FTC: Debt Collection Scam Illegally Processed $5.2 Million in Payday Loans
The operators of a fraudulent debt collection scheme will pay more than $608,000 in consumer redress to settle a federal complaint that they illegally processed payday loan debts.
The settlement resolves a Federal Trade Commission (FTC) complaint that claims the operators processed more than $5.2 million in payments from consumers for payday loan debts that they did not owe. Along with the financial judgement, the operators are banned from the debt collection business.
The FTC complaint filed against Kirit Patel, Broadway Global Master Inc., and In-Arabia Solutions Inc. in 2012, alleges that callers working with the defendants harassed consumers into paying on bogus debts, often pretending to be agents of law enforcement or fake government agencies such as the Federal Crime Unit of the Department of Justice.
In a separate criminal proceeding, Patel pleaded guilty to mail and wire fraud charges brought by the U.S. Department of Justice based on his scheme. This week, he was sentenced to a one-year prison term.
In addition to banning the defendant from the debt collection business, the FTC's settlement order also prohibits the defendants from making misrepresentations about any product or service, profiting from customers' personal information, or failing to properly dispose of customer information.
The order imposes a judgment of more than $4.3 million. Due to the defendants' inability to pay, the amount will be suspended upon payment of $608,500, which will be used for consumer redress. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.