Last week, the Washington State Attorney General filed a lawsuit against Convergent Outsourcing, Inc. for sending 75,000 “Settlement Offer” letters to Washington consumers without disclosing that the underlying debt was beyond the statute of limitations. While yet another example of Washington Attorney General Bob Ferguson’s active enforcement of the state’s debt collection laws, the Attorney General’s press release provides broader insights into how state attorneys general are scrutinizing companies and how a business can take proactive steps to mitigate regulatory scrutiny.

“Sophisticated” Companies Will Be Held to Account

While the Washington Attorney General generally warned that “[d]ebt collection companies cannot use deception as a means to get around the law,” he took specific issue with Convergent’s size and capabilities, proclaiming: “I intend to hold this large, sophisticated debt collection corporation accountable for its unlawful conduct putting profits above the law.” The press release went further to detail that Convergent is a “collection agency with approximately 700 employees and $80 million in annual revenues” that “collected on accounts of major corporations around the country.”

As such, it is important for large companies to proactively take actions that allow them to be above reproach. One way to do this is to develop purposeful relationships with regulators that afford the opportunity to openly discuss potential innovative changes to a business’s practices to obtain assurances that a particular communication or practice complies with state laws. If a company is successful in obtaining such assurances, those assurances can then be pointed to if another of the 56 state and territorial attorneys general take issue with your practices later on.

Regulators Keep an Eye on Private Actions

Often, consumer protection attorneys in state attorneys general offices are hesitant to take enforcement actions unless they know that their case may be successful, and one way to ensure this is to await a ruling from a private action.

This is exactly what occurred here. In the press release, the Washington Attorney General points out that Convergent’s settlement offer letter was declared to be infirm in September 2016 by the United States Court of Appeals for the Fifth Circuit in Daugherty v. Convergent Outsourcing, 836 F.3d 507 (2016).

The Attorney General’s utilization of this ruling, from more than five years ago, also demonstrates the persistence of state regulators and their ability to utilize tools such as tolling agreements and the fact that equitable claims often do not have a statute of limitations.

As a result, if a company is found to have violated consumer protection laws, it should take the necessary efforts to prepare for follow-on lawsuits by state Attorneys General. State regulators often will be looking to ensure that the company has changed the controversial business practice and will be considering whether restitution has already been provided to affected consumers. As such, the company will want to work proactively to demonstrate that it is independently remedying the problem to minimize the potential for regulatory action that may yield additional civil penalties.

Minimal Consumer Harm Can Still Snowball into Millions in Remedies

While the breaking news exposed by the Wall Street Journal and New York Times often leads to the establishment of nationwide, multistate actions, the lifeblood of the attorney general’s office are consumer complaints brought by a state’s citizens. It is from these individual complaints that an attorney general’s consumer protection lawyers obtain information to dig deeper into an issue to both identify legal issues with a business’s practices and determine the true scope of such a problem.

Here, despite only having “obtained three of the ‘settlement offer’ letters Convergent sent to Washington consumers,” the Attorney General suit extended to 75,466 collection letters sent to Washington consumers from January 1, 2013 to February 23, 2015. This likely means that Convergent provided this information voluntarily in response to an inquiry from the Attorney General or the State of Washington obtained this information utilizing its subpoena power.

Even though this action was spurred by the Attorney General after receiving only three “settlement offer” letters, the Washington Attorney General’s complaint demands that the court order Convergent to return all revenue it collected from the more than 3,000 Washington consumers as a result of the letters at issue, and also requests restitution nationwide (despite this demand extending beyond the scope of the Washington Attorney General’s authority). Additionally, these allegations have the potential to result in millions of dollars to the State in the form of civil penalties (up to $2,000 per violation) and related attorneys’ fees and costs.

Given the size of the hammer held by state attorneys general, it is important that companies respond quickly and appropriately to consumer complaints. If a company demonstrates a willingness to resolve a stand-alone consumer complaint, a regulator may be more prone to utilize its limited resources enforcing its laws against another company.