Authorities Shut Down 5 Shady Debt Collectors, Secure $6.5M In Relief

Image courtesy of (Luke Hornick)

The Federal Trade Commission teamed up with two states to put an end to five unscrupulous debt collection operations that illegally deceived millions of Americans. The actions, made under the “Operation Collection Protection” initiative between federal, state and local law enforcement authorities, represent $6.5 million in relief for millions of consumers. 

Of the five actions, four were disclosed Wednesday, while the fifth was entered under seal, FTC chairwoman Edith Ramirez said during a press conference. The allegedly illegal practices cover many of the hallmarks of deceptive debt collectors, including the use of harassing phone calls and false threats of litigation, arrest, and wage garnishment.

“Debtors have certain rights and rogue collectors that step outside the law will face the consequences of illegal behavior,” Ramirez said.

[click to enlarge] (FTC)

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In all, the FTC, along with 70 federal, state and local partners working under Operation Collection Protection, have brought 150 actions against deceptive debt collection operations, securing more than $88 million in judgments.

The first case, a joint effort between the FTC and Illinois Attorney General Lisa Madigan’s office, orders a married couple to pay $6.4 million for operating a phantom debt collection scheme.

As alleged in the original complaint [PDF] filed in May, Illnois-based K.I.P. LLC has been defrauding individuals by attempting to collect on non-existent payday loan debts since 2010.

The operators – Charles Dickey, and Chantelle Dickey – used several business names to target consumers who obtained or applied for payday or other short-term loans, pressing them into paying debts they either did not owe or the company had no authority to collect.

In order to obtain payments, the company threatened to garnish consumers’ wages, suspend or revoke their driver’s licenses, have them arrested or imprisoned, or sue those who did not pay.

Many targeted individuals paid the debts because they believed the defendants would follow through on their threats or because they simply wanted to end the harassment.

Under the proposed consent order [PDF], the company does not admit wrongdoing, but are barred from misrepresenting financial products and services, profiting from customers’ personal information and must pay $6.4 million in refunds to affected debtors.

A second case announced Wednesday also involved phantom payday loans debts, but has yet to result in a judgment against the company.

This joint effort of the New York Attorney General’s office and the FTC alleges that Delaware Solutions used a host of illegal tactics to pry payments from consumers who never owed a debt.

According to the FTC, the company bought payday loans supposedly owed to a company that repeatedly told them to stop collection efforts because the debts were invalid.

Delaware Solutions regularly ignored evidence that the supposed borrower had never taken out a payday loan.

In many cases the operation failed to identify themselves as debt collectors, falsely portrayed themselves as process servers or attorneys, and falsely threatened arrest or litigation.

Debts the company attempted to collect were also divulged to third parties in an attempt to embarrass the supposed borrower into paying the fake debt.

A New York District Court issued a temporary restraining order against the Delaware Solutions defendants on October 6, 2015, halting their operations.

The case against California-Based BAM Financial alleges the company obtained payments from people through intimidation, lies and other unlawful tactics.

The FTC alleges [PDF] that, starting in 2011, the defendants purchased consumer debts and collected payment on their own behalf by threatening individuals with lawsuits, wage garnishment and arrest, and by impersonating attorneys or process servers.

Collectors allegedly disclosed debts to, or harassed, third parties, failed to identify themselves as debt collectors, and failed to notify consumers of their right to receive verification of the purported debts.

In once instance, an 84-year-old woman was falsely told there was a warrant out for her daughter’s arrest and that a sheriff would serve her with process.

Additionally, the company allegedly told another customer that she would not be allowed to see her children, and have her wages garnished if she did not make a payment.

A U.S. District Court in California granted the FTC a temporary restraining order [PDF] halting BAM Financial’s operation. The FTC seeks relief and the permanent stop of illegal collection practices by the company.

The final action announced Wednesday was also a joint effort between the FTC and NY Attorney General’s office putting an end to a July 2014 complaint against National Check Registry, ordering its one of its operator to pay a $112,000 judgment.

According to the original complaint [PDF], since 2010 National Check Registry, along with its operators and nine interrelated companies, used lies and false threats to collect more than $8.7 million from Americans.

Among other things, the FTC and AG’s office claim the defendants misrepresented that debtors had committed check fraud or another criminal act; falsely threatened arrest or imprisonment, lawsuits, garnished wages, or put a lien on their property; failed to back up claims that debts were actually; charged illegal fees; and improperly revealed debts to third parties.

In some cases, collectors for the company told a supposed debtor that they would have the “Washington County Police” issue a warrant for her arrest, and another serving in the military that they would bring an action against him under the Uniform Code of Military Justice.

The operation also charged an illegal $8 “processing fee” when payments were made over the phone.

The agencies allege that in 2013 the operators began using a separate name – eCapital Services, Inc. – in order to evade detection and continue illegal collection practices after signing an agreement that prohibited it from violating federal and state debt collection laws, according to the complaint.

Under the settlement order [PDF], the company and its operators are barred from misrepresenting material facts about any financial-related product or service, including lending, credit repair, debt relief, and mortgage assistance relief services, and profiting from customers’ personal information.

Joseph Bella, one of the scheme operators, must ay $112,000 and surrender certain bank accounts, two cars and two boats.


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