In a new national campaign targeting abusive debt-collection practices,
the Federal Trade Commission emphasized working with its state partners
to combat illicit debt collection practices such as harassing phone calls
and false threats of litigation. Federal regulators have shut down four
debt collection companies in the past month and have brought 30 new law-enforcement
actions with state regulators since October 1, 2015.
Two of the four targeted debt collectors that received court orders to
halt operations were BAM Financial of California and Delaware Solutions
of New York. While BAM’s actions regarding the order are currently
unknown, Delaware Solutions is in the process of litigation. The other
two companies have settled with the FTC and state Attorney General. These
companies include K.I.P LLC, and National Check Registry of New York.
The order against BAM alleged that the company “extracted payments
from consumers through intimidation, lies and other unlawful tactics.”
According to the FTC’s complaint, BAM bought consumer debts and
collected payment on its own behalf by threatening consumers with lawsuits,
wage garnishment and arrest, and by impersonating attorneys or process
servers. BAM also allegedly disclosed debts to or harassed third parties
regarding consumers’ debts. In one specific instance, BAM told a
consumer that if she did not pay, she would not be allowed to see her
children, her wages would be garnished, and she would be reported to the IRS.
The FTC has accused Delaware Solutions of “attempting to collect
on debts they knew were bogus.” Delaware Solutions allegedly bought
payday loans supposedly owed to a company that repeatedly told Deleware
Solutions to stop collection efforts because the debts were invalid. Evidence
that the consumers had never authorized a payday loan was also ignored.
According to the FTC’s complaint, Delaware Solutions failed to identify
themselves to consumers as debt collectors, falsely portrayed themselves
as process servers or attorneys, and falsely threatened consumers with
arrest or litigation.
K.I.P., LLC’s settlement with the FTC and Illinois Attorney General
requires K.I.P to pay $6.4 million and the company is currently banned
from working in any debt collection business. K.I.P was charged in April
2015 with threatening and intimidating consumers to pay payday loan debts
they either did not owe, or did not owe to this company. According to
the complaint, the defendants used a host of business names to target
consumers who obtained or applied for payday or other short-term loans.
Due to the threats or a desire to end the harassment, many consumers paid
even though they may have not owed the debts.
National Check Registry of New York’s settlement with the FTC and
the New York Attorney General prohibits the company from misrepresenting
material facts about any financially-related product or service, including
loans, credit repair, debt relief, and mortgage assistance. Additionally,
one of the defendants, Joseph Bella, has been ordered to pay $112,000
and surrender certain bank accounts, two cars, and two boats. It has been
alleged that National Check Registry used lies and false threats to collect
millions of dollars from consumers.
These cases come in the midst of an expanding effort to address the consumer
finance complaints that are prevalent throughout the nation. Since the
financial crisis of 2008 exposed troublesome practices within the debt
collection field, federal regulators have attempted to correct such issues
with viable remedies such as the creation of the Consumer Financial Protection
Bureau. In a news conference addressing the new federal efforts, FTC Chairwoman
Edith Ramirez stated, “What we are trying to… is build a
national coalition that includes federal partners, state partners, and
local partners. We believe enforcement has a crucial role as well as educating
both consumers and businesses.”
For more about this story,