Despite criticism, debt collector keeps expanding

A Horsham firm that Merrill Lynch & Co. once dubbed "the Wal-Mart of debt collection" has continued to expand, with help from Wall Street investors, despite running afoul of consumer-protection laws.

NCO Financial Systems of Horsham last year combined with other outsourced-collection and customer-contact firms controlled by a JPMorgan Chase & Co. investment fund into a holding company called Expert Global Solutions, based in Plano, Texas. Expert Global claims $2 billion in yearly revenue, databases that track consumers' purchases and contact information, and 42,000 workers at 120 call centers in the United States, the Philippines, India, Canada, Barbados, and Panama.

The combined company is the largest debt collector in the world, according to the Federal Trade Commission. Expert Global says 200 of the Fortune 500 companies are its clients. NCO employs 400 in Horsham, spokesman Tom Hoy says.

The group was nailed by the FTC with the highest fine it has ever levied against a debt collector earlier this month.

The FTC's complaint alleged that Expert Global, NCO, and affiliates ALW Sourcing and Transworld Systems "call persons repeatedly or continuously with the intent to annoy, harass or abuse," tell borrowers' bosses and others that they aren't paying their bills, keep calling even when the consumers they target insist they have paid or don't owe the money, don't verify that the supposedly delinquent borrowers listed by their corporate clients really do owe, and use "false, deceptive or misleading" collection tactics - all in violation of federal consumer protection laws. The company agreed to pay a $3.2 million penalty and said it had improved its collection procedures.

The settlement followed a deal last year with Ohio and 18 other states in which NCO agreed to set aside more than $1 million to refund consumers who were browbeaten into paying debts they did not actually owe, and to pay for complaint investigations.

In 2006, NCO settled charges by Pennsylvania Attorney General Tom Corbett, now the state's governor, that the company used "false, deceptive or misleading" tactics to collect for its clients, which included hospitals, banks, phone, cable TV, and utility giants. NCO paid Pennsylvania $300,000 and promised not to break consumer laws again.

In 2004, NCO paid the previous record FTC debt-collection fine - $1.5 million - for delaying reports on when consumers fell behind on their loans, damaging their credit records for years after debts were settled. That complaint was filed in federal court in Philadelphia by then-U.S. Attorney, now U.S. Rep. Patrick Meehan (R., Pa.). NCO promised to comply with consumer laws.

Asked about the FTC's most recent fine and settlement against Expert Global, spokesman Hoy sent a statement saying the company had "already implemented systems and procedures to help address their areas of concern" and to "ensure compliance and fair treatment of consumers."

He also called the FTC's complaint a "legacy issue" about past practices before its recent reorganization.

NCO expanded rapidly in the 1990s under Michael Barrist, a Havertown native and Drexel University accounting graduate. Barrist and his team took NCO public in 1996, and joined JPMorgan's One Equity investment group in leading a $1.26 billion buyout 10 years later. JPMorgan doesn't use NCO or its affiliates to collect from its own customers, bank spokesman Paul Hardwick said.

Buyout firms hope to cut costs, boost earnings, and sell at a profit. But NCO reported losses in the years following its buyout. In 2011 the company said Barrist's board "terminated" him as chief executive, paid him $3.4 million in severance, and replaced him with Ronald A. Rittenmeier, former chief executive of Electronic Data Systems Corp. Yet Barrist remained chairman of NCO's board, and one of the company's largest individual shareholders, after One Equity, Citigroup, and other institutions.

Barrist's term as chairman ended last year, around the time the company reorganized and won new financing that helped raise its credit ratings above low junk-bond levels.

Barrist and other NCO veterans now run Ambler-based debt collector Radius Global Solutions. In a May statement announcing the venture, Barrist promised "to not just reenter the industry but to transform it" using new communications technologies to reach consumers.

He and other ex-NCO officials declined to discuss the FTC's findings about practices their old company says took place on their watch. "Since Michael and I are no longer with NCO Group it would be inappropriate for us to comment," said Paul Weitzel, a Radius official and spokesman.