Collector LTD Financial to Pay $1.4 Million to Settle FTC Charges

Houston-based collection agency LTD Financial Services yesterday agreed to pay nearly $1.4 million to settle Federal Trade Commission charges that it threatened, harassed and misled consumers.

LTD collects on about 1.25 million consumer accounts a year offering services in English and Spanish. LTD has 800 staff, operates facilities in Houston and San Antonio, Texas and is one of the 25 largest collection agencies in the country, according to its Web site. The firm primarily serves credit card issuers and retailers.

The FTC charged that collectors for LTD “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.”

Collectors allegedly harassed consumers, called them at work, disclosed the existence of debts to family members, employers, co-workers, and neighbors, “and sometimes used racial slurs and profanity,” according to the complaint. Front-line supervisors and mid-level managers either participated or were aware of such practices under their supervision but failed to impose sufficient discipline, according to the FTC. 

Tom Carter, an attorney in the FTC’s Dallas office that worked on the case, said the agency gathered close to 1,400 complaints against LTD during its investigation. Audio tapes from consumers of collection calls indicated “clearly significant violations,” said Carter.

“(LTD’s) own internal monitoring showed (agents) violated the law. They did not sufficiently discipline employees they knew violated the law,” Carter said.

LTD responded in a statement that it settled the case to avoid costly litigation and that it did not admit to any violation of any laws.

In the statement, LTD reported it was first contacted by the FTC over two and half years ago, and that it “cooperated fully and expeditiously to accommodate (the FTC’s) every request." 

The company said it was “puzzled about why we were chosen for investigation.” Its complaints had decreased by about 33 percent from 2005 to 2006 while total collection agency complaints to the FTC increased during that time. LTD said its complaints have continued to decrease, and its “complaint ratio (complaints per customer contact) is lower than most other major collection agencies.”

LTD said it has implemented inbound consumer complaint hot lines to allow consumers to speak with a compliance staffer. The firm said it enhances agent training and compliance programs every year and that this has helped make it a better partner to its clients than it was three years ago.

Under the proposed settlement, LTD will pay a $1.375 million civil penalty, and its owners, Timothy Feldman and Leonard Pruzansky, and 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.

An executive with the Houston Better Business Bureau told the Dallas Star-Telegram that LTD seemed to be doing a good job of resolving complaints and sending consumer questions back to the credit grantors. “I would say we were surprised,” said Carol Ritter, vice president of operations. “They appeared to be doing everything correctly. We’ve seen some agencies in town that were just horrendous.” 

Carter said sending a file back to a creditor doesn’t resolve the consumer’s complaint or change agent behavior. “You’ve got to stop what you are doing. If you don’t punish the collector and stop the violation you aren’t fixing the problem,” said Carter.