Robocalling Phantom Debt Collector Accused Of Harassing, Defrauding Consumers

People hate debt collectors, perhaps as much as, if not more than, they despise robocalls from telemarketers. And phantom debt collectors — those who attempt to collect debts that aren’t owed to them, if at all — are among the worst of the bunch. So when you combine the automated recorded messages of robocalls with the incessant harassment of phantom debt collectors, you create a particularly loathsome Frankenstein’s monster.

The Consumer Financial Protection Bureau has filed suit [PDF] in a federal court in Georgia against several related debt collection operations, their principals, payment processors, and the telemarketing firm that allegedly aided them in their scheme.

The complaint alleges that the collectors — using companies named Universal Debt & Payment Solutions; Universal Debt Solutions; WNY Account Solutions; WNY Solutions Group; Check & Credit Recovery; Credit Power; and S Payment Processing & Solutions — “engaged in a scheme to defraud consumers by using threats, intimidation, and harassment to collect ‘phantom’ debts.”

Via robocalls placed through telemarketing defendant Global Connect, the CFPB says that the collectors threatened consumers with “false allegations of check fraud and false claims of debt owed.” People who received these calls were told they could end up being subjected to a “financial restraining order,” and that their employer would be notified about their debt. The calls also threatened wage-garnishment and arrest if the debt was not paid, alleges the complaint.

“The Debt Collectors refused to identify the issuer of the supposed debt to consumers,” reads the lawsuit, “but convinced consumers of their legitimacy by providing the consumer’s personal information, including date of birth, place of employment, and Social Security number. In most, if not all, cases, consumers did not owe any debt the Debt Collectors had a right to collect.”

In addition to the many actual company names involved in the collections, the CFPB says the defendants used a slate of fictional businesses, like “LRS Litigations,” “IRS Equity,” “Worldwide Requisitions,” and “Arbitration Resolution” to trick people into believing they would be sued if they didn’t pay up.

These threats and misrepresentations resulted in millions of dollars in payments made under duress even if they were not owed.

The CFPB is accusing the payment processing companies for the collectors — Global Payments, Inc.; Pathfinder Payment Solutions, Inc.; Frontline Processing Corp.; and Francis David Corp. d/b/a Electronic Merchant Services — of facilitating the “large-scale fraud by enabling the Debt Collectors to accept payment by consumers’ bank cards when the Payment Processors knew, or should have known, that the Debt Collectors were engaged in unlawful conduct.”

The complaint contends that these payment processors gave the collectors “an air of legitimacy and allowed the Debt Collectors to efficiently process a high volume of collections.”

Global Connect, the telemarketing firm used to blast out the robocalls, is accused of providing the debt collector defendants with the “ability to effortlessly broadcast millions of threatening and false statements to consumers in telephone messages.”

The CFPB argues that the success of this phantom debt collection scheme relied on the participation of the processors and the telemarketing firm.

The complaint was actually filed in March, but it remained under seal until today. Yesterday, a court granted a preliminary injunction halting the alleged bad behavior and freezing the assets of the individual defendants and their businesses.

“Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed,” said CFPB Director Richard Cordray in a statement. “We are taking action against the many parties that allegedly contributed to this phantom debt collection operation. The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers.”