FTC Halts Scammers Impersonating Legitimate Debt Collection Businesses

The Federal Trade Commission issued an enforcement action in a fraudulent debt collection operation involving imposters of legitimate small businesses, showing the harm that such illegal activity can have on both consumers and lawful debt collection companies that work with consumers to resolve rightfully-owed debts.

According to a blog post from Rosario Méndez, an attorney with the FTC’s Division of Consumer and Business Education, the defendants involved with the operation pretended to be lawyers and threatened consumers with lawsuits and jail time to collect debts they did not owe.

The FTC also alleges that the “defendants illegally disclosed purported debts to third parties, failed to send consumers required written notices with the debt amount and the creditor’s name, and failed to give them an opportunity to dispute the debt.”

This unlawful conduct is in direct contrast to the compliant practices of legitimate debt collectors who only pursue debt that is actually owed and treat consumers with respect. By law, debt collectors must inform a consumer of his/her right to dispute a debt and request written verification if requested. Once sought, all collection activity stops until this proof is provided. Debt collectors must also avoid disclosing the existence of a debt to an unauthorized third party. Legitimate debt collectors take these obligations seriously and invest significant time and resources to ensure compliance with various statutes, including the Fair Debt Collection Practices Act.

Not only do unlawful actors like those involved in the FTC’s enforcement action cause substantial harm to consumers and the professional debt collection industry as a whole, but in this case, by impersonating actual small businesses, the scammers also caused tremendous harm to specific businesses.

“These imposters often used the names of real small businesses or names that were very similar to those of existing businesses. When these real businesses started receiving calls from people trying to reach the ‘debt collectors’ or complaining about abusive practices, they realized that their businesses’ [names were] being used in a scam. So they filed complaints with the FTC,” according to Méndez.

This action serves as a good reminder for business owners to research their name online to monitor if anyone else is using that name, a practice the FTC itself recommends. In fact, according to Méndez, businesses may alert the FTC if they start receiving complaints about practices with which they are not involved.

The U.S. District Court for the Middle District of Florida, Orlando Division temporarily stopped the operation and froze its assets at the request of the FTC, which seeks to end the practices, according to a news release. The U.S. District Court for the Middle District of Florida, Orlando Division has jurisdiction over this case. The FTC voted 2–0 to approve the compliant and the court entered a temporary restraining order against the defendants on July 10, 2017. The complaint includes violations of the FTC Act and the FDCPA.

Kollek commends the FTC for using its enforcement authority to stop the egregious practices of this fraudulent debt collection scheme and highlighting the distinction between these scammers and legitimate debt collection businesses. Kollek looks forward to working with the FTC and other government agencies to continue to rid the marketplace of bad actors who have no intention of complying with the law, causing substantial harm to consumers and legitimate debt collectors.