FTC: Debt Collectors Used Lies, Threats And Insults To Get People To Pay Up

"Look, I am trying to help your company. This matter is serious and will cause problems at the job."

That's allegedy what employees at Rincon Debt Management, a debt collection company based in Corona, California, were supposed to say when they were trying to get money out of someone.

Except sometimes, according to a complaint filed by the Federal Trade Commission, the person they were trying to put pressure on didn't owe any money at all.

Rincon, along with six other California companies, is a defendant in a formal complaint filed earlier this month by the FTC. On Wednesday, a U.S. district court halted activity at all seven companies and had their assets temporarily frozen.

The seven companies all appear to be the same group operating under different names, according to Tom Syta, assistant regional director for the FTC's western region. The complaint identifies two men, Jason Begley and Wayne Lunsford, who appear to have been leading the operation. But no matter what the group was calling itself, the FTC alleges, it was breaking the law.

The complaint accuses Rincon employees of falsely claiming that they were process servers or calling on behalf of attorneys; falsely claiming that litigation was underway against the person they were trying to reach; and falsely claiming that the so-called debtor might be arrested or have their property seized if they didn't pay back their debt -- all methods that are illegal.

Some of the people Rincon was targeting didn't actually owe money to anyone. They'd paid their debts back, the FTC says, or they'd never owed money in the first place. But sometimes, these people were so intimidated by the false-pretense calls that they would write Rincon a check anyway.

"People who felt like they didn't owe the money would pay it to get rid of that problem," said Tom Syta, assistant regional director for the FTC's western region.

All in all, the FTC claims, Rincon and the other defendants took in about $9.4 million over the course of 18 months.

The economic downturn has generated an unending flow of business for the debt collection industry, as more and more people struggle to pay their bills in a climate of high unemployment and flat wages. The collection industry employs almost 450,000 people, and is expected to grow by as much as 26 percent in the next three years.

At the same time, the slumping economy means that collectors are increasingly unable to wring money out of debtors, either because they're reluctant to part with it in lean times or because they simply don't have it. And some collectors resort to illegal tactics -- like calling at all hours of the night, using profanity and threats, and lying about the amount of the debt -- in order to strong-arm debtors into sending them cash.

Syta told The Huffington Post that Rincon, like many collection agencies, felt they were "dealing with guys who owe money, and they can do what they need to do to collect. And that's just not the case."

According to the FTC complaint, employees at Rincon worked from a script. Once Rincon had a target picked out -- say they were going after John Q. Everyman -- there were a few different approaches they could take.

A Rincon worker might call up John's office and talk to his boss. Reading from a script, the Rincon caller would try to convince John's boss that John was in legal trouble -- about to be served with court papers, in fact, unless he paid up the money he owed.

Or the Rincon caller might try one of John's friends or relatives. Again, Rincon would try to convince the other person that John would be dragged into court over his debts unless he called them back to discuss repayment.

If the person on the other end of the line balked, Rincon's callers were supposed to press the issue. If a caller reached John's wife, for example, and she said she was driving a car, the caller was instructed to tell her, "I suggest you pull over. This is time-sensitive."

Syta said Rincon's callers broke the law by misrepresenting themselves, and by intimating that debtors could be arrested if they didn't pay up.

"Maybe there was a debt collector over there who didn't use the scripts that were distributed," Syta told HuffPost. "[But] the consumers that we talked to all had a very consistent story."

Since April 2008, the FTC and the Better Business Bureau have received a combined 270 statements about Rincon and the other companies, from people all around the country.

The FTC is now going through the companies' records, preparing a second, more detailed brief to be filed on November 1. The companies will then have a chance to file an opposition brief, and perhaps defend their actions, on November 3.

Last month, a court order halted activity at another debt collection company that was also the subject of an FTC complaint. That group, known as Rumson, Bolling & Associates, is alleged to have insulted and threatened debtors, calling them names like "asshole," "white trash," "scumbag" and "goatfucker."

In one case, the complaint alleges, a caller from Rumson, Bolling contacted a woman who was unable to pay back the cost of her daughter's funeral. The caller threatened to dig up the woman's daughter and hang her from a tree if she did not pay her debt, according to the complaint.

Syta said that when it comes to debt collection, scams and illegal practices are incredibly common.

"The debt collection world is the number one industry that the FTC gets complaints about," he said. "More than we get about travel scams or Internet scams or telemarketing."

Information about how to deal with debt and guard against scammers is available at the FTC's Money Matters Web site. Further information about what debt collectors are and aren't allowed to do can be found at the FTC's Consumer Protection page.