Chicago Debt-Collection Scam Temporarily Stopped by Federal Courts
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Chicago Debt-Collection Scam Temporarily Stopped by Federal Courts

March 30, 2016

A federal court has temporarily stopped a Chicago-area debt collection operation from threatening and intimidating consumers into paying debts they did not owe.

The court issued the injunction at the request of the Federal Trade Commission (FTC) and the Illinois Attorney General after the agencies filed a complaint against the operation. The six-company operation also allegedly illegally provided portfolios of fake debt to other debt collectors.

According to the complaint, since at least 2011, the defendants used a host of business names to target consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts they either did not owe or that the defendants had no authority to collect.

The complaint charges that the defendants called consumers and demanded immediate payment for supposedly delinquent loans, often armed with consumers' sensitive personal and financial information. Defendants also allegedly threatened consumers with lawsuits or arrest, and falsely said they would be charged with defrauding a financial institution and passing a bad check – even though failing to pay a private debt is not a crime.

In addition, the complaint claims that since 2015, the defendants have held themselves out as a law firm with authority to sue and obtain substantial judgments against delinquent consumers.

The defendants also allegedly harassed consumers with improper phone calls, disclosed debts to relatives, friends and co-workers, failed to notify consumers of their right to receive verification of the purported debts, and failed to register as a debt collector in Illinois, as required by state law.

The complaint notes that in response to the defendants' repeated calls and alleged threats, many consumers paid the debts, even though they may not have owed them, because they believed the defendants would follow through on their threats or they simply wanted to end the harassment.

In addition to illegal collection allegations, the defendants are charged with providing bogus payday loan debt portfolios to other debt buyers, who then tried to collect the fake debts. According to the complaint, the defendants represented that the portfolios included delinquent debts owed to specified lenders and that the defendants had the right to market those lenders' debts. However, those lenders had not made loans to the consumers identified in the portfolios, or authorized the defendants to market any of their debts.