Text-Messaging Debt Collector Hit With $1 Million Fine for Posing as Law Firm

Harassing text messages aren't just for scorned lovers anymore. At least one debt collection agency has been using texts to go after indebted consumers -- and the government says that those texts broke the law.

The Federal Trade Commission regularly sues debt collectors for illegal collection practices, but for the first time it's gone after a debt collector for chasing consumers with text messages. National Attorney Collection Services, Inc. and National Attorney Services LLC, which are both based in Glendale, Calif., and owned by Archie Donovan, have agreed to pay $1 million in the case.

It's not actually illegal to use text messaging to collect on outstanding debts. The big issue here is the name: Not only did the debt collectors fail to disclose they were calling from a debt collection firm, the companies' names gave the false impression that they were law firms. And according to the FTC, collectors represented themselves as attorneys or legal assistants in their text messages and phone calls.

The collectors also broke the law by revealing people's debts to their friends, family and co-workers -- specifically, by using envelopes with a cartoon of a man having his pockets shaken out by Uncle Sam. To protect consumers' privacy, debt collectors aren't supposed to reveal on their envelopes that there is a collection notice enclosed.

In a blog post amusingly titled "DONT VIOL8 FDCPA. K? THX," the FTC said that the debt collectors also directly disclosed debts to family members in phone calls and texts. Trying to shame consumers like that is a big violation of the Fair Debt Collection Practices Act.

In addition to the $1 million fine, the companies will have to cease any debt collection practices that violate the FDCPA, including changing the names of the businesses so as to stop giving the impression that they are lawyers.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.