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Debt Collector Pays $1.3 Million to Settle FTC Charges

LTD Financial Services abused, misled consumers

November 7, 2007

According to an FTC complaint, collectors for LTD Financial Services, L.P., which collects on about 1.25 million consumer accounts per year, violated the FTC Act and the Fair Debt Collection Practices Act by falsely threatening or implying that LTD would garnish consumers’ wages, seize or attach their property, or initiate lawsuits or criminal actions against them if they failed to pay.

“Debt collectors who get complaints from consumers should not only take notice, but also take action,” said Lydia B. Parnes, Director of the FTC’s Bureau of Consumer Protection. “The message from this case is clear: Either comply with the law or face stiff penalties.”

LTD collectors, who collect in English and Spanish, allegedly called consumers at their place of work despite knowing it was inconvenient for them to receive calls there, and disclosed the existence of debts to family members, employers, co-workers, and neighbors.

They also are accused of harassing consumers and using abusive tactics such as immediately calling back after consumers hung up on them, and sometimes using racial slurs and profanity.

According to the complaint, some front-line supervisors and mid-level managers either participated or were aware of such practices under their supervision but failed to do anything.

Hundreds of consumer complaints against LTD are filed with the FTC, the Houston Better Business Bureau (BBB), various state attorneys general, and the company itself, the FTC’s complaint states, noting that LTD’s response to complaints “is cavalier at best,” that complaints from attorneys general and the BBB alleging egregious law violations frequently are dismissed without significant investigation, and that collectors often go unpunished or merely receive a warning.

The complaint also contends that LTD’s internal compliance program regularly catches collectors violating federal law, but even multiple egregious violations often go without serious punishment, and that senior managers either turn a blind eye to the unlawful acts or fail to exercise the supervision necessary to recognize the problems.

Under the proposed settlement, LTD will pay a $1.375 million civil penalty. In addition, LTD and its owners, Timothy Feldman and Leonard Pruzansky, and its top managers, John Brewster and Derrek Davis, are permanently prohibited from misrepresenting to consumers that nonpayment of a debt will result in garnishment of wages, seizure or attachment of property, or lawsuits.

They also are permanently barred from using false, deceptive, or misleading representations in connection with the collection of any debt, communicating with a consumer at any unusual time or place, including their place of employment, or harassing, oppressing, or abusing any person.

The settlement requires the defendants to disclose clearly and conspicuously to consumers that they may stop the company from contacting them about the debt, and to notify consumers that they may contact a special LTD physical address, e-mail address, or toll-free phone number if they have a complaint about the way the company is collecting the debt.

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