United States District Court, W.D. North Carolina, Charlotte Division
C. MULLEN UNITED STATES DISTRICT JUDGE.
MATTER is before the Court on the Motion to Strike
(Doc. No. 35) filed by on January 12, 2018 by Plaintiff
Federal Trade Commission. Defendants filed a response on
January 26, 2018. Plaintiff filed a reply on February 1,
2018, and Defendants filed a surreply on February 15, 2018.
For the following reasons, Plaintiff's Motion is granted
in part, denied in part.
ACDI Group, LLC (“ACDI”) is a North Carolina
limited liability corporation registered, owned, and
controlled by Defendant Anthony Swatsworth
(“Swatsworth”). Defendant Solutions to
Portfolios, LLC (“STP”) is a North Carolina
limited liability corporation also registered, owned, and
controlled by Swatsworth. ACDI is a debt purchasing company,
and STP is a debt collection company. During the relevant
time period, the two businesses operated from the same
address. STP collected upon all debts acquired by ACDI, and
STP has also collected upon debts owned by two other
entities. The finances of the two companies completely
overlapped during the 2014 year.
2014, Swatsworth negotiated a purchase of debt portfolios
through Craig Manseth of United Debt Holdings
(“UDH”). Swatsworth had worked with Manseth and
UDH in the past. Manseth brokered a purchase of past-due
payday loans from SQ Capital, LLC (“SQ Capital”).
Swatsworth knew that SQ Capital was owned by Joel Tucker, and
Swatsworth told Manseth that he had heard bad things about
Tucker. Manseth urged Swatsworth to sample the portfolio and
told him that everything would be “Okay.”
Swatsworth stated that ACDI was “one of the guinea pigs
to sample it and purchase it.” On July 24, 2014, ACDI
purchased the portfolio, containing approximately 2, 335
purported past-due payday loans, from SQ Capital for $24,
812.25. The aggregate unpaid balance of the purported debts
in the file was $992, 490. The contract identified the seller
as SQ Capital and the original lender as
Swatsworth did not receive a bill of sale from the original
lender, but he testified that it is the customary practice in
the industry for brokers, such as UDH, to not normally
provide bills of sale from the original lender.
began contacting consumers to collect on the purported debts
on July 28, 2014. Immediately, Defendants experienced issues
with multiple accounts. Each day, two or more purported
borrowers disputed the debts and provided documentary
evidence that they had repaid the loans or had never taken
out a loan. Defendants collected this information and
provided it to UDH. Defendants continued to contact purported
borrowers from the portfolio until August 15, 2014, when
Manseth sent Swatsworth an email directing him to stop
contacting individuals from the portfolio. The email stated:
“Anthony- Shut whole file down. Keep what you've
collected and futures. Tylor will refund on Tuesday.”
Defendants retained the payments they had received from
non-disputed accounts, but ceased contacting individuals from
the portfolio. Defendants also received and retained
forty-five additional payments after August 15, 2014 from
individuals that they had contacted before Manseth instructed
them to shut the file down. The last payment Defendants
received was on May 29, 2015. Defendants also received a
complete refund of the amount paid for the portfolio from SQ
Capital by September 2014. All told, Defendants collected
$30, 397.29 from the 500FastCash portfolio in addition to the
full refund of the purchase price.
loan information contained in the 500FastCash portfolio that
Defendants purchased was falsified. 500FastCash is a
registered trademark of Red Cedar Services, Inc. (“Red
Cedar”), which had engaged AMG Services, Inc.
(“AMG”) as the exclusive servicer for 500FastCash
loans during the relevant time period. Further, the loan
information in the portfolio does not match any recorded
customer information from actual 500FastCash reports.
to a subpoena issued during the FTC's investigation of
the 500FastCash portfolio, the FTC took Swatsworth's
testimony on September 23, 2015. Swatsworth testified about
the actions of Tucker, SQ Capital, and UDH. The FTC informed
Defendants that they were also under investigation for their
debt collection practices in March 2017.
filed its complaint in this matter on June 22, 2017, alleging
that Defendants violated: (1) Section 5(a) of the FTC Act, 15
U.S.C. § 45(a), which prohibits “unfair or
deceptive acts or practices in or affecting commerce;”
and (2) Section 807(2)(A) of the FDCPA, 15 U.S.C. §
1692e, which prohibits a debt collector from using “any
false, deceptive, or misleading representation or means in
connection with the collection of any debt.” The
Complaint seeks a preliminary injunction, a permanent
injunction to prevent future FTC Act violations by
Defendants, equitable monetary relief, and costs.
in their answer, asserted seven affirmative defenses: (1)
waiver, (2) estoppel, (3) bona fide error, (4) condition of
mind defense, (5) compliance with FTC, (6) lack of requisite
intent, and (7) lack of knowledge.
in this matter was set to close on November 1, 2017. In their
pre-discovery disclosures, Defendants identified Swatsworth
as the only individual that they would use to support their
claims or defenses. On August 11, the FTC specifically
requested that Defendants produce “[c]all scripts used
in the collection of consumer debt, ”
“[c]ompliance policies and training materials used in
the collection of consumer debt, ” and “[a]ll
documents related to consumer complaints.” The FTC also
requested that Defendants “[i]dentify all personnel
tasked with legal compliance regarding consumer debt
collection, including but not limited to compliance with the
FDCPA.” In response, Defendants produced a 132-page
“STP Group Compliance Policies and Procedures”
document, one page of a telephone call script for answering
machines or voice mail for STP, and a PDF document of
consumer complaints and the responses to those complaints.
Defendants listed Swatsworth as the only individual tasked
with legal compliance regarding consumer debt collection.
After multiple requests, Defendants also provided a list of
approximately 100 employees who worked for Defendants in 2014
and 2015. And following this Court's Order granting the
FTC's motion to compel, Defendants produced contact
information for those employees on November 22, 2017.
November 16, 2017, the FTC filed a motion for summary
judgment. After receiving an extension of time, Defendants
responded on December 22, 2017. The FTC now moves to strike
seven exhibits that Defendants attached to its December 22,
2017 response to FTC's motion for summary judgment. The