The FTC alleged that Midwest Recovery, and owners Brandon M. Tumber, Kenny W. Conway and Joseph H. Smith, collected more than $24 million from consumers on such debts, largely by debt parking.
What is “debt parking”, also known as “passive debt collection?”
According to an article by the Federal Trade Commission “FTC” – debt parking can result in a consumer only finding out that a purported debt exists when his or her credit report is accessed in connection with buying a car or home, opening a credit card, or seeking employment. While the debts may not be valid, consumers can feel pressured to pay them off.
“The defendants parked fake or questionable debts on people’s credit reports and then waited for them to notice the damage when they were trying to get a loan or a job,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “The defendants used this illegal ‘debt parking’ to coerce people to pay debts they didn’t owe or didn’t recognize.”
80 and 97 percent of the debts it investigated were inaccurate or not valid
The FTC’s complaint alleges that Midwest Recovery received thousands of complaints each month about the purported debts from consumers, with the company itself finding that between 80 and 97 percent of the debts it investigated were inaccurate or not valid. In addition to payday lending debts, the complaint notes that the company parked significant quantities of medical debt, which is often a source of confusion and uncertainty for consumers because of the complex, opaque system of insurance coverage and cost sharing.
In one example from the complaint, a consumer was told when applying for a mortgage that an outstanding $1,500 medical debt placed on his credit report by Midwest Recovery had lowered his credit score and jeopardized his purchase. The consumer contacted the hospital to whom the debt was owed, who told him that he only owed an $80 co-pay. In spite of that, Midwest refused to remove the $1,500 debt and threatened the consumer with a lawsuit if he didn’t pay.
The FTC’s complaint alleges that the company and its owners, Brandon M. Tumber, Kenny W. Conway, and Joseph H. Smith, violated the FTC Act, the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and the FCRA’s Furnisher Rule.
Under the terms of the settlement, Midwest Recovery and its owners will be prohibited from debt parking and pursuing consumers for alleged debts without a reasonable basis. The settlement also requires Midwest Recovery and Tumber to contact credit reporting agencies and request all debts reported by the company be deleted from consumers’ credit reports.
The settlement includes a monetary judgment of $24.3 million
The settlement includes a monetary judgment of $24.3 million, which is partially suspended based on an inability to pay. Tumber and the company will be required to pay $56,748, and Tumber will also be required to sell his stake in another debt collection company and provide the proceeds from that sale to the FTC. In addition, Midwest Recovery will be required to surrender all of its remaining assets. If the defendants are found to have misrepresented their ability to pay, the full amount of the judgment would become immediately payable.
MUSINGS BY DIANE:
Has anyone ever contacted you demanding payment for a debt you don’t owe? My guess is ‘yes’. Not only does this happen all the time, it is a something some debt collectors set up on purpose. They report a false claim and then wait for you to check your credit report. Only then do you take action to remove the fake report – which will take several months, if at all. Unfortunately, you do not discover that false claim until you need a clean credit report in order to purchase that new home or car. Which means you need that report to be clean now, not several months from now. That results in many people paying to remove the false report, which is exactly what the company reporting the fake debt wanted. This is somewhat like rewarding the thief for robbing your home.
The moral – ALWAYS pull your credit reports at least once a year in order to determine if someone is parking a false or misleading debt. You can do this for free at AnnualCreditReport.com.
– Diane L. Drain
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
In Case You Missed It
Published On: March 31, 2024
Into the Shadows: Unraveling the Dark World of Fraud, Schemes, and Scams The Sneaky World of Fraud and Scams: How They Work and Why You Should Be Careful Fraud and [...]
Published On: March 8, 2024
In today's consumer landscape, credit cards are the normal tools for managing finances and making purchases. However, having credit card debt can lead to financial stress and vulnerability to predatory schemes. Recognizing the importance [...]
Published On: December 29, 2023
The article titled "Dangers of Using Public Wi-Fi Networks" posted on Galloptech Group's blog offers a comprehensive and insightful exploration of the risks associated with using public Wi-Fi networks. Here's an outline of what makes [...]
Published On: July 24, 2022
Want to avoid dishonest debt collectors? Watch this video from FTC’s Consumer Advice By Joseph Ferrari,July 22, 2022 (reprint from FTC, Consumer Alerts) During Military Consumer Month 2022, the FTC is highlighting resources [...]
