Feds Shut Down Debt Collector That Allegedly Collected $1.2M In Unowed Debts

Once again, as part of its ongoing efforts to crack down on unscrupulous debt collectors, the Federal Trade Commission has accused a North Carolina company of running a “phantom” debt collection scheme that went after people for money that they did not actually owe.

The FTC announced today that it had filed a complaint accusing the debt collection operation with using intimidation and deception to extract more than $2.1 million from consumers.

The operation used a variety of names, such as Lombardo, Daniels & Moss; Barron, Gibson & Phillips; and Cohen, Daniels & Moss, in its attempt to collect debts.

According to the complaint [PDF], since March 2013 the operation began to perpetrated a scheme to defraud individuals through the collection and process of payments for debts that were not actually owed, or which the companies had no authority to collect.

To do so, the FTC alleges that the operation contacted individuals by phone, claiming that individuals were delinquent on payday loans or other debts.

In an effort to appear legitimate, the collectors claimed to know individual’s personal information, such as Social Security numbers, bank account numbers, or names and contact information of relatives.

The collectors then threatened the individuals with arrest or other formal legal action if they did not pay, the complaint alleges.

For example, the operators allegedly told consumers that they would be sued, have their wages garnished, or have their bank accounts frozen if payment was not made.

In some cases when the individuals did not make payment, the FTC claims the operators allegedly called consumers repeatedly and regularly used profanity.

For instance, the FTC claims that one collector told a customer he was a “lying son of a b****,” “white trash,” and “not fit to hold a job.”

Additionally, the collectors allegedly disclosed purported debts to third parties, failed to disclose that they were debt collectors calling to collect a debt and that any information consumers provided could be used for that purpose, and failed to send consumers legally required written notices with the debt amount and the creditor’s name, giving consumers an opportunity to dispute the debt, according to the FTC.

Customers who questioned the debts and contacted creditors found that they never had any debts with those creditors or that their debts had already been paid, the complaint states.

In all, the FTC claims that the operations violated the FTC Act and the Fair Debt Collection Practices Act. A federal court temporarily halted the scheme and froze its assets at the request of the FTC, which seeks to end the practices.