In the first settlement of its kind, a debt collection firm recently agreed to pay $1 million in civil penalties to settle allegations that it sent illegal and deceptive text messages to borrowers.

Consumer protection advocates viewed the case with interest because it was the first time the Federal Trade Commission took action against a debt collection company over the alleged use of unlawful text messages. Unlike traditional forms of communication, the use of text messaging for commercial purposes has been relatively unregulated, making it an attractive tool for marketers and scam operators.

Debt collectors posed as lawyers, FTC says

According to the complaint, the debt collector operated under the names National Attorney Services and National Attorney Collection Services, creating the impression that it was a law firm staffed by lawyers. In fact, however, it was not. Using this guise, the companies allegedly used text messages, phone calls and postal mail to threaten borrowers with lawsuits and imprisonment if they failed to make payments on their debts.

The FTC claimed that the companies violated federal consumer protection laws by failing to identify themselves as debt collectors in these communications, and by failing to inform recipients of their right to dispute the debt. In addition, the FTC accused the companies of violating debt collection laws by contacting third parties such as friends, coworkers and relatives of borrowers in their efforts to collect payment. Consumer protection laws prohibit debt collectors from contacting third parties unless it is done in an attempt to identify a borrower’s location.

The debt collector sent more than 1 million text messages to borrowers over a period of 18 months, the FTC complaint alleged. Many of these texts read "It is URGENT for you to call National Attorney Services regarding a very sensitive matter." The messages also included the borrower’s name and a fake case number. The terms of the recent settlement require the company to discontinue its use of improper text messages and pay a civil penalty of $1 million.

Using bankruptcy to eliminate debt and stop creditor harassment

When debts become unmanageable, harassment from creditors and bill collectors can turn a bad situation worse. In some cases, people who are behind on their payments and unable to catch up can find relief through bankruptcy. Depending on a number of factors, including the borrower’s individual circumstances and the type of bankruptcy involved, people who file for bankruptcy may be able to have some or all of their debts discharged, giving them an opportunity to make a fresh financial start.

Another benefit of bankruptcy for many borrowers struggling with creditor harassment is a legal tool called an automatic stay, which prevents creditors from contacting the borrower to seek payment while the bankruptcy case is pending. To learn more about bankruptcy and its potential benefits if you or a loved one is struggling with debt, contact a knowledgeable bankruptcy lawyer in your area.