Officers of Debt Collection Agency to Pay $1.1 million; Banned from ARM Industry

In the last action of a long-running investigation into a network of debt collection agencies, the Federal Trade Commission said Thursday that the companies’ owner and officers will pay $1.1 million to resolve the matter and be permanently barred from the debt collection industry in the U.S.

The FTC said that the settlement resolves FTC allegations that three debt collection companies, their owner, David M. Hynes II, and the companies’ principals subjected consumers to abusive debt collection practices and deceived their small business clients.  Under the settlement, defendants will pay $700,000.

In a separate settlement, the FTC also obtained over $400,000 in judgments against three other companies that Hynes controlled, which were alleged to have received funds from the defendants’ activities.

The defendants were based in Van Nuys, Calif., but collected debts nationwide. Most of their business was operated under the name Rumson, Bolling & Associates. The FTC’s complaint alleged that the defendants used multiple illegal debt collection practices, most violations of the Fair Debt Collection Practices Act (FDCPA) and numerous other statutes.

Among other things, the FTC alleged that the defendants berated consumers with obscene and profane language, threatened them with physical harm, improperly disclosed consumers’ debts to their employers, co-workers, neighbors, and other third parties, and falsely threatened consumers with lawsuits, arrest, seizure of their property, or wage garnishment.  Several consumers reported that defendants even threatened to dig up the bodies of consumers’ deceased relatives for alleged non-payment of funeral bills.

The FTC also alleged that the defendants deceived their small business clients.  Using the slogan “no recovery, no fee,” the defendants promised that they would collect their clients’ past-due accounts on a contingency basis.  The FTC alleged that, in many cases, the defendants collected money for a client, then kept all of the money or more than they were entitled to keep.  In some cases, the defendants asked clients for additional fees, purportedly for legal expenses in filing a lawsuit that would “guarantee” the successful collection of a debt.  However, in many cases, the defendants failed to file the promised lawsuits and the clients never received any money in satisfaction of the debt.

This is not the first action the FTC has taken against the Rumson family of companies.

In March 2012, the FTC settled with two other Rumson officers, levying fines and permanently banning them from the debt collection business. The FTC had previously shut down the company in October 2011 and launched the investigation into the officers that culminated Thursday.