COURT ORDERS TEMPORARY HALT TO COMPANY COERCING PEOPLE TO PAY DEBTS THEY DON'T OWE

FROM:  U.S. FEDERAL TRADE COMMISSION
FTC, Illinois Attorney General Halt Chicago Area Operation Charged With Illegally Pressuring Consumers to Pay ‘Phantom’ Debts

The Federal Trade Commission and the Illinois Attorney General’s Office have obtained a court order temporarily halting a fake debt collection scam located in Aurora, Illinois, a western suburb of Chicago. The defendants are charged with illegally using threats and intimidation tactics to coerce consumers to pay payday loan debts they either did not owe, or did not owe to the defendants.

The FTC’s case against K.I.P., LLC, Charles Dickey, and Chantelle Dickey is the agency’s seventh ‘phantom’ debt collector matter.

 “This company scared and tricked people into paying debts they didn’t owe,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working with terrific partners like the Illinois Attorney General, we will keep going after phantom debt scams like this one and shutting them down.”

“The defendants have threatened and intimidated their way into stealing hundreds of thousands of dollars from unsuspecting people all across the country,” Illinois Attorney General Lisa Madigan said. “Between our two offices, we have hundreds of complaints. It is clear they must be stopped.”

According to the complaint, since at least 2010, the defendants used a host of business names to target consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts that they either did not owe or that the defendants had no authority to collect.

Often armed with sensitive financial information, the defendants would call consumers and demand immediate payment for payday loans that were supposedly delinquent.  To pressure consumers to pay, the defendants threatened that they would:

Garnish consumers’ wages;
Suspend or revoke their drivers’ licenses;
Have them arrested or imprisoned; or
File a lawsuit against them.
In response to the defendants’ repeated calls and alleged threats, many consumers paid the debts, even though they may not have owed them, because they believed the defendants would follow through on their threats or they simply wanted to end the harassing phone calls.

The complaint also charges the defendants with failing to provide consumers with a notice containing: 1) the amount of the debt; 2) the name of the creditor to whom the debt is owed; 3) a statement that unless the consumer disputes the debt, it will be assumed to be valid; 4) a statement that if the consumer does dispute the debt in writing, the defendants will verify the debt is correct; and 5) a statement that upon the consumer’s written request, the defendants will provide the consumer with the name and address of the original creditor if different from the current creditor.

Finally, the complaint charges that the defendants: called consumers at work when they knew such calls were prohibited by consumers’ employers; harassed and abused consumers; used obscene or profane language; and called consumers repeatedly with the intent of annoying or abusing them.

The complaint also alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Collection Agency Act, and that the defendants are not licensed debt collectors as required by Illinois law.

Defendants named in the case include: K.I.P., LLC; Charles Dickey, individually and as an owner, member, or managing member of K.I.P., LLC, and also doing business as (d/b/a) Ezell Williams and Associates, Corp.; Ezell Williams, LLC; Excel Receivables, Corp.; Second Chance Financial Credit, Corp.; Second Chance Financial, LLC; Payday Loan Recovery Group, LLC; Payday Loan Recovery Group; Payday Loan Recovery; International Recovery Services, LLC; International Recovery Services; and D&R Recovery. The complaint also names Chantelle Dickey, also known as Chantelle Rudd and Chantelle Williams, as an individual and as a manager of K.I.P.

The FTC and the Illinois Attorney General’s Office appreciate the Aurora Police Department, North Aurora Police Department, Better Business Bureau of Chicago and Northern Illinois, and the U.S. Postal Inspection Service Chicago Division for their valuable assistance with this matter.

DEBT COLLECTORS BEWARE OF INCREASED ENFORCEMENT OF FAIR DEBT COLLECTION PRACTICES ACT

FROM:  FEDERAL TRADE COMMISSION 
FTC Increases Deterrence with Stepped Up Enforcement of the Fair Debt Collection Practices Act

Over the last year, the Federal Trade Commission has continued aggressive enforcement of the Fair Debt Collection Practices Act by bringing or resolving nine debt collection cases, according to the agency’s annual summary of debt collection activities.

“When it comes to debt collection, the FTC has many tools in its arsenal, including research, enforcement, and consumer education,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “But in the years since the financial crisis hit, we have increased our emphasis on law enforcement.”

In 2013, the FTC obtained court orders stopping illegal debt collection activities in seven cases, and referred two other debt collection cases to the Department of Justice for civil penalties.  In several of the cases, the FTC obtained temporary restraining orders halting the unlawful conduct, freezing the defendants’ assets, and appointing receivers to take over operations while court proceedings progressed (Asset & Capital Management Group and Goldman Schwartz Inc.). The Commission also brought its first enforcement action regarding text message debt collection (National Attorney Collection Services, Inc.), continued to pursue “phantom” debt collectors (Pinnacle Payment Services, LLC and Pro Credit Group, LLC), and placed the largest third-party debt collector under an order that includes the agency’s highest debt collection civil penalty (Expert Global Solutions). For the most egregious violators, the FTC obtained orders banning the responsible parties from ever participating in debt collection again (Forensic Case Management Services, Inc. and Goldman Schwartz Inc.).

The FTC also filed three amicus briefs in the last year. In its brief for the Seventh Circuit, the FTC argued that a payday lender’s mandatory pre-dispute arbitration clauses may be unconscionable, in part because they require alleged debtors to arbitrate in a remote tribal court, effectively pressuring those consumers to abandon their legal claims or defenses. The FTC joined the Consumer Financial Protection Bureau in filing two other amicus briefs. The first, submitted to the Seventh Circuit, argued that a debt collector violates the law whenever its communications tend to deceive or mislead consumers into believing that a time-barred debt could be the subject of a collection suit. The second, submitted to the Second Circuit, argued that debt collectors whose process servers failed to notify consumers that they were being sued violate the Fair Debt Collection Practices Act, which broadly prohibits deceptive and unfair collection practices in any form.

Besides enforcement, the FTC’s debt collection program includes education and public outreach as well as research and policy initiatives. The FTC’s consumer education work in debt collection, includes the launch last year of its Financial Educators site. The site addresses personal finance topics, including credit and debt, among other things. The FTC also collaborated with ChildFocus, Inc. and the Annie E. Casey Foundation to help produce the free guide, Youth and Credit: Protecting the Credit of Youth in Foster Care, which discusses credit issues facing the more than 26,000 children in the United States who age out of foster care every year.  Finally, as part of the FTC’s Legal Services Collaboration project, FTC staff met with legal services providers in cities around the nation to discuss various consumer protection issues, including the FTC’s work in the debt collection arena.

The FTC’s research and policy activities include the Life of a Debt Roundtable Event, which examined data integrity in debt collection and the flow of consumer data throughout the debt collection process.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to submit annual reports to Congress on the Fair Debt Collection Practices Act.  The FTC shares federal jurisdiction for enforcing the act with the CFPB.  The FTC’s summary of its own recent work on debt collection issues assists the CFPB in preparing the report to Congress.

The Commission vote approving the letter was 4-0.