Debt Collectors Sued for Fraudulent Activities

Debt collectors accused of harassing consumers about “phantom” debts.

According to an article in the American Banker, by Rachel Witkowski ,  4/9/2015, The Consumer Financial Protection Bureau “CFPB” has filed a massive lawsuit against more than a dozen debt collectors, payment processors and related entities for failure to stop fraudulent collection tactics.  The case was filed in U.S. District Court for the Northern District of Georgia, on March 26, 2015.

The article goes on to say that the “complaint accuses a handful of connected debt collectors based in Georgia and New York of harassing consumers about “phantom” debts.  But the potentially groundbreaking part of the case is that the CFPB also sued several payment processors, including worldwide processor Global Payments and its contracted parties, because the agency said they “should have known” about the alleged violations.”

We are taking action against the many parties that allegedly contributed to this phantom debt collection operation.

‘The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers.”

Why is this “ground breaking”?  This is the first time that payment processors are held to the same standard of responsibility as the debt collectors.  Yes, there are standards even though most us in the debtor bankruptcy world don’t see any prosecution for breaching those stands.  But I digress – there are legal implications if someone tries to collect on a debt they know to be noncollectable (e.g. bankruptcy or statute of limitations).  Those obligations are now being argued apply to the processors of the debts.  In other words the processors cannot say “Mikey told me to do it” and think they are protected.

Consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed

The article goes on to say “Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed,” said CFPB Director Richard Cordray, in a press release.

The complaint said that “consumers paid millions of dollars” because of the threats made by the debt collectors, including Universal Debt & Payment Solutions, WNY Solutions Group, and Check & Credit Recovery.   The debt collectors used collectors and automated telephone broadcasting services to contact consumers and their family members to threaten consumers with false allegations of check fraud and false claims of debt owed, which would result, according to the debt collectors, in service of a ‘financial restraining order,’ notification to the consumer’s employer of the alleged fraud or debt, garnishment of wages, and arrest, unless the consumers paid the alleged debt'”

Several parties were named in the complaint:

Electronic Merchant Services, Global Connect LLC, Global Payments and a subsidiary, Pathfinder Payment Solution, Frontline Processing Corp., Universal Debt & Payment Solutions, WNY Solutions Group, and Check & Credit Recovery.  The agency specifically cited Marcus Brown and Mohan Bagga in a press release Wednesday for leading the group of people named in the case for running some of the entities.