On October 22, 2010, Allied Interstate agreed to pay a fine totaling $ 1,750,000 to settle the FTC’s allegations that Allied violated the FDCPA while attempting to collect accounts from consumers during 2006 through 2008. The $ 1,750,000 fine is the second largest that a debt collector has agreed to pay the FTC.

After investigating Allied Interstate for a year, the FTC filed a lawsuit against Allied. (The FTC’s lawsuit seeking fines and an injunction against Allied Interstate is summarized in a previous post.) The FTC alleged that Allied Interstate frequently called the people who did not owe the account and continued to call them even after the person they called disputed even owing the debt. The FTC also alleged that Allied Interstate often continued to call people seeking information about how to locate the consumer to people who did not know how to contact Allied’s target and that Allied Interstate continued to call these people even after Allied Interstate should have known to quit calling.

The FTC’s complaint also accused Allied Interstate of frequently calling consumers so frequently that the calls amounted to harassment.

Besides paying a substantial fine, Allied Interstate agreed to take corrective action intended to assure compliance with the Fair Debt Collection Practices Act.

The Consent Decree between Allied Interstate and the FTC requires Allied Interstate to enhance its procedures whenever (1) a consumer disputes that she or he owes the debt or the amount of the debt; or (2) a reasonable person would consider the information that Allied Interstate is relying on to try to collect the debt to be implausible, facially unreliable, or missing essential information. In either of these circumstances, Allied Interstate must either close the account and cease its efforts to collect the account or suspend collection until it has conducted a reasonable investigation and verified that its information about the debt is accurate and complete. If Allied Interstate is unable to substantiate that the consumer owes the debt, the Consent Decree prohibits Allied Interstate from from selling the debt or assigning it to any other debt collector (or debt buyer) other than returning the account to the company that assigned the account to Allied.

The Consent Decree also prohibits Allied Interstate from :

(1) making false statements to collect a debt or obtain information about a consumer;

(2) making claims that a debt is owed or about the amount without a reasonable basis;

(3) asking a third party for a consumer’s location information more than once without that third party’s consent or a reasonable belief that the person’s earlier response was wrong or incomplete and that the person now has correct location information;

(4) communicating with third parties about a consumer’s debt without the consumer’s consent or court permission;

(5) using obscene or profane language;

(6) harassing consumers with repeated phone calls;

(7) making any other false or misleading statement in collecting a debt, including threatening action it does not intend to take; and

(8) violating the Fair Debt Collection Practices Act.

Allied Interstate did not admit any wrongdoing in the settlement.

According to the Minneapolis StarTribune, Allied Interstate released a statement which pointed out that wrong numbers have been recognized as an ‘industry issue’ for several years. Allied Interstate added that it has developed statistical methods to reduce such errors and now relies on a new system to better identify consumers’ phone numbers. “We have already seen a dramatic reduction in complaints as a result of the new system” said Robert Burke, a vice president of iQor Inc. (Allied Interstate’s parent company).

It appears that Allied Interstate is promising to improve or even fix the “predictive dialer” technology that powers the annoying robo-dialers used by almost every collection agency.

Even assuming that Allied Interstate’s improved robo-dialer system achieves compliance so that Allied Interstate no longer calls consumers or even the wrong person repetitively, the allegations in the FTC’s complaint indicate that Allied Interstate may need to also focus on its employees who call consumers.

The FTC alleged that : (1) Allied Interstate often disclosed that the caller was attempting to collect a debt to people other than consumers or their spouse including co-workers, neighbors, and non-spousal family members; and (2) Allied Interstate’s collectors often used abusive language during telephone conversations with consumers. Both of these allegations, if true, indicate problems which are caused by the human element and not merely the phone system or robo-dialer.

The FTC seldom files enforcement actions against debt collectors. In the past decade, the FTC filed 21 lawsuits against debt collectors including 11 cases during the past five years.

The FTC is focusing its investigatory and litigation resources on larger debt collectors (such as Allied Interstate). Allied Interstate, based in St. Louis Park, MN, has 12 offices in the United States, Canada, India, and the Philippines. The FTC hopes that by focusing on large collection agencies such as Allied Interstate, it will deter smaller debt collectors who engage in the same practices.

Given the limitations in the FTC’s budget, the FTC staff faces a big challenge just to try to assure that the large debt collectors substantially comply with the FDCPA.

Fortunately, Congress recognized that the problems created by illegal debt collection are pervasive and allowed consumers and their lawyers to prosecute private lawsuits as well. I am proud to represent Florida consumers who want to protect their rights against over reaching debt collectors.

(C) 2010 Donald E. Petersen
Orlando, FL
All rights reserved.