FTC and NY OAG Crackdown on Debt Collection Scheme

The Federal Trade Commission and the New York Attorney General’s Office have announced that two New York-based operations and their principals have been charged with running a scheme to collect money from consumers on bogus debts.

The Federal Trade Commission has been aggressive of late when it comes to investigating and initiating enforcement actions against phantom debt chain players, including those who sell fake debt portfolios and those who harass consumers to collect the phony debt.

According to the FTC, the debt broker and its owner, bought, placed for collection and sold lists of phantom debts, including debts that were fabricated by the defendants or disputed by consumers. The FTC alleges that the phony debts were placed for collection with several collection agencies, who collected on them via illegal tactics.

The complaint alleges knowledge that the debts were fake and, to some extent, allegedly purchased from a defendant in a separate FTC action that was banned from the debt collection industry, who, in turn, purchased the debt from a defendant in another FTC action who was banned from handling sensitive personal information about consumer debts.

According to the FTC, the defendant continued to buy phantom debt lists and place them for collection, even after learning that consumers disputed the debts. Similarly, as alleged by the FTC, a collection agency used by a defendant here continued its collection efforts after consumers said they had never heard of the lenders and provided records to prove they owed nothing. The FTC asserts that the collection agency engaged in other illegal collection practices, including failing to provide required notices about the debt and consumers’ rights to dispute the debt, and threatening to contact, or contacting, family members or other third parties.

The defendants are charged with violating the Federal Trade Commission Act, the Fair Debt Collection Practices Act and New York state law.

Richard B. Newman is an FTC and state Attorneys General compliance and defense attorney at Hinch Newman LLP.

Informational purposes only. Not legal advice. Previous case results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.


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Richard B. Newman

Richard B. Newman is a nationally recognized FTC advertising compliance, CID investigation and regulatory enforcemetn attorney. He regularly provides advertising counsel and represents clients in high-profile investigations and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard is also an ecommerce lawyer and spam defense attorney. His practice additionally focuses upon false advertising defense, data privacy, cybersquatting, intellectual property law and transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements. Richard advises clients on how to minimize the legal risks associated with digital marketing, email marketing, telemarketing, social media influencer campaigns, endorsements and testimonials, negative option marketing models, native advertising, online promotions and comparative advertising,

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