It was a telephone call Allen Jones would never forget. “This is your mother******* wake-up call, you little lazy a*** b****. Get your mother******* n***** ass up and go pick some mother******* cotton fields.” The Lewisville resident, who is black, received as many as eight such voicemail messages in August 2007, all of which were laced with expletives and racial slurs. One threatened sexual violence against Jones’ wife, and another promised to “get into the sheets” with her and “show her what a real man is like.”

The callers were employees of Berwyn, Pa.-based Advanced Call Center Technologies, a debt-collection firm with a call center in Harlingen, and the genesis for the harassment was an alleged $81 debt on a Bank of America credit card—a debt Jones contends was already paid.

Seeking vindication, Jones filed a lawsuit in the 193rd Judicial District Court in Dallas County in 2008 against Advanced Call Center Technologies and two of its former employees, Carlos Oliva and Alonso Rodriguez, who made the profane, abusive phone calls. The lawsuit alleged violations of the Texas consumer protection laws governing debt-collection practices, invasion of privacy, intentional infliction of emotional distress, deceptive trade practices, and—against ACCT only—negligent hiring and supervision of one of the two employees.

After two efforts at settling the case through mediation failed, the case went to trial in late May. That it went all the way to trial came as something of a surprise to Jones’ attorneys, given the egregious conduct of the debt collectors. “I was amazed,” says Mark Frenkel of Dallas’ Frenkel & Frenkel.  “I would not have made the same decision,” adds Dean Malone of Dallas’ Law Offices of Dean Malone P.C. (Full disclosure: I have represented aggrieved consumers and defended debt-collection companies in litigation, and in 2008, I defended a debt-collection practices case against Dean Malone, which settled within several months.)

During the two-week jury trial, Malone and Frenkel presented a series of witnesses, each seemingly more damning than the previous one. They played videotaped depositions of four former ACCT employees (they were not parties to the litigation), who testified about a workplace gone wild, where debt collectors got high, made fun of debtors while they were on hold, and derisively referred to black debtors as “crows.”

The jury heard the testimony of Geoffrey Burke, a Virginia consumer who had also been on the receiving end of offensive telephone calls from ACCT. Burke, who’d lost his mother in a car accident, testified how one of the company’s debt collectors accused him of being a “little punk” who was “in bed with your mother and your sister and your cousin” while calling about a Bank of America balance that wasn’t his. (Burke recovered around $30,000 in a separate lawsuit against ACCT.) Frenkel, who heard a juror audibly gasp during Burke’s testimony, says such witnesses demonstrated that ACCT would “dehumanize anybody.”

It only got worse for the defense when Carlos Oliva, who initially denied making the offensive statements and said he wanted to clear his name, later testified that it was hard for him to shed his prison mentality while working for ACCT. Oliva had been in prison for stretches totaling about six years for a variety of drug offenses, a DWI, and an assault, and he applied for a job at ACCT within months of his release. According to Malone, Oliva maintained that he had a meeting with an ACCT manager after the company learned of his criminal history and that, despite this, he was kept on the job. (Calls to attorney Dean Siotos of Dallas’ Henslee Schwartz, who defended ACCT and Alonso Rodriguez, and Lee Cameron of the Dallas office of Wilson Elser, who defended Oliva, were not returned.) While neither Oliva nor Rodriguez are still employed with ACCT, Malone is quick to point out that there was “no evidence that either defendant was terminated as a result of the allegations or the lawsuit itself.”

Whether it was the witnesses’ testimony, or listening to the vulgar and racially offensive phone calls (made as early as 6:30 a.m. and as late as 10:30 p.m.), something struck a chord with the jury of seven whites and five blacks. Even without any evidence of economic damages, they found in Jones’ favor against all three defendants, awarding $50,000 for mental anguish, $143,000 in attorney’s fees, and a whopping $1.5 million in additional damages. While Texas law allows punitive damages for egregious conduct, it imposes caps on how much can be awarded and requires that a jury be unanimous in awarding them; here, the jury was split 10-2. But because the Deceptive Trade Practices Act allows a jury to treble the amount of actual damages where a defendant’s conduct has been knowing and willful, the verdict would remain substantial enough—so much so that just a few weeks after the verdict, both sides had apparently reached a confidential settlement. According to Malone, “My client is happy with the resolution,” and the case will not be appealed.

The verdict ignited a media firestorm and sent shock waves through the debt-collection industry. A story that aired on WFAA-TV (Channel 8) has become a YouTube sensation, and Malone and Frenkel have fielded interview requests from newspapers across the United States, CNN Headline News, and even a radio station in Ireland. A story by a national television-news magazine soon may be in the works as well, Jones’ attorneys say. And it hasn’t been bad for business, either. Both Malone and Frenkel emphasize consumer law as a big part of their respective practices, and the phones have been ringing off the hook for each lawyer since the verdict—not only from prospective clients, but also from lawyers nationwide seeking advice. Frenkel and Malone are willing to help and, in the interests of improving the industry’s practices, Frenkel even says, “If a debt-collection company wanted me to come speak, I’d be happy to.”

Companies might want to listen. In 2009, 8,287 federal lawsuits were filed nationally claiming violations of the Fair Debt Collection Practices Act, a federal law that regulates the practices of third-party debt collectors. That represents a roughly 60 percent increase over the previous year, according to WebRecon, a site that tracks collection-related litigation. It’s a figure likely to remain on the rise, with nearly 5,000 FDCPA suits filed in the first half of 2010 alone, according to WebRecon.

More and More Complaints

The Federal Trade Commission, which has enforcement responsibility over FDCPA violations (consumers are also able to seek relief by suing in federal or state courts), reports receiving 88,190 consumer complaints about third-party debt collectors in 2009—an increase of nearly 10,000 from the year before. Overall, the FTC says, it receives more complaints about the debt-collection industry than any other.

How pervasive a problem is debt-collection abuse? That depends on whom you ask. Malone says the problem is “very widespread” and that he is seeing “a more abusive collector of late—appearing at places of employment, consumers harassed based on false assertions, etc.” He contends that “the economy is driving a great deal of that.” Frenkel agrees, noting that “as the middle class disappears, you’re going to see more abusive debt-collection practices.”  Steven R. Dunn, a veteran consumer attorney with Dallas’ The Dunn Law Firm who mainly defends debt collectors, acknowledges that debt-collection suits are on the rise but attributes this partly to the ambiguous wording of the FDCPA. Many cases, he points out, “involve a very minor violation” of the statute itself but can also feature a disproportionate amount of attorney’s fees that can be “the biggest stumbling block to settlement.” Of the Jones case, Dunn says, “It is extremely rare to have collectors engaging in conduct as egregious as this.”

Rare or not, the verdict against ACCT and its former employees presents some “teachable moments” not only for the various collection agencies in North Texas, but also for the many companies here and elsewhere that use such third-party collectors. (Various car financing, credit card, and home mortgage lenders have creditor call centers in North Texas, and payday lenders such as ACE Cash Express and Cash America also call Dallas-Fort Worth home.) As Malone points out, if a company hires outside debt collectors, it can be liable under Texas law if it knew or should have known of the collection agency’s abusive practices or if it exercises certain controls over how the collection agency does its work. Malone recommends that companies vet such third-party collectors by asking for “three or four references,” contacting the Texas Attorney General’s Office to see if any complaints have been made against the agency, and by searching the federal courts database (called PACER) to check whether judgments have been entered against the collection firm.

Malone and defense attorney Steven Dunn agree that the Jones case underscores the need for companies to be careful about their hiring practices, too. “Agencies will look at this as a lightning rod to revisit their hiring practices and the supervision of their collectors, as well as their training methods,” Dunn says. Malone adds that, because debt collectors are given access to sensitive information about individuals, “companies need to be careful about their policy on hiring, and they need to be consistent in enforcing that policy. A jury shouldn’t view upper-level management as asleep at the wheel.”

Good advice, to be sure. But what did Bank of America—the company that hired ACCT to pursue the alleged debt in the first place—learn from this experience? Does it still have ACCT collectors calling consumers over unpaid balances even in the wake of such outrageous conduct? We don’t know for sure because, according to Bank of America spokesperson Diane Wagner, the bank doesn’t discuss “our vendor relationships.”

John G. Browning is a partner at the law firm of Thompson Coe Cousins & Irons in Dallas and an award-winning legal journalist.