FTC, U.S. District Court Shutter West Coast Debt Collection Operation

The Federal Trade Commission has charged two individuals and seven companies operating under the name Rincon Debt Management with illegal debt collection activities. Based on a request from the FTC, a U.S. district court has issued an order to stop the illegal conduct, freeze the operation’s assets, and appoint a temporary receiver to take over the defendants’ business while the Commission proceeds with its case.

According to a release by the FTC, Rincon Debt Management is alleged to have deceived and abused consumers – making bogus threats that consumers had been sued or could be arrested over debts they often did not owe. The FTC asserts that since March 2009, the defendants have been unjustly enriched by at least $9.4 million, according to court documents.

The FTC complaint alleges that the defendants targeted both English- and Spanish-speaking consumers.  The defendants called consumers and their employers, family, friends, and neighbors, posing as process servers seeking to deliver legal papers that purportedly related to a lawsuit.  In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls.  The defendants also posed as attorneys or employees of a law office, and demanded that consumers pay “court costs” and “legal fees.”  However, according to the FTC, the debt collectors making calls to consumers were not actually process servers, attorneys, or their employees, and the defendants did not file lawsuits against consumers.  In addition, in many instances, consumers did not even owe the debt the defendants were trying to collect.

The FTC charged that the defendants’ false and misleading claims that they were process servers or attorneys who had filed – or were about to file – a lawsuit against a consumer violated the FTC Act.  In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:

• improperly contacting third parties about consumers’ debts;
• failing to disclose the name of the company they represented, or the fact that they were attempting to collect on a debt, during telephone calls to consumers;
• misrepresenting the existence of a debt, the amount, and other facts about the debt; and
• failing to notify consumers of their right to dispute and obtain verification of their debts.

The Commission vote authorizing the staff to file the complaint was 4-0.  The FTC filed the complaint and request for a temporary restraining order in the U.S. District Court for the Central District of California on October 11, 2011.  On the same day, the court granted the FTC’s request.

The complaint names as defendants Jason R. Begley; Wayne W. Lunsford; Rincon Management Services, LLC; Prime West Management Recovery, LLC; Pacific Management Recovery, LLC; City Investment Services, LLC; Global Filing Services, LLC; National Filing Services, LLC; and Union Management Services, LLC.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law.