A consumer victory over sleazy debt collectors

About $4 million worth of checks are now in the mail to partially compensate thousands of consumers who lost money to a group of sleazy Southern California debt collectors.

According to the Federal Trade Commission, the checks close the book on a settlement reached last year with Asset and Capital Management Group, a debt-collection firm that purchased people’s financial obligations from creditors for pennies on the dollar.

The company’s leaders then “falsely threatened consumers with lawsuits, wage garnishment, seizure of their property and arrest, and disclosed debts to consumers’ employers, colleagues and family members,” the FTC said.

The case serves as a good reminder that consumers have rights when it comes to debt collection and that you shouldn’t hesitate to contact authorities if a collector plays rough. I’ll share some tips in a moment.

“Consumers shouldn’t be subjected to threats and intimidation,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “We’re pleased that victims of this scheme will be getting money back from the defendants.”

The debt collectors were identified by the agency as Thai Han, Jim Tran Phelps, Keith Hua and James Novella. Along with having about $4 million worth of personal assets seized to compensate victims, the four have been banned for life from the debt-collection industry.

The FTC’s complaint said the men operated more than a dozen debt-collection firms and a variety of shell companies that received proceeds from the firms’ activities.

The companies identified themselves to consumers with assorted acronyms, the FTC said, “creating a virtual alphabet soup of business names and an elaborate corporate structure that has no apparent legitimate business rationale.”

The group used “boiler room” calling centers in Orange and Riverside counties to contact consumers and inform them that lawsuits were being filed against them. “Dire consequences” were threatened if consumers didn’t come across with some money, the FTC said.

In reality, the agency said, no lawsuits against consumers were ever filed.

In a particularly insidious move, the collectors would turn up the heat on potential victims by contacting their employers or family members with bogus claims of being process servers attempting to deliver legal papers, according to the complaint.

As many as 95,000 people fell victim to the racket, officials said.

I tried and failed to reach the four defendants in the case. I wanted to ask how they could prey on thousands of people who were dealing with the aftermath of the worst economic downturn since the Great Depression.

I also was keen to ask about the terms of the FTC settlement, which included the defendants’ turning over to authorities a Mercedes, a BMW, a Cadillac and an Aston Martin, along with the title to a $2-million home and other property.

Who knew debt collection could be so lucrative?

For consumers, the important thing to remember is that you’re not alone out there. You’re protected by the Fair Debt Collection Practices Act.

The federal law limits when and how debt collectors can contact you. For instance, they can’t call early in the morning or late at night — unless you say it’s OK. And they can’t call you at work if you tell them to stop.

A debt collector always has to disclose his or her identity and can’t pretend to be someone they’re not — like, say, a process server scaring the bejeepers out of your boss.

Speaking of which, a debt collector can’t inform anyone else about money you may owe. They can only get in touch with others to obtain your contact information.

Above all, a debt collector can’t threaten or harass you.

“There are lots of cases where debt collectors don’t comply with this aspect of the law,” said April Kuehnhoff, a staff attorney with the National Consumer Law Center. “You should report such treatment to the Consumer Financial Protection Bureau or the FTC.”

Keep this in mind: You may owe $1,000, say, but a debt collector probably paid just a fraction of that amount for the right to chase after you.

For that reason, many collectors will settle for less than the full amount owed. Don’t be shy about negotiating.

If the debt’s already been paid off, or if a collector has you confused with someone else, inform them in writing that you don’t owe any money and don’t want to be contacted again. This often will be enough to get a collector to turn his attention elsewhere.

And one last thing: Most consumer debt, including credit card debt, has a statute of limitations. A collector can come after you after the time period is up and can even try to sue you, but you can have the case thrown out of court.

In California, the statute of limitations for most debt is four years. Bankrate.com has a good chart showing the time limits in other states.

Oh, and if you see a debt collector pull up in an Aston Martin — James Bond’s car — run for cover. He’s probably up to no good.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.