FTC Announces Nationwide Crackdown on Illegal Debt Collectors

FTC Announces Nationwide Crackdown on Illegal Debt Collectors
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November 4, 2015

Federal regulators and law enforcement agencies are cracking down on illegal debt collectors.

The Federal Trade Commission (FTC) and other law enforcement authorities around the country announced the first coordinated federal-state enforcement initiative targeting deceptive and abusive debt collection practices. This nationwide crackdown encompasses 30 new law enforcement actions by federal, state, and local law enforcement authorities against collectors who use illegal tactics such as harassing phone calls and false threats of litigation, arrest, and wage garnishment.

The cases announced today bring to 115 the total number of actions taken so far this year by the more than 70 law enforcement partners in the Operation Collection Protection initiative.

Some of these actions allege that collectors knowingly attempted to collect so-called phantom debts – phony debts that consumers do not actually owe. The illegal practices targeted by authorities also include the failure of some collectors to give consumers legally required 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," FTC Chairwoman Edith Ramirez said in a statement. "Debtors have certain rights and rogue collectors that step outside the law will face the consequences of illegal behavior."

As part of the initiative, the FTC announced five new enforcement actions against debt collectors engaged in allegedly illegal practices. The FTC has asked federal courts to halt three abusive debt collection operations. One of the complaints has been filed under seal, and so the Commission cannot yet disclose details of that case. Two other operations have agreed to settle Commission charges.

BAM Financial: The FTC has alleged that the defendants extracted payments from consumers through intimidation, lies and other unlawful tactics. According to the FTC's complaint, the defendants bought consumer debts and collected payment on their own behalf by threatening consumers with lawsuits, wage garnishment and arrest, and by impersonating attorneys or process servers. They also unlawfully 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.

Delaware Solutions: In a joint action by the FTC and the Attorney General of the State of New York, the Delaware Solutions defendants are charged with attempting to collect on debts they knew were bogus. The defendants bought payday loans supposedly owed to a company that repeatedly told them to stop collection efforts because the debts were invalid, and ignored consumers' evidence that they had never authorized a payday loan.

According to the complaint, the defendants also failed to identify themselves to consumers as debt collectors, falsely portrayed themselves as process servers or attorneys, and falsely threatened arrest or litigation. The defendants also unlawfully disclosed consumers' debts to third parties in an attempt to embarrass the consumers into paying them.

K.I.P., LLC: Under a settlement with the FTC and the Illinois Attorney General, a married couple who ran a phantom debt collection scheme based in Aurora, Illinois, have agreed to a $6.4 million judgment, and a ban on working in any debt collection business.

In April 2015, the FTC and the Illinois Attorney General charged K.I.P. LLC, and Charles and Chantelle Dickey, with threatening and intimidating consumers to pay payday loan debts they either did not owe, or did not owe to the defendants. The U.S. District Court for the Northern District of Illinois, Eastern Division subsequently halted the operation and froze the defendants' assets pending litigation.

National Check Registry: The operators of a debt collection scheme agreed to a ban on participating in any debt collection business to settle charges brought by the FTC and the New York Attorney General's Office in June 2014 that the defendants used lies and false threats to collect millions of dollars from consumers.

The settlement order prohibits the defendants 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. One of the defendants, Joseph Bella, will pay $112,000 and surrender certain bank accounts, two cars and two boats.

To read more about each case, visit the FTC website.