Stop Debt Collectors

FTC
For Release: May 13, 2004

NCO Group to Pay Largest FCRA Civil Penalty to Date
One of the nation’s largest debt collection firms will pay $1.5 million to settle Federal Trade Commission charges that it violat¬ed the Fair Credit Reporting Act (FCRA) by reporting inaccurate information about consumer accounts to credit bureaus. The civil penalty against Pennsylvania¬based NCO Group, Inc. is the largest civil penalty ever obtained in a FCRA case.

According to the FTC’s complaint, defendants NCO Group, Inc.; NCO Financial Systems, Inc.; and NCO Portfolio Management, Inc. violated Section 623(a)(5) of the FCRA, which specifies that any entity that reports information to credit bureaus about a delinquent consumer account that has been placed for collection or written off must report the actual month and year the account first became delinquent. In turn, this date is used by the credit bureaus to measure the maximum seven year reporting period the FCRA mandates. The provision helps ensure that outdated debts—debts that are beyond this seven year reporting period—do not appear on a consumer’s credit report. Violations of this provision of the FCRA are subject to civil penalties of $2,500 per violation.

The FTC charges that NCO reported accounts using later than actual delinquency dates. Reporting later than actual dates may cause negative information to remain in a consumer’s credit file beyond the seven-year reporting period permitted by the FCRA for most information. When this occurs, consumers’ credit scores may be lowered, possibly resulting in their rejection for credit or their having to pay a higher interest rate.

The proposed consent decree orders the defendants to pay civil penalties of $1.5 million and permanently bars them from reporting later-than-actual delinquency dates to credit bureaus in the future. Additionally, NCO is required to implement a program to monitor all complaints received to ensure that reporting errors are corrected quickly. The consent agreement also contains standard recordkeeping and other requirements to assist the FTC in monitoring the defendants’ compliance.

Most debt collectors are truly vicious. I suppose they also do this in order to get around not only the FCRA but also other state laws, like ones that forbid any collection activity for accounts older than a certain number of years. Yes, a consumer may still owe the debt until it is either paid or written off in bankruptcy, but collectors are forbidden to even attempt collection after a certain number of years in some states.

And if NCO Group’s shenanigans sound like an isolated incident, they’re not. Michael Weed, a former employee of the collection agency Asset Acceptance, filed a suit against that company for wrongful termination. An employee for eight years, he claims that he went to upper management to report re-aging and was subsequently terminated. In addition to his claims of re-aging, he reported the following breaches:

• “In order for a consumer to clear their name, they have to pay the debt. They made a lot of money off of this. There were 500 mistakes that I know of.
• “Asset violated disclosure laws by giving out debt information to third parties, such as relatives.
• “Asset would intentionally delay settlement of debt disputes to force debtors to pay the claim, and even if they didn’t even owe the debt, they would pay it in order to get a mortgage.”

Be forewarned, this is not an isolated incident but the modus operandi of many collection agencies.