A U.S. district court on Monday halted a Buffalo, N.Y.-based collection agency from doing business, froze the operation's assets and appointed a temporary receiver to take over the defendants' business pending trial. The ruling came after charges from the Federal Trade Commission and the New York Attorney General’s office.

Going by various names including National Check Registry, the business began using another name – eCapital Services LLC – to evade detection after signing an agreement with New York authorities in October 2013 that prohibited it from violating federal and state debt collection laws, according to the joint complaint.

Three individuals – Joseph C. Bella III, Diane Bella and Luis A. Shaw – and nine interrelated companies they control are charged in the scheme.

Operating since February 2010, the defendants have collected at least $8.7 million dollars in payments for purported debts, according to the complaint, which charged that the defendants’ tactics violated the Federal Trade Commission Act, the Fair Debt Collection Practices Act and several New York state laws.

The FTC and New York Attorney General's office said the defendants used lies and threats against consumers. The defendants misrepresented that consumers had committed check fraud or another criminal act; falsely threatened to arrest or imprison consumers, sue them, garnish their wages, or put a lien on their property; failed to back up their claims that consumers owed the debt; charged illegal fees; and improperly revealed consumers’ debts to third parties, according to the complaint.

Also, according to the complaint, the defendants:

  • told one consumer in Washington State that they would have the "Washington County Police" issue a warrant for her arrest, and another serving in the military that they would bring an action against him under the Uniform Code of Military Justice;
  • said the only way to avoid arrest, imprisonment, lawsuits, wage garnishments, and seized assets would be to make an immediate payment over the phone;
  • continued to accuse consumers of check fraud and other crimes even after they produced evidence showing they didn’t owe the debt in question;
  • contacted friends, family members, and co-workers of consumers whom they claimed owed a debt, and in some cases, not only revealed the supposed debt but also said the consumers had committed check fraud, and would be arrested or imprisoned if the debt was not paid;
  • added an illegal $8 “processing fee” when consumers made payments on supposed debts over the phone;
  • failed to provide consumers with debt collection notices and disclosures that are required under state and federal law, making it difficult for consumers to determine whether they owed the debt, and how they could dispute its validity; and
  • continued trying to collect a debt from a consumer who had discharged the debt in bankruptcy.

Along with Joseph and Diane Bella, Luis A. Shaw, National Check Registry and eCapital Services, the complaint names as defendants Check Systems LLC, Interchex Systems LLC, Goldberg Maxwell LLC, Morgan Jackson LLC, Mullins & Kane LLC, Buffalo Staffing Inc. and American Mutual Holdings Inc.

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