Debtors Beware: the FTC Finds that Debt Collection Text Messages Go Too Far

October 24, 2013

Thursday, October 24, 2013, by Keta Desai
The Federal Trade Commission (“FTC”) has reached a settlement in its first action against a debt collector for attempting to collect debts in an unlawful way through the use of text messages. The FTC brought suit against Archie Donovan and his two debt collecting agencies. The defendant companies collect debts on behalf of companies which provide loan services to Spanish-speaking consumers. The FTC alleged that the defendant debt collectors’ use of text messaging and phone calls in both English and Spanish was unlawful because it violated the Fair Debt Collection Practices Act by failing to disclose that the messages and calls were coming from debt collectors. The FTC’s complaint further stated that the defendant debt collectors also violated the Federal Debt Collection Practices Act (“FDCPA”) by sending messages not only to the debtors, but also to third parties including the debtors’ family members, friends, co-workers, and even strangers. These text messages misrepresented that the text messages and phone calls were being sent by attorneys and that failure to pay the debt could result in imprisonment, lawsuits, and wage seizure.

“…not saying enough to the debtor, and saying too much to third parties.”

Due to the advances in mobile technology, “snail mail” and land lines have become outdated forms of communication; this posed a problem for debt collectors whose traditional method of reaching consumers was through letters and phone calls to their homes. Thus, collectors began to utilize text messaging as a new form of communication which would allow them to have instant contact with their debtors. However, this new method proved unsuccessful as the FTC found that the defendant debt collectors’ new tactic, specifically the “manner or transmission, and the wording of texts”, violated the FBDCPA. As expressed by Anita Ramasastry, the defendants found themselves in trouble by “both not saying enough to the debtor, and saying too much to third parties.”
The FDCPA requires debt collection agencies to identify their purpose and that any gathered information from communication would be used for such purpose. It also required that debtors have their privacy protected, especially if the communication was likely to be seen, heard, or sent to third parties; accordingly, the nature and details of the debt were not to be revealed without making the collector liable.  A colorful example of debt collectors’ violations is the use of cartoon picture upon the envelopes containing letters mailed to debtors which depicted a “large arm shaking money from someone who is being held upside down.” This choice of “stationary” publicly revealed the letter’s debt-related content – a disclosure which is legally prohibited.
The settlement between the FTC and Donovan resulted in a one million dollar penalty, a requirement that the debt collecting companies would cease to attempt communications with debtors via text messages without first obtaining express consent, and a guarantee misrepresentations of being law firms and false threats to sue would no longer be made. While this case is viewed as a step in the right direction, reservations exist that the use of debt collection text messages will always hold some level of increased risk and liability.