency, says that a little planning and know-how can help you deliver a holiday season that’s on budget and maybe even a little less stressful.

Getting Started
By making a shopping list, creating — and sticking to — a realistic budget, and looking for good values, you may be able to avoid the headache that could come with post-holiday debt.

List the people you plan to buy gifts for, the type of gifts you plan to buy, and how much you plan to spend. Include the cost of cash gifts, holiday travel, extra food, wrappings, decorations, greeting cards, and postage. If it relates to the holiday season and it costs money, add it to your budget.

Shopping the Holiday Sale Ads
How do you decide if the deal is real? Here are some tips to help you get the most for your money.

Shop around. A “sale” price isn’t always the “best” price. Some merchants may offer a sale price on the item you want for a limited time; other merchants may offer items at a discount everyday.

Read sale ads carefully. Some ads may say “quantities limited,” “no rain checks,” or “not available at all stores.” Before you step out the door, call to make sure the item you want is in stock.

Consider your time and travel costs. If an item is on sale, but the store is across town, include your time and the costs of transportation and parking in the price.

Look for price-matching policies. Some merchants will match, or even beat, a competitor’s prices.

Go online. Check out websites that compare prices. If you decide to buy from an online merchant, keep shipping costs and delivery time in mind.

Carefully consider bargain offers that are based on purchases of additional merchandise. For example, “Buy One, Get One Free” or “Free Gift with Purchase.” If you don’t really want or need the item, it’s not a deal.

Clip coupons. Coupons are useful when they save you money on what you’re already planning to buy. Check coupons for any restrictions. For example, do expiration dates apply, or do you have to spend a certain amount before you can use the coupon? Some retailers will accept expired coupons, and even coupons from their competitors. Check with the retailer before you leave home to learn their policy.

Ask about sale adjustments. If you buy an item at regular price and it goes on sale the next week, can you get a credit or refund for the discounted amount?

Staying on Track
Regardless of how you pay for your purchases, remember to:

Keep track of your spending. Incidental and impulse purchases add up. Jot down what you spend after every purchase.

Save your receipts. You need them for returns and exchanges. Check credit and debit card sales and return receipts against your monthly bills and statements, and report any problems to the credit card issuer promptly.

Ask for gift receipts. Many retailers offer gift receipts that code the price. That way, if the recipient returns the item, they’ll get the same value even if the item has been discounted further.

Ask about refund and return policies. Many merchants may have different refund and return policies for sale items. For example, clearance merchandise may be on final sale, meaning no refunds or exchanges.

Keep good records. Whether you’re ordering by mail, phone, or online, it’s important to keep detailed information about the transaction, including your order number, shipping costs and dates, warranties, and refund and return policies. Some online merchants do not process returns at their retail locations.

Ship early. If you’re sending gifts to out-of-towners, factor in extra time for shipping. If you wait until the last minute, you may pay a hefty price for express or overnight shipping.

Keep an eye on your wallet. Don’t flash cash. Keep an eye on your credit or debit card during transactions, and get them back as quickly as possible. If your cards are lost or stolen, report the loss or theft immediately to the card issuers.

Layaway Programs
If you’re not keen on paying with plastic and don’t have the cash on hand, you may want to ask about a layaway program. Layaway purchase plans are designed for customers who want to buy merchandise without using credit or paying the full price immediately.

Layaways are not credit purchases. When you buy an item on credit, you take the merchandise home with you. When you use layaway, you typically make a deposit — usually a percentage of the purchase price — and pay over time until you have paid for the item in full. In exchange, the retailer holds the merchandise for you.

To avoid problems, get the store’s layaway policy in writing. It should include:

the terms of the layaway plan: how much time you have to pay for the merchandise; when your payments are due; the minimum payment required; and possible charges, like a service fee, for using the plan. Find out if there is a fee or a penalty for missed or late payments: Will your contract be cancelled? Will the merchandise be returned to the sales floor?

the refund policy: If you decide you don’t want the merchandise after you’ve made some or all the payments, you may expect a refund. But retailers’ policies may differ: Some give you all your money back; others may charge a non-refundable service fee; and still others may offer a store credit for the amount you paid.

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FTC Credit Repair Crackdown

October 21st, 2008

With the economy upside down scammers are on the hunt. I have received more email scam offers in the last 2 weeks than I have ever received. They’re coming at 20-30 a day offering cash, sweepstakes, new identity and free cars.  You need to be very diligent right now because these fraudsters are banking on our desperate times to cash in.

Even credit repair scams are up more than usual. Companies offering full guarantees of removing any item and offering new identities are on the prowl. The FTC has launched yet another operation against these fraudsters.

FTC’s ‘Operation Clean Sweep’ Targets ‘Credit Repair’ Companies.  The Federal Trade Commission, in cooperation with 25 state agencies in 23 states, will hold a press conference to announce a crackdown on operations that deceptively claim they can remove negative information from consumers’ credit reports – even if that information is accurate and timely.

WHEN: October 23 – 10:30 a.m.
WHERE: FTC Headquarters
600 Pennsylvania Avenue, N.W., Room 432
Washington, D.C.
MEDIA CONTACT: Office of Public Affairs
202-326-2180

Fox News also discussed the sweep operation today warning consumers to be careful and that if it sounds too good to be true. It is. If anyone offers to fix your credit for a fee consider the following.

  • They must give you a three day cooling off to cancel the contract.
  • They cannot collect the money in advance for work yet to be performed.
  • The company must be licensed and follow the CROA, Credit Repair Organization Act.
  • The company cannot give you a new identity or social security number.
  • Avoid offers to let you piggy bank on a consumers’ A credit for a fee.
  • Offers for loans with ultra high rates and fees or unacceptable terms.

While I agree that scams are rampant and you need to be VERY cautious, I also hope the FTC discusses that one in four credit reports contain errors and the lack of trust within the credit system is what causes consumers to seek help.

The credit bureaus have accuracy issues that we as consumers have to deal with and often getting those issues resolved is impossible. Consumers get frustrated and overwhelmed and ultimately seek out help. That is why education is so important. Not just education about scams but education about how to be your own credit repair expert so that you can fix problems yourself without running up against stall after stall.

Sometimes it seems that the these warnings are meant to put fear into us about the potential scams but they stop short of fully educating us. The FTC has education on their website about basic credit repair issues but there is a lot of education still needed about debt collectors and zombie debts, expired statutes, credit bureau stall, credit mishandling of information and so on.

You can learn more about credit issues in our credit library.

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Debt-Negotiation Defendants Agree to Settle FTC Charges

September 26th, 2008

Four debt-negotiation companies have agreed to settle Federal Trade Commission charges that they violated federal law by falsely claiming they could reduce consumers’ debt by up to 60 percent, leading many people into financial ruin and bankruptcy. The proposed settlements bar them from engaging in further violations of the Federal Trade Commission Act.

The settling defendants were among three individuals and seven companies charged by the FTC with deceptive and unfair practices in violation of the FTC Act (see press releases dated September 21, 2006 and December 5, 2006). All of the defendants in the nationwide operation were charged with misrepresenting how much they could reduce consumers’ debt, and not adequately disclosing the likelihood that consumers would be sued if they took the defendants’ advice and stopped paying creditors. The FTC also charged the defendants with not disclosing that consumers’ account balances would grow from interest, interest rate increases, late fees, and other charges; and falsely advising consumers that negative information that appeared on their credit report as a result of participating in the defendants’ program would be removed upon completion of the program.

A court-appointed receiver closed the businesses. The proposed settlement announced today resolves litigation with the remaining defendants in the case, National Support Services LLC, Homeland Financial Services LLC, Financial Liberty Services LLC, and United Debt Recovery LLC. The settlement bars them from falsely representing that enrolling in a debt-negotiation program is likely to enable consumers to pay off their credit-card or other unsecured debts for a substantially reduced amount; that consumers’ creditors are likely to negotiate settlements under which they will accept substantially less than the amount owed; that debt negotiators can negotiate better settlements with creditors than consumers can negotiate themselves; or that debt negotiators have an established relationship with creditors that gives them an advantage in negotiating favorable settlements.

The defendants also are barred from falsely representing that negative information that appears on a consumer’s credit report as a result of participating in a debt-negotiation program will be removed upon completion of the program; that any such negative effect on a credit rating, credit score or credit report is likely to be minimal or short-term; that creditors are unlikely to sue consumers who participate in a debt-negotiation program or otherwise fail to make minimum monthly debt payments; or that participating in a debt-negotiation program is likely to end most or all harassment or contact from creditors.

The defendants also are barred from falsely representing that creditors will not contact the consumer after a consumer notifies them to stop; that consumers who participate in a debt-negotiation program do not need to worry about balances on their credit accounts increasing while they are in the program; or that any defendant or any other person will begin negotiating with all of a consumer’s creditors immediately upon enrolling in a debt-negotiation program; or misrepresenting any other fact material to a consumer’s decision to participate in a debt-negotiation, debt-reduction, or debt-management program, or to buy any good or service.

In addition, they are barred from failing to disclose, clearly and conspicuously, before purchase, all information material to a consumer’s decision to buy any debt-negotiation services or credit-related products, programs, or services, including the possibility that, if consumers stop paying creditors, one or more creditors may sue the consumer; the fact that federal law prohibits creditors from misrepresenting a consumer’s payment history to credit reporting agencies and that creditors can report accurate negative information such as delinquencies and charge-offs for seven years; and that when consumers stop paying creditors, their credit account balances will increase due to interest, interest rate increases, and late fees and other charges.

The settlement announced today requires the defendants to pay funds held by the receiver and contains record-keeping provisions to allow the FTC to monitor compliance with its order. The Commission vote to authorize staff to file the stipulated final order was 4-0. The order was filed in the U.S. District Court for the Central District of California, Southern Division.

In two related settlements reached in September 2007, the two men who founded and controlled the four companies paid judgments totaling $110,000. Dennis Connelly, who paid $45,000, was banned from telemarketing, and Richard Wade Torkelson paid $65,000 (see stipulated final orders in Related Documents).

NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

FTC Press Release
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

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Debt Collection firm violated FDCPA

September 19th, 2008

A collection agency called Anderson, Crenshaw Associates based in Texas has been accused of violating the Texas Fair Debt Laws. The agency allegedly sent out a bill to a consumer and when she didn’t recognize the debt and called the agency, a man on the other end refused to identity himself.

While it’s legal for debt collectors to use alias names for their business, it isn’t legal to mislead or harass a debtor, which the Texas AG claims happened in this case.

Over 71,000 complaints were filed with the Federal Trade Commission last year against debt collectors. As I told you yesterday in a related article, debt collection is up with our current economy situation, more consumers are going to fall prey to abusive tactics.

If a debt collector contacts you and you believe they have violated your rights, contact the AG or FTC and report the abuse.

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Credit repair website shut down by FTC

September 12th, 2008

FTC Obtains Court Order Against Husband-Wife Credit Repair Team

Here’s a perfect example of why you should never believe when someone tells you that they can guarantee you to remove anything and charge advanced fees for removal of negative items.

The Federal Trade Commission charged two credit repair marketers with violating federal law by collecting advance payment for credit repair services and falsely promising to remove derogatory information from consumers’ credit reports – even if the information is accurate and not obsolete. At the Commission’s request, a federal court halted the defendants’ allegedly unlawful business practices and froze their assets pending further litigation. The FTC seeks to bar the defendants from further violations and make them forfeit their ill-gotten gains.

According to the FTC’s complaint, the defendants marketed their “services” to consumers throughout the nation via an Internet Web site, www.lhcreditrepair.com, classified ads in USA Today, Thrifty Nickel, Common Cents, and www.americanclassifieds.com, and online listings such as www.kellysearch.com and www.aboutus.org. Statements on their Web site include, “Have you had a bankruptcy? We will repair your credit so that this past event does not haunt your future.” Consumers who called the defendants in response to their ads were told, “Anything that hurts you, we’re going to get it off of [your credit report].”

The complaint states that the defendants often led consumers to believe that accurate information on their credit reports might somehow be considered inaccurate and subject to removal. Even when consumers told them that the information was accurate, the defendants led consumers to believe that it could be removed. The defendants allegedly claimed they had special knowledge and expertise that enabled them to permanently remove negative information, including late payments, charge-offs, Collections, tax liens, repossessions, foreclosures, bankruptcies, and judgments, even when the information was accurate and not outdated.

According to the complaint, the defendants offer four levels of service ranging from $250 to $1,150 per person. They require an advance fee they call a deposit, which varies in amount, depending upon the program selected. On their Web site’s home page they claim, without qualification, that “[a]fter we have cleared your files we will stay with you for life, at no additional charge, to catch any other bad files that might show up.” Subsequent Web pages indicate, however, that only one of the four service levels includes the “for life” feature.

The defendants are Rudolph Joseph Strobel, a/k/a Lee Harrison, and Leanna Ruth Harrison, both doing business as Lee Harrison Credit Restoration, Credit Restoration, and Lee Harrison Associates Credit Restoration (LHCR), all located in Naples, Texas. They are charged with violating the credit repair Organizations Act (CROA) and the FTC Act by falsely representing that they can improve consumers’ credit reports by permanently removing negative information, even when the information is accurate and not obsolete. The defendants are also charged with violating the CROA by requiring advance payment for credit repair services; and by failing to provide, before contracts are signed, the written “Consumer Credit File Rights Under State and Federal Law.” In addition, they are charged with violating the CROA by failing to include in their consumer contract a full and detailed description of the services to be performed, including all guarantees of performance and an estimate of the date by which the services will be performed; and failing to include a conspicuous statement about the consumer’s right to cancel the contract without penalty or obligation within three business days after the contract is signed.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Texas, Marshall Division.

Additional credit repair information is available in “Credit Repair: Self-Help May Be Best,” at www.ftc.gov/bcp/conline/pubs/credit/repair.shtm. The FTC advises that only time, a conscious effort, and a personal debt repayment plan can improve your credit report. The first step is to learn what information is in your credit report. If you find errors or mistakes, federal law gives you the right to have them corrected – free of charge. Federal law requires that the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – provide you with a free copy of your credit report once every 12 months, if you ask for it. To order your free report, visit annualcreditreport.com, call 1-877-322-8228, or complete and mail the Annual Credit Report Request Form.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been
or is being violated, and it appears to the Commission that a proceeding is in the public interest.
The complaint is not a finding or ruling that the defendant has actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:
Frank Dorman,
Office of Public Affairs
202-326-2674
STAFF CONTACT:
Anne D. Lejeune
FTC’s Southwest Region
214-979-9371
(Lee Harrison Credit Restoration)
(FTC File No. 0823141)

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Debt collectors re-aging old debt through new credit offer

July 23rd, 2008

This story is just so blatantly wrong that its no wonder the FTC came down on this company.

According to the FTC, the company Compucredit and Jefferson Capital were marketing charged off debt back to the consumers via a new credit card. The program put the old debt back on the credit card and the debtor could in essence, have new credit reported to the credit bureaus but the catch is, many of the debtors were renewing the statute of limitations on previously uncollected debt!

Basically, a credit card issuer and a debt collector got together and came up with this idea. Reaging an old debt into new credit! Sneaky.

Debt-transfer Visa program. According to the complaint, CompuCredit and Jefferson Capital marketed a Visa credit card to consumers with charged-off debt.

CompuCredit and Jefferson Capital represented that the consumers’ old debt balance would be immediately transferred to the card and reported to consumer reporting agencies as paid in full. Consumers who accepted the offer, however, were immediately enrolled in a debt repayment plan and did not receive a Visa card until they paid 25 percent to 50 percent of their charged-off debt.

The FTC alleges that CompuCredit violated the FTC Act by misrepresenting the amount of credit that would be available immediately to consumers, failing to disclose up-front fees, failing to disclose that certain purchases could reduce a consumer’s credit limit, and misrepresenting a debt collection program as a credit card offer.

Jefferson Capital allegedly violated the FTC Act and FDCPA by misrepresenting a debt collection program as a credit card offer and using abusive collection tactics such as making debt collection calls to individual consumers more than 20 times per day, including before 8 a.m. and after 9 p.m., and on Sundays.

The Commission voted 4-0 to authorize staff to file the complaint. The complaint was filed in the U.S. District Court for the Northern District of Georgia.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. The case will be decided by the court.

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