US v. Central Adjustment Bureau, Inc.

• Decision Date: 28 October 1986
• Docket Number: No. CA 3-80-1671-R.,CA 3-80-1671-R.
• Parties: UNITED STATES of America, Plaintiff, v. CENTRAL ADJUSTMENT BUREAU, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

667 F. Supp. 370

UNITED STATES of America, Plaintiff, v. CENTRAL ADJUSTMENT BUREAU, INC., et al., Defendants.

No. CA 3-80-1671-R.

United States District Court, N.D. Texas, Dallas Division.

October 28, 1986.

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Raymond W. Phillipps, Randy S. Chartash, Consumer Affairs Section, Antitrust Div., U.S. Dept. of Justice, John F. LeFevre, Div. of Credit Practices, Bureau of Consumer Protection, Federal Trade Comn, Washington, D.C., for plaintiff.

Alan J. Hostetter, Claude P. Wilson, Jr., George Carrison Potts, Golden, Potts, Boeckman & Wilson, Dallas, Tex., for defendants.

MEMORANDUM OPINION

BUCHMEYER, District Judge.

This opinion concerns serious violations of almost every prohibition in the Fair Debt Collection Practices Act, 15 U.S.C. § 1692.¹ It constitutes this Court's findings of fact and conclusions of law under Rule 52(a), Fed.R.Civ.P.

I. Introduction

The government charges that the defendant, Central Adjustment Bureau, Inc. ("CAB"), has consistently and repeatedly violated the Fair Debt Collections Practices Act, 15 U.S.C. § 1692. The defendant denies these charges.

Two trials were held. The first was limited to evidence concerning the defendant's headquarters and its regional collection office in Dallas. The second was limited to the six regional collection offices discussed in Appendix A to this opinion.

At the request of the defendant, which complained bitterly about the expense of this litigation, the government's discovery — and, thus, its evidence at the two trials — was limited to the defendant's headquarters and to a representative number of the defendant's 26 regional collection offices. And, also at the instance of the defendant, the number of depositions which the government was permitted to take in each region was limited. See, e.g., Appendix B, 412. However, again at the defendant's request, this Court denied the government's motion to resolve this matter "on the papers" before the second trial — because it was necessary for this Court to judge the credibility of the witnesses (primarily debtors, present employees of the defendant, and ex-Central Adjustment Bureau employees), who gave dramatically conflicting testimony.

In making the credibility findings concerning the witnesses whose testimony was presented at both trials — which are recited in Appendix A (387-398) and in Appendix B (403-408). This Court considered all of the circumstances under which the witness testified: the demeanor of the witness in court or as revealed in the deposition; whether the witness had some personal interest in the outcome of the case; whether the testimony was inconsistent, or whether it was supported or contradicted by other credible evidence; whether the witness was impeached concerning some material matter.²

This Court has not automatically credited the witnesses for the government and discredited those of the defendant. Indeed, at the first trial, several of the witnesses for both parties were discredited (Appendix A, 403-408). However, at the second trial, the government's choice of witnesses was obviously affected by the Court's credibility choices at the first trial; accordingly, Appendix A credits the testimony of more government witnesses, and discredits the testimony of more of the defendant's witnesses, than was done in after the first trial (as reflected in Appendix B).

This opinion incorporates the stipulations of facts presented by the parties at both trials. It also includes (i) as Appendix A, the credibility findings concerning the evidence at the second trial; and (ii) as Appendix B, the oral findings of fact and conclusions of law (and credibility choices) delivered in open court after the conclusion of the first trial.

II. Applicable Legal Standard

Under the Fair Debt Collection Practices Act, the test is not whether "a reasonable consumer" would be deceived, misled or harrassed by the prohibited practices—because the Act is intended to protect "unsophisticated consumers." Therefore, this Court must look not only at the "reasonable consumer," but also to a less sophisticated consumer in determining whether the debt collection practices act has a tendency or capacity to deceive. Jeter v. Credit Bureau, 760 F.2d 1168, 1172-73 (11th Cir.1985); Baker v. G.C. Services, 677 F.2d 775, 778 (9th Cir.1982).³ See also Bingham v. Collection Bureau, Inc., 505 F.Supp. 864, 870 (N.D.Dak.1981); Wright v. Credit Bureau of Georgia, Inc., 548 F.Supp. 591, 599 (N.D.Ga.1982), reconsidered, 555 F.Supp. 1005, 1007 (N.D.Ga.1983); Rutyna v. Collections Accounts Terminal, Inc., 478 F.Supp. 980, 982 (N.D.Ill. 1979). Contra Blackwell v. Professional Business Services of Georgia, 526 F.Supp. 535, 537-538 (N.D.Ga.1981).

III. Telephone Violations

The government did prove by a preponderance of the evidence the use of "abusive, deceptive and unfair debt collection practices" by the defendant and many of its debt collectors (including some of the supervisors and managers in the defendant's regional collection offices).⁴ This evidence, which is summarized in Appendix A (offices besides Dallas) and in Appendix B (Dallas office), shows that the defendant has — as alleged by the government—engaged "in consistent and widespread abuse of consumers in direct violation of the Fair Debt Collection Practices Act." Specifically, the defendant CAB and its debt collectors in various regional offices consistently and repeatedly violated the Fair Debt Collections Practices Act:

... by making telephone calls to debtors at inconvenient times, before 8:00 a.m. and after 9:00 p.m. § 805(a)(1);⁵

... by making calls to the debtor's place of employment after being told not to do so by the debtor or the employer § 805(a)(3);⁶

... by contacting third parties about the debt without the consent of the debtor § 805(b) and § 804;

... by making harrassing and abusive telephone calls to debtors and relatives, including the use of racial slurs,⁷ belligerent threats, and terms like "liar, deadbeat, crook," etc. § 806;

... by using obscene and profane language in collection calls, including the terms "god-damn liar, low-down son of a bitch, shit, the judge doesn't give a fuck about your complaint,⁸ hell, shit, and asshole" § 806(2);

... by making repeated phone calls to debtors, as many as 4-5 calls or more to the same debtor in a single day § 806(5);

... by making false representations designed to make the debtor believe that the caller was an attorney § 807(3);

... by making false representations that the debtor would be arrested or jailed, or that the debtor's property would be seized or garnished to pay the debt § 807(4);

... by threatening to sue or take other action which was not intended because the CAB clients had not authorized the filing of any lawsuit § 807(5);⁹

... by falsely representing that the debtors were guilty of crimes and would go to jail because debts were not paid § 807(7);

... by using false and deceptive means to collect debts § 807(10), such as defrauding a debtor's mother by convincing her that the daughter's college grades would be revoked — and her degree would be cancelled — if the mother did not immediately pay a $400 debt owed to a college. (Appendix A, 393);

... by soliciting post-dated checks with the purpose of threatening criminal prosecution § 808(3); and

... by failing to validate the accuracy of the claim or by continuing collection efforts after receiving written notice that the debt had been paid or was disputed § 809.¹⁰

More particularly, the evidence summarized in Appendix A and Appendix B — including the testimony of debtors and of ex-employees of the defendant, and the exhibits — established the following violations of the Fair Debt Collection Practices Act:

§ 805(a)(1) — Inconvenient Calls: violations in the Atlanta, Boston, Richmond and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 405 and 407).

§ 805(a)(3) — Calls to Place of Employment: violations as to Atlanta, Louisville, Boston, Richmond and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 404-405).

§ 805(b) — Communications With Third Parties: violations as to Atlanta, Louisville, Boston, Richmond and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 404-405).

§ 804 — Location Information: violations as to Atlanta, Louisville, Boston, Richmond and Seattle offices (see Appendix A under sections titled "§ 805(b) — Communications With Third Parties"); violations as to Dallas office (Appendix B, 404-405).

§ 806 — Harrassment or Abuse: violations as to Atlanta, Louisville, Boston, Richmond, and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 404-405, 406, 407).

§ 806(2) — Obscene or Profane Language: violations as to Atlanta, Louisville, Boston, Richmond and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 403-404, 406-407).

§ 806(5) — Repeated or Continuous Telephone Calls: violations as to Atlanta, Louisville, Boston, Richmond and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 405, 407).

§ 807(3) — Representation As An Attorney: violations as to Atlanta, Louisville, Richmond and Seattle offices (see Appendix A); no violations found as to Dallas office (Appendix B, 406-407).

§ 807(4) — Threat of Arrest or Imprisonment or Garnishment: violations as to Atlanta, Louisville, Boston, Richmond and Seattle offices (see Appendix A); no violations as to Dallas office (Appendix B, 406-407).

§ 807(5) — Threat to Take Unintended Action: violations as to Atlanta, Louisville, Boston, Richmond, Seattle and Cleveland offices (see Appendix A); violations as to Dallas office (Appendix B, 404-405, 405-406).

§ 807(7) — Representations of Debtor Crime: violations as to Louisville, Boston, Richmond and Seattle offices (see Appendix A); violations as to Dallas office (Appendix B, 404).

§ 807(10) — Deceptive

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