The Original is Available Here: http://bit.ly/x8QorK
BY DAVID SHEPARDSON
JANUARY 31, 2012
DETROIT NEWS WASHINGTON BUREAU
Washington —The Justice Department said a Michigan-based debt collector has agreed to pay a $2.5 million civil penalty and make sweeping changes designed to protect consumers.
Warren-based Asset Acceptance LLC, one of the largest purchasers of old debts in the United States, was accused by the government of a host of improper activities regarding its collection of old debts.
Asset is alleged to have collected on “zombie” debts without informing consumers that these debts were not legally enforceable. In making a partial payment or promise to pay, consumers might have unwittingly breathed life back into these debts, the government said.
“This is the netherworld of credit — zombie debt — that if companiescan bring just a little bit of it to life, (it) can turn out to be real profit,” said Peter Henning, a law professor at Wayne State University and former Securities and Exchange Commission attorney. “Companies are going to use tactics that go to the edge of the law. And they are taking advantage of people’s ignorance.”
In some states, consumers reset the statute of limitations if they promise to pay the debt or make a partial payment.
“Most consumers do not know their legal rights with respect to collection of old debts past the statute of limitations,” said David Vladeck, director of the Federal Trade Commission’s Bureau of Consumer Protection.
The government also said Asset failed to investigate claims made by consumers that they didn’t owe debts.
The settlement will end an investigation launched by the FTC in February 2006.
The company specializes in purchasing old consumer debts from other companies, such as credit card companies, health clubs, and telecommunications and utilities providers, as well as other debt buyers, and attempts to collect them.
Asset Acceptance has purchased tens of millions of consumer accounts for pennies on the dollar, the FTC said. These were typically accounts at least a year delinquent or more.
As of Sept. 30, 2010, Asset held more than 34 million individual accounts with an original value of more than $42 billion. Asset purchased the debt for just 2.54 percent of the face value.
Asset’s parent company — Asset Acceptance Capital Corp. — said the deal resolves the FTC investigation without an admission of wrongdoing by the company.
“This agreement gives consumers even more visibility into how we will work with them and sets new standards for the industry. We are pleased to have this matter behind us,” said Rion Needs, Asset’s president and CEO. “As we have already implemented many of the requirements of the consent decree, we now welcome the opportunity to work with the FTC to make these measures the new standards in debt collection.”
The Justice Department also said Asset systematically failed to conduct a reasonable investigation when a consumer told the company that a debt the company called about was not the consumer’s debt, that the debt had already been paid or that the consumer had been the victim of identity theft.
Asset also allegedly reported negative information about consumers to credit bureaus, even when the company was aware that a consumer had not received a written notice of that fact because the notice was returned as undelivered mail, the Justice Department said. Some consumers learned that Asset had reported them to a credit bureau when applying for a mortgage or auto loan, the FTC said.
Even if they believed the debt was invalid, some consumers would pay Asset to avoid losing out on a new loan they needed to get quickly.
The Justice Department charges that Asset repeatedly called the wrong person when attempting to collect on a debt, even after being told that the company had reached the wrong number.
“Debt collectors can play a legitimate role in our economy, but only if they follow the law,” said Tony West, assistant attorney general for the civil division at the Justice Department. “As this resolution demonstrates, those who do not deal fairly and honestly with consumers will be held accountable.”
The settlement also requires other changes to Asset’s business practices that create safeguards for consumers.
Asset must now conduct a reasonable investigation into the legitimacy of a debt when it becomes aware of a consumer dispute or if the company that sold a debt to Asset provided unreliable information about the original debt.
The proposed consent decree, filed Monday in the U.S. District Court for the Middle District of Florida in Tampa, will settle charges alleging that Asset violated the Federal Trade Commission Act, the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.
A federal judge must still approve the deal.