Justice Department Settles Case Against One of Nation’s Largest Debt Buyers
WASHINGTON – Asset Acceptance LLC, a Michigan-based debt buyer, has agreed to a consent decree to settle a civil lawsuit regarding its debt collection activities, the Justice Department announced today. In the decree, Asset agrees to implement a range of new practices to protect consumers and to pay a $2.5 million civil penalty. Asset specializes in purchasing old consumer debts from other companies, and then holding and collecting on these debts over a long period of time. According to the complaint, as of Sept. 30, 2010, Asset held more than 34 million individual accounts with an original value of more than $42 billion, making it one of the nation’s largest debt buyers and a market leader.
If accepted by the court, the proposed consent decree, filed today in the U.S. District Court for the Middle District of Florida in Tampa, will settle charges alleging that Asset violated the Federal Trade Commission Act, the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. The complaint bringing these civil charges was also filed today.
According to the complaint, many of the debts Asset purchased are outside of the statute of limitations and consumers have no enforceable legal obligation to pay that debt. In some states, consumers can reset the statute of limitations if they promise to pay the debt or make a partial payment on the debt. Asset is alleged to have collected on this so-called “zombie” debt without informing consumers that these debts were not legally enforceable, or that in making a partial payment or promise to pay, they may have unwittingly breathed life back into these debts.
The complaint also charges additional violations of federal consumer protection laws, including that Asset systematically failed to conduct a reasonable investigation when a consumer told the company that a debt Asset called about was not the consumer’s debt, that the debt had already been paid or that the consumer had been the victim of identity theft. Similarly, when learning of a consumer dispute from a consumer reporting agency, the company is alleged to have systematically failed to conduct a reasonable investigation of the dispute. Asset also allegedly reported negative information about consumers to credit bureaus, even when the company was aware that a consumer had not received a written notice of that fact because the notice was returned as undelivered mail. According to the complaint, some of these consumers would only learn that Asset had reported them to a credit bureau when applying for a mortgage or auto loan. Even if they believed the debt was invalid, some consumers would pay Asset to avoid losing out on a new loan they needed to get quickly.
The complaint further charges that Asset repeatedly called the wrong person when attempting to collect on a debt, even after being told that the company had reached the wrong number.
“Debt collectors can play a legitimate role in our economy, but only if they follow the law,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “As this resolution demonstrates, those who do not deal fairly and honestly with consumers will be held accountable. The consent decree we are filing today – which requires Asset Acceptance to pay a stiff penalty and change the way it does business – can serve as a model for the entire debt collection industry.”
Under the terms of the settlement, when Asset attempts to collect a debt that may be beyond the statute of limitations, the company must inform the consumer that he or she will not be sued on the debt; further, the company must remind consumers of this promise in any situation where the consumer is likely to have forgotten the disclosure or its effects.
The settlement also requires other changes to Asset’s business practices that create safeguards for consumers. For example, the company must conduct a reasonable investigation into the legitimacy of a debt when it becomes aware of a consumer dispute or if the company who sold a debt to Asset provided unreliable information about the original debt. The company can no longer consider undelivered mail to constitute notice that information about a consumer is being reported to a credit reporting agency or repeatedly contact third parties in a way that violates the Fair Debt Collection Practices Act.
“We are proud to announce this landmark consumer protection settlement in an area that is of great concern to our residents and to this office,” stated Robert E. O'Neill, U.S. Attorney for the Middle District of Florida. “We hope that this consent decree will have the added benefit of deterring other debt collectors from engaging in the sharp practices that we are addressing here.”
The Department of Justice’s Consumer Protection Branch and the U.S. Attorney for the Middle District of Florida filed the complaint and proposed consent decree on behalf of the Federal Trade Commission (FTC), which investigated the violations and referred the case to the Department of Justice. The agreed civil penalty is the second-largest ever in an FTC debt collection case and should deter other debt buyers and debt collectors from engaging in similar misleading practices as those alleged in the complaint.
This matter was investigated by Tracy S. Thorleifson and Julie Mayer of the FTC. The case is being prosecuted by Adrienne Fowler and Sang Lee of the Justice Department’s Consumer Protection Branch.
NOTE: The stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated orders have the full force of law only when signed by the judge.
IF YOU HAVE QUESTIONS, PLEASE CALL THE DEPARTMENT OF JUSTICE OFFICE OF PUBLIC AFFAIRS AT 202-514-2007.