A federal court has halted a Chicago-area operation that allegedly threatened and intimidated consumers to collect payday loan debts they didn't owe or didn't owe to the defendants. The defendants also allegedly provided portfolios of fake debt to other debt collectors – the FTC’s first case alleging that practice.

Since at least 2011, the complaint alleges the defendants targeted consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts they either didn't owe or that the defendants had no authority to collect. 

The defendants allegedly providing bogus payday loan debt portfolios to other debt buyers, that then tried to collect the fake debts, according to the complaint. The defendants allegedly represented that the portfolios included delinquent debts owed to specified lenders and that the defendants had the right to market those lenders’ debts. However, those lenders hadn't made loans to the consumers identified in the portfolios or authorized the defendants to market any of their debts.

The defendants include: Stark Law LLC, also doing business as Stark Recovery; Stark Legal LLC; Ashton Asset Management Inc.; CHM Capital Group LLC, also d/b/a Capital Harris Miller & Associates; HKM Funding Ltd.; Pacific Capital Holdings Inc., formerly known as Charles Hunter Miller & Associates Inc. and also d/b/a Pacific Capital; Hirsh Mohindra, also d/b/a Ashton Lending LLC; Gaurav Mohindra; and Preetesh Patel.

The complaint charges that the defendants called consumers and demanded immediate payment for supposedly delinquent loans, often armed with consumers’ sensitive personal and financial information. The defendants also allegedly threatened consumers with lawsuits or arrest, and falsely said they would be charged with "defrauding a financial institution" and "passing a bad check” – even though failing to pay a private debt isn’t a crime. The complaint also claims that since 2015 the defendants have held themselves out as a law firm with authority to sue and obtain substantial judgments against delinquent consumers.  The complaint notes that in response to 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 harassment.The harassment allegations included making improper phone calls, disclosing debts to relatives, friends and co-workers, failing to notify consumers of their right to receive verification of the purported debts and failing to register as a debt collector in Illinois, as required by state law.

"It’s illegal to harass people to pay debts they clearly don’t owe, and to sell phony debts to other debt collectors," said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. "We’re proud to partner with the Illinois Attorney General to halt these egregious debt collection practices.” Added Illinois Attorney General Lisa Madigan, "Phantom debt collection is one of the most brazen scams today. With the FTC, we are working to protect consumers by shutting down these scam operations.” The defendants weren’t immediately available for comment.Since January, collection enforcement activities include:

  • The Consumer Financial Protection Bureau resolved four debt collection law enforcement actions and issued Supervisory Highlights, a report highlighting debt collection supervision work generally completed between last September and December.

  • The Minnesota Department of Commerce took eight actions. It imposed fines of up to $50,000 against Alliant Capital Management LLC, Premier Recovery Group JD and Associates, Mountain West Legal Solutions, Credence Resource Management LLC, Selene Finance and Credit Protection Association for various violations, including failing to obtain a collection agency license, failing to properly register collectors, and using deceptive, abusive or unlawful collection tactics. It also obtained a court order placing Weinerman and Associates into receivership for improperly handling client funds, failing to maintain a license, and other violations.

  • The Idaho Department of Finance revoked the licenses of Oxford Law LLC and RJM Acquisitions LLC for failing to maintain a surety bond as required by state law.

  • The Colorado Department of Law entered into a stipulated final order against Collecto Inc., d/b/a EOS CAA, imposing a $99,000 penalty for violating notice requirements for consumers and improper credit reporting.

  • The Pennsylvania Attorney General’s office filed an Assurance of Voluntary Compliance with Foot and Ankle Surgery Center LLC, providing for $7,000 in civil penalties plus costs of investigation for allegedly unlawful collection notices that falsely indicated that they were official court documents or legal papers.

  • The Indiana Attorney General’s Office entered into an Assurance of Voluntary Compliance with RoTech Holdings Ltd. to resolve allegations that the respondents unlawfully harassed and deceived consumers. The AVC prohibited RoTech from collecting debt from Indiana consumers, and ordered it to pay nearly $5,000.

 

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