Home > 2014 > Managing Debt

The True Story of a Debt Collector That Can’t Pay Its Own Debt

Advertiser Disclosure Comments 1 Comment

The Federal Trade Commission has ordered a Houston-based debt collector to pay a $4 million penalty for allegedly using false and deceptive collection practices, which cost consumers more than $1.3 million in unfair fees.

The company can’t pay the penalty.

So what happens when the debt collector can’t pay its own debts? According to the ruling, RTB Enterprises (which also operates as Allied Data Corp.) and its owner, Raymond T. Blair, must forfeit assets totaling $100,000 to partially suspend the judgment. Blair would be ordered pay the full $4 million if he failed to turn over his assets, which include a luxury mobile home.

The Cost of Unlawful Collections

It seems like a small price for a company that is said to have sucked $1.3 million from debtors by claiming transaction and convenience fees were inevitable, in addition to falsely claiming to speak for attorneys who would sue debtors if they didn’t pay. The FTC also alleges collectors deceived consumers in order to acquire their personal information.

Apparently, collectors were trained to tell consumers that payments were not accepted if sent by mail, so they could not avoid the fees associated with taking payments by phone. In some cases, the fees were added to consumers’ accounts without their knowledge, the complaint says. Perhaps most striking about this order from the FTC: The company will be allowed to continue its operations, as long as it ends its illegal practices and complies with the judgment suspension.

Mark Schiffman, vice president of the collection association ACA International, said via email he couldn’t comment on specifics of the litigation, but a collector’s capacity to stay in business following such severe accusations relies on a few requirements going forward: the ability to retain clients, get proper licensing in its state and get business insurance and bonding required by state law.

“We don’t condone bad behavior and feel strongly that businesses caught breaking the law should be held accountable,” Schiffman said.

How to Handle Debt Collectors

Dealing with a collection account can be very stressful for consumers, but in spite of the pressure they may feel, people need to know their rights in such situations. Debt collectors are not inherently deceptive or mean-spirited, but in the event you encounter someone who is breaking the rules, you’ll want to know how to protect yourself.

Debt collectors are not allowed to lie to consumers (which is what seems to have happened in this case), and there are many other rules by which third-party collectors much abide. Here are 10 rights you should be aware of if a collector contacts you.

Paying a collection account doesn’t remove the negative trade line from your credit report, but it should prevent the debt from changing hands and potentially causing you more financial stress. A collection account will hurt your credit score, but only temporarily. As the account ages off your report, it will have less of an impact on your credit standing, which you can track for free through Credit.com.

More on Identity Theft:

Image: Wavebreak Media

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Sid

    Its funny how Journalist try to make a story more then what it is. She mentions that the owner of the collection company has a “Luxury Mobile Home”. Trying to portray that these owners of the company have money. I have never heard of a luxury mobile home. What is it worth $50K???

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team