The Federal Trade Commission has just wrapped up a case that should send shivers down the spines of managers working in the debt-collection industry.

You know, the same shivers that many consumers get when they receive calls from intimidating bill collectors.

In 2008, a Pennsylvania-based collection company—Academy Collection Service—and its owner paid $2.25 million to settle FTC charges that its employees had violated the Fair Debt Collection Practices Act. It was the largest civil penalty ever imposed on a debt-collection business.

Recently, the FTC announced it had entered into a settlement with the two remaining individual defendants who worked at Academy. The agency accused the supervisors of participating with, or having the authority to control, collectors who allegedly misled, threatened and harassed consumers; disclosed their debts to third parties; and deposited postdated checks early, all in violation of federal law. Neither the company nor the managers admitted guilt. No one from the company returned calls for comment.

“The FTC wants to remind debt collectors of their responsibilities and obligations under the law,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection in a release announcing the settlement. “Abusive collection actions are illegal, and if debt collectors use abusive tactics they could face legal action.”

Under the terms of the FTC settlement, senior managers Albert S. Bastian and Keith L. Hurt III, who oversaw Academy’s Las Vegas collection center, were ordered to pay civil penalties of $375,000 and $300,000, respectively.

The fines have been reduced to $7,500, based on the financial situations of the managers. It’s dreadfully ironic that the managers get a big break on their debt after their company was accused of harassing debtors. I wish the larger fines hadn’t been reduced. This would have been a better example to the industry. These individuals would then understand how it feels to be a hounded debtor.

The FTC charged that Academy employees, in violation of federal law, were disclosing to consumers’ parents, children, employers, co-workers and neighbors that they had unpaid debt. Individuals also were being called on their jobs even though collectors were told that the debtors’ employers prohibited such practices.

The FTC also said that Academy was making unauthorized withdrawals from consumers’ bank accounts and that collectors threatened consumers with violence.

The company’s internal compliance program sometimes caught collectors violating the law but allowed employees with multiple violations to go unpunished, the FTC charged. Even when workers were terminated for violations, the company rehired the same collectors within a few weeks or months of their termination, the FTC complaint said.

More than 1,000 complaints against the company were filed with the FTC, various state attorneys general, and the Nevada and Pennsylvania Better Business Bureaus.

Although there are plenty of responsible debt collection firms and employees, the Government Accountability Office has called for major reform to the law that covers how companies collect debt from consumers. The rise in credit card delinquencies and charge-offs that has accompanied the current economic recession has focused new attention on the practices of creditors and third-party companies in collecting delinquent credit card debt, the GAO said in a report.

The FTC has been evaluating whether there is a need to update the Fair Debt Collection Practices Act. For example, the agency is proposing that when a debt collector contacts a consumer, the name of the original creditor and a breakdown of the debt owed, including the original principal, total interest and total fees, must be disclosed.

Under current law, if a consumer disputes a debt, the collector is required to verify only what is owed before pursuing further collection efforts.

The FTC offers a video about consumer rights at

www.youtube.com/ftcvideos

. You can also find more information at

www.ftc.gov/moneymatters

.