On April 7, the United States District Court for the Eastern District of Texas granted the government’s motion for summary judgment against a Texas-based third party debt collector, Commercial Recovery Systems, Inc. (“CRS”) and its president, Timothy Ford.
As previously reported, the Department of Justice, on behalf of the Federal Trade Commission, filed a complaint against CRS and its current and former principals for alleged violations of the Fair Debt Collection Practices Act (“FDCPA”) and the Federal Trade Commission Act (“FTCA”), claiming that the company used illegal debt collection tactics.
The district court found that CRS and Ford violated the FDCPA and FTCA in four specific ways. First, Defendants’ collectors falsely represented that they were attorneys, or were employed by an attorney, law firm, or court. Second, Defendants’ collectors routinely threatened consumers with legal action, although Defendants never filed any lawsuits nor intended to file any lawsuits against the debtors with whom they communicated. Third, Defendants routinely misrepresented to consumers that nonpayment would result in seizure, garnishment, or property attachment proceedings. Finally, the collectors misrepresented that the debts were already taken to judgment or were already the subject of active litigation.
The Court concluded that “[t]he summary judgment record is clear and it is uncontroverted that CRS 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.” Because CRS has declared bankruptcy, the DOJ did not seek civil penalties from the company. However, the Court found that Ford, who had the authority to control the company’s collection practices, was liable for civil penalties for FDCPA violations by CRS. The Court additionally held that injunctive relief against both Defendants was appropriate.