Federal Regulators Announce Effort to Fight Abusive Debt-Collection Practices

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.”

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