With times getting tougher, Greeda Greenshade at ShortCircuit City noticed that her customers were paying their invoices much later. So, Greeda hired an outside firm StrongArm Collectors to collect the aging receivables. ShortCircuit did get a little concerned, however, when one of its best customers Delia Dish called to complain about StrongArm’s collectors who left a voicemail –

This message is for the deadbeat Delia. If you think that you could rip these merchants off, not pay your bills, and hide behind your telephone, I guess you’ll just have to explain to the judge why you stole from this merchant, ShortCircuit City. At this moment, we do not have any intentions of working this matter out with you voluntarily. You may need to turn yourself in to the local county sheriff’s office.

Delia reported that she was told if she did not pay, her children would “watch their mother being taken away in handcuffs,” and they would “be bringing their mommy care packages in prison.” StrongArm’s caller dialed Delia 17 times in 10 minutes using abusive language, referring to her as a “deadbeat,” “retard,” “thief,” and “idiot.” Later a collection letter on the letterhead of the law firm Dewey, Cheatum & Howe, advised Delia that the law firm would consider taking criminal or civil action against Delia. However, the law firm neither signed nor sent the letters. In fact, the law firm had no idea that StrongArm was even sending them. Finally, StrongArm called Delia’s 64-year old mother. Fearing that Delia would be arrested and carted off to jail, Delia’s mother paid StrongArm’s demand plus its additional charges, in full.

Does StrongArm Collectors have a problem?

As a debt collector, StrongArm has a problem. It repeatedly violated the Fair Debt Collection Practices Act because it was just the collector, did not originate the debt, and it

• used abusive language and called Delia repeatedly
• falsely represented that communications came from an attorney
• falsely represented that Delia would be arrested or imprisoned, or had committed a crime, and falsely threatened legal action
• communicated with someone else about the details of Delia’s debt
• added impermissible additional charges to the debts collected

Does ShortCircuit City have a problem? Maybe. One of the penalties that can be assessed against StrongArm is cancellation of the debt. That would end ShortCircuit’s ability to collect anything from Delia.

Litigation Tips of the Month. If you use a bill collection company, know their tactics as well as their claimed successes. Obviously those businesses who hire collection agencies are trying to avoid the “hard” cost of dollars not collected; however, there is also the potential of a “soft” cost from lost customers if unethical collection methods are employed. Delia Dish, recently a great customer, who might appear to be a deadbeat today may again become one of ShortCircuit City’s best customers tomorrow.

If StrongArm calls, the customer Delia should have asked for proof that it “owns” the debt or has authority to collect it, and that the amount of the debt is correct. If Delia disputed the debt in writing, StrongArm must stop all collection efforts within 30 days until it proves its authority to collect and the correct amount to be collected.

See Federal Trade commission v. Check Investors, Inc,; Check enforcement; Jaredco, Inc.; Barry S. Sussman; Elizabeth M. Sussman; Charles T. Hutchins, Case No. 05-3957, decided by the US Court of Appeals for the Third Circuit Nos. 05-3558/3957, which upheld the district court’s order for injunctive relief and $10.2 million in fines awarded to the Federal Trade Commission.  And, see Household Credit Services, Inc. v. Driscol, 989 S.W.2d 72 (Tex. App. – El Paso 1998), and the Texas Debt Collection Act, Texas Finance Code 392.206.