Debt Collection Text Messages Must Comply with the Law

blogpostpic4-24For the first time in its history, the Federal Trade Commission (“FTC”) recently initiated an action against a debt collector for its allegedly unlawful use of debt collection text messages.  Almost a month after filing its complaint in the United States District Court for the Central District of California, the FTC settled with the debt collector.  Among other provisions, the debt collector agreed to make a One Million Dollar payment to the FTC to settle its unlawful use of debt collection text message claims.  The action and settlement should be a warning to debt collectors at large that the FTC is scrutinizing their use of text messages in performing collection services.

The FTC Action

According to the complaint, National Attorney Collection Services, Inc., National Attorney Services LLC and their principal, Archie Donovan, unlawfully sent debt collection text messages to consumers that failed to identify the sender as a debt collector (and instead implicitly misrepresented to consumers, based on their names, that the corporate entities were law firms) or disclose that any information obtained would be used to collect a debt.  Instead, the FTC alleged that the text messages: 1) falsely identified the debt collector as a law firm; and 2) did not contain any of the disclaimers required by the Federal Trade Commission Act or the Fair Debt Collection Practices Act.  The complaint further alleged that in its text messages, the debt collector “threaten[ed] to take legal action against consumers – including litigation, arrest and garnishment – without the intention or ability to take the action.”  In addition, the FTC alleged that the debt collector failed to notify consumers of their right to dispute the subject debts.

The Settlement

The defendants never answered the complaint and chose instead to enter into a settlement agreement.  The defendants agreed to pay a whopping One Million Dollars to settle the action.  In addition, the defendants agreed that they would no longer use their company names or any other writing to deceive consumers into believing that they are a law firm, or anything other than debt collectors.  Furthermore, the defendants agreed to cease making any threat of legal action against consumers, in text messages or otherwise, unless the threatened actions are lawful and/or the defendants have the authority and intention to take such actions.  The defendants further agreed that they would no longer send debt collection text messages to consumers unless the defendants received prior consent to do so from the consumer.

Protect Yourself Against FTC Act and Fair Debt Collection Act Claims

The FTC has been vigorous in bringing enforcement actions against text message marketers.   (see The FTC and State Attorneys General Cracking Down,  FTC and Text Message Marketers).  With this action and settlement, it appears that the FTC will expand its enforcement actions to include debt collectors as well.

If you are interested in learning more about this topic, or if you have been served with legal process relating to the FTC Act, the Fair Debt Collection Act, the Telephone Consumer Protection Act (see New TCPA Rules Effective October 16, 2013) or CAN-SPAM Act (see Remote Images May Violate the CAN-SPAM Act), please e-mail us at or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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