A Texas federal district court has entered a $2 million civil penalty judgment against the former president of a debt collection company for alleged violations of the FDCPA and FTC Act. The judgment follows the court’s finding in a prior order that $2 million was a “reasonable and appropriate penalty for [the president’s] violations of the Fair Debt Collection Practices Act.” The company and former president had previously been banned by the court from “participating in debt collection activities” and “advertising, marketing, promoting, offering for sale, selling, or buying any consumer or commercial debt or any consumer information relating to a debt.”
In January 2015, the DOJ, on behalf of the FTC, had filed a complaint against the company and its former president and vice president alleging that the defendants had engaged in various practices in violation of the FDCPA and FTC Act, including impersonating attorneys and attorneys’ staff and falsely threatening consumers with litigation or wage garnishment. In April 2016, the court entered summary judgment against the company and former president, stating “the summary judgment record is clear and uncontroverted that [the company] is a debt collector covered by the FDCPA and that its collectors have committed numerous violations of the FDCPA and Section 5 of the FTC Act.” With regard to the company’s president, the court found that as president and sole owner of the company, he had actual or implied knowledge of the FDCPA violations because he “not only played a role in formulating the policies and practices that resulted in the violative acts, but in fact actually set the policies of his company. As President, he had the authority to fire or otherwise discipline his employees for employing deceptive debt collection activities.” In September 2016, the court entered a stipulated order permanently banning the company’s former vice president from participating in debt collection activities and activities related to the sale or purchase of consumer or commercial debts or debt-related consumer information. The order also imposed a $496,000 civil penalty judgment that was suspended except for $10,000 based on inability to pay.)
In its order finding $2 million to be an appropriate penalty, the court noted that the FTC Act authorizes a penalty of up to $40,000 for each act that violates the FDCPA “with actual or implied knowledge of the FDCPA” and that the “maximum theoretical penalty for the estimated 109,634 violations exceeds $4 billion.” The court stated that the FTC had established the defendant’s lack of good faith through his admissions that the company had no formal FDCPA training program and that he had hired “abusive collection managers and refused to fire them if they were effective.” The court also noted his awareness of consumer complaints and that he “he had the ultimate authority over the collection managers and the collectors.”