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

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.