FTC Sues Debt Collection Agency Over Legal Threats and Other Practices

The Federal Trade Commission said Wednesday that on its behalf, the Justice Department filed a lawsuit in federal court against a Texas-based debt collection operation and its current and former principals for illegally threatening consumers with false claims that unless they pay a debt, they will face legal action or wage garnishment.

The FTC’s complaint charges Commercial Recovery Systems, Inc. (CRS), its president, Timothy Ford, and its former vice president, David Devany, with violating the FTC Act and the Fair Debt Collection Practices Act (FDCPA) by using deceptive methods to collect debts. CRS has been collecting consumer debts nationwide since 1994. The company collects third-party debt, including credit card and auto loan debt.

According to the complaint, since at least 2010, CRS’s debt collectors have deceptively told consumers that unless they pay a debt CRS claims they owe, a debt collection lawsuit will be filed against them. In some cases, consumers are told that such a case has already been filed and will lead to adverse consequences unless the debt is paid.

“When it comes to debt collection, people have rights,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It’s illegal to harass people, or to make false threats about wage garnishment or lawsuits. Unfortunately, these unscrupulous debt collectors systematically lied to the people they called.”

In addition, the FTC alleges that in many cases, when CRS calls consumers to collect on a debt, its representatives falsely claim or imply that they are lawyers or are calling on behalf of a lawyer, or that they are judicial employees. The complaint alleges in other cases, CRS falsely tells consumers that they will garnish their wages, levy their bank accounts, or seize their property unless they pay the debt. In truth, CRS lacks the authority and intent to take any of these actions.

“The defendants in this case are alleged to have lied to consumers in violation of the law,” said DOJ’s Acting Assistant Attorney General for the Civil Division, Joyce R. Branda. “We will enforce these laws and stop those who would use deception to extract money from American consumers.”

In its lawsuit, the FTC is seeking an injunction to stop the allegedly illegal conduct and civil penalties.