The operators of a fraudulent debt collection scheme will be banned from the debt collection business under a settlement with the Federal Trade Commission, resolving charges that they illegally processed more than $5.2 million in payments from consumers for payday loan debts they did not owe.

The settlement resolves a complaint the FTC filed against Kirit Patel, Broadway Global Master Inc. and In-Arabia Solutions Inc. in 2012, alleging that callers working with the defendants harassed consumers into paying on bogus debts, often pretending to be agents of law enforcement or fake government agencies such as the "Federal Crime Unit of the Department of Justice." The court subsequently halted the operation and froze the defendants’ assets pending litigation

In a separate criminal proceeding, Patel pleaded guilty to mail and wire fraud charges brought by the U.S. Department of Justice based on his scheme. This week, he was sentenced to a one-year prison term.

Along with banning the defendant from the debt collection business, the FTC’s settlement order also prohibits the defendants from making misrepresentations about any product or service, profiting from customers’ personal information, or failing to properly dispose of customer information.

The order imposes a judgment of more than $4.3 million. Because of the defendants' inability to pay, the amount will be suspended upon payment of $608,500, which will be used for consumer redress. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The FTC vote authorizing the staff to file the proposed stipulated final order was 4-0. The order was entered by the U.S. District Court for the Eastern District of California on September 10.

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