A California man was arrested Friday for allegedly defrauding a bank out of $6.8 million in connection with his debt collection business, according to the Federal Bureau of Investigation.

Michael T. Sahlbach, 60, of Granite Bay, Calif., owned National Credit Acceptance Inc., which bought pools of delinquent consumer accounts from other companies at a discount and then tried to collect on the debts.

A grand jury indictment unsealed Friday in federal court in Sacramento, Calif. alleges Sahlbach used fraud to receive millions of dollars in bank funds, and used those funds to get even more money from his bank before defaulting on his line of credit. He was taken into custody on suspicion of six counts of bank and wire fraud.

Sahlbach had a $25 million line of credit with First Bank to buy pools of debt, but the account required Sahlbach to put up 15% of the cost. According to the indictment, Sahlbach in the fall of 2008 told the bank he was buying debt from Lender Exchange and the bank then transferred $6.8 million to Lender Exchange. Sahlbach did not inform First Bank that he controlled Lender Exchange.

Sahlbach had registered Lender Exchange as a business in California using an alias and using the address of a parking garage. According to the indictment, he used the money from Lender Exchange to pay the 15% required to get more funds from his line of credit. Soon after receiving the final disbursement from First Bank, Sahlbach defaulted on the line of credit, according to court documents.

Sahlbach could not be reached for comment. He faces a maximum penalty of 30 years in prison and a $1 million fine if he is convicted. The FBI's Sacramento Division investigated the case.

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