WASHINGTON — A Van Nuys debt collection operation and the people who ran it agreed to pay $1.1 million to settle federal allegations that they improperly bullied consumers to get them to pay overdue bills and deceived clients about fees.
The settlement ends a case in which a federal judge in Los Angeles found the defendants liable for $33.8 million in fines and penalties. The defendants, however, had no more money to pay the judgment, the Federal Trade Commission said Thursday.
The deal, stemming from a 2011 case against Forensic Case Management Services Inc., owner David M. Hynes II and other officers, permanently bars the operators from the debt collection business.
The case was part of an FTC crackdown on abusive debt-collection practices, especially as the sluggish recovery from the Great Recession pushed more consumers into debt.
Employees of the company, which did business as Rumson, Bolling & Associates, among other names, violated federal law by berating and threatening people in pursuit of old debts and improperly disclosing information about those debts to employers, co-workers and others, the FTC said.
"Several consumers reported that defendants even threatened to dig up the bodies of consumers' deceased relatives for alleged nonpayment of funeral bills," the agency said.
The company also allegedly deceived its clients, reneging on a "no recovery, no fee" pledge in its collection of old debts. In many cases, the company kept more of the money it collected than it was entitled to, and in some instances added fees, the FTC said.
In 2011, a federal judge halted the company's operations.
Under the settlement, Forensic Case Management, Specialized Recovery Inc. and Commercial Receivables Acquisition Inc., along with Hynes and former executive Lorena Quiroz-Hynes, will be required to pay $700,000 because they cannot afford to pay the rest, the FTC said.
Two others connected to the companies, James S. Hynes and Heather True, agreed to smaller judgments that were suspended because of their inability to pay.
None of them admitted any wrongdoing, said their attorney, Christopher L. Pitet of Newport Beach.
"From Day One, we have denied doing anything wrong," Pitet said. "We had extensive training and policies in place to prevent abusive debt-collection practices, and to the extent any employees engaged in those practices … it was against company policy."
In a separate settlement, three companies controlled by David Hynes — Vesper Collins, Ramillies, both of Sherman Oaks, and Innsbruck — agreed to pay $403,487. The companies weren't involved in the alleged debt-collection violations, but profited from them, the FTC said.