A national crackdown on 30 debt collectors by federal, state, and local agencies announced Wednesday takes action against collectors who use illegal tactics such as harassing phone calls and threats of legal action, arrest, and wage garnishment.
The cases bring to 115 the total number of actions taken this year by more than 70 law enforcement partners in the Operation Collection Protection initiative.
In some of the debt collection cases, companies attempted to collect “phantom debts” – phony debts that consumers don’t owe. The illegal practices also include the failure to give consumers disclosures and notices, or to follow state and local licensing requirements.
“Being in debt is stressful enough for many Americans without also being subjected to intimidation and false threats,” Edith Ramirez, chair of the Federal Trade Commission, said.
The commission has asked courts to close down two abusive debt collection operations:
BAM Financial: The commission alleges that the defendants bought consumer debts and collected payment by threatening consumers with lawsuits, wage garnishment, and arrest, and by pretending to be attorneys or process servers. They also told third parties about the debts and harassed them, didn’t identify themselves as debt collectors, and didn’t notify consumers of their right to receive verification of the “debts.”
In one case, the defendants told a consumer’s 84 year-old mother they had a warrant for her daughter’s arrest, and later told the consumer they represented a bounty hunter and would have the sheriff serve her with papers.
The defendants told another consumer that she wouldn’t be allowed to see her children, and that they’d garnish her wages and report her to the Internal Revenue Service if she didn’t pay.
Delaware Solutions: In a joint action by the commission and the New York attorney general, the Delaware Solutions defendants are charged with trying to collect on debts they knew were bogus. The defendants bought payday loans owed to a company that told them to stop collection efforts because the debts weren’t valid, and ignored consumers’ evidence that they’d never authorized a payday loan.
The defendants also didn’t identify themselves as debt collectors, told consumers they were process servers or attorneys, and threatened arrest or legal action, according to the lawsuit. The defendants also told third parties about consumers’ debts to embarrass the consumers into paying them.
Two companies have signed settlements with regulators:
K.I.P., LLC: Under a settlement with the commission and Illinois attorney general, a married couple who ran a phantom debt collection scheme have agreed to pay $6.4 million and not to work in debt collection.
In April 2015, K.I.P., LLC and Charles and Chantelle Dickey were charged with threatening and intimidating consumers to pay payday loan debts they either didn’t owe or didn’t owe to the defendants. A court halted the operation and temporarily froze the defendants’ assets.
The defendants used many business names to target consumers who received or applied for payday or other short-term loans, according to the lawsuit. Claiming those loans were delinquent, they threatened to garnish consumers’ wages, suspend or revoke their driver’s licenses, have them arrested or put in jail, or sue those who didn’t pay.
Many consumers paid, even though they didn’t owe the debts, because they thought the defendants would follow through on their threats or because they wanted to end the harassment, the commission said.
National Check Registry: The operators of a debt collection scheme agreed to a ban on taking part in any debt collection business to settle charges brought by the commission and the New York Attorney General’s Office in June 2014 that the defendants used lies and threats to collect millions of dollars from consumers.
The settlement prohibits the defendants from misrepresenting facts about financial-related products or services, including lending, credit repair, debt relief, and mortgage assistance relief services, and profiting from customers’ personal information. One defendant, Joseph Bella, will pay $112,000 and surrender some bank accounts, two cars, and two boats.
To learn more debt collection, visit Facing Debt Collection? Know Your Rights and Fake Debt Collectors.
