HOUSTON (CN) - A federal judge froze the assets of a group of third-party debt collectors that regulators have accused of using "scare tactics" to collect on payday loans.
Two weeks ago, the the Federal Trade Commission sought a permanent injunction against several debt collectors that it said had violated the Federal Trade Commission Act and the Fair Debt Collection Practices Act.
The defendants are: Goldman Schwartz Inc. dba Goldman, Schwartz, Lieberman & Stein; Debtcom Inc. dba Cole, Tanner & Wright; Harris County Check Recovery Inc.; The G. Wright Group Inc. dba The Wright Group; Gerald Wright aka Barry Schwartz; Starlette Foster aka Star Foster; and Jennifer Zamora.
"Defendants collect debts for numerous payday loan companies, including Ace Cash Express, Advance America, Allied Cash Advance, Checkmate, First Cash Advance, and MoneyMart," according to the FTC complaint, which had been sealed through Jan. 18.
The FTC said the debt collectors threaten individuals with arrest and legal action, disclose debts to third parties, misrepresent the amount allegedly owed, collect unauthorized fees, harass and abuse borrowers, fail to provide required notices, and hide their identities.
"Defendants' collectors frequently use scare tactics to convince customers to pay," its complaint said. "Collectors routinely claim defendants are a law office, law firm, or a litigation firm. These statements are false, yet occur on a daily basis."
The FTC added: "Defendants' collectors routinely claim to be affiliated with, or working in conjunction with, government agencies or entities. For example, defendants' collectors identified themselves as 'detectives of the court,' claimed to work 'in conjunction with the Houston District Attorney's Office,' and claimed to work 'hand-in-hand' with local sheriff's offices, police departments, and a district attorney's office's hot check division. There is no organization named the Houston District Attorney's Office, and defendants are not affiliated with the Harris County District Attorney's Office in Houston, Texas.
"Defendants' collectors routinely accuse customers of committing crimes, call consumers 'criminals,' and tell consumers whose checks are returned due to insufficient funds that they 'stole money' or committed felony 'check fraud.' Yet, under most states' laws, including Texas, drafting a post-dated check later returned for non-sufficient funds is not a crime, absent independent proof of intent not to cover the check."
The complaint also details the abuse and harassment in which the defendants allegedly deal.
"Some of defendants' collectors and managers, including Zamora, use abusive language when collecting debts, such as calling female consumers 'b*tch' or telling consumers they 'need to make this f***ing payment,'" the FTC said. "Defendants' collectors sometimes call consumers repeatedly with the intent to annoy, abuse or harass, such as immediately calling consumers back after they ended the previous call."
U.S. District Judge Gray Miller granted the FTC a preliminary injunction with asset freeze, debt collection ban and appointment of permanent receiver on Monday.
The order says that the debt collectors must also disable their websites.
As of Wednesday and Thursday, goldmanschwartz.com and harriscountycheckrecovery.com both display only a notice of the lawsuit and link to the FTC's site.
The FTC is represented by lead attorney Thomas Carter in the Southern District of Texas.
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