Consumer Finance Litigation

On November 4, 2015, the Federal Trade Commission (FTC) and other law enforcement authorities announced the first coordinated federal-state enforcement initiative targeting deceptive and abusive debt collection practices. The national initiative, named Operation Collection Protection, encompasses 30 new enforcement actions by federal, state, and local law enforcement authorities against collectors. The cases announced today bring the total number of actions taken so far this year to 115 by more than 70 law enforcement partners participating in the initiative. As part of the initiative, the FTC announced new enforcement actions against debt collectors engaged in allegedly illegal practices:

• BAM Financial: FTC alleged the defendants bought consumer debts and collected payment by threatening consumers with lawsuits, wage garnishment and arrest, and by impersonating attorneys or process servers. They also allegedly unlawfully disclosed debts to, or harassed, third parties, failed to identify themselves as debt collectors, and failed to notify consumers of their right to receive verification of the purported debts.
• Delaware Solutions: In a joint action by the FTC and the Attorney General of the State of New York, the Delaware Solutions defendants are charged with attempting to collect on debts they knew were bogus. The defendants bought payday loans supposedly owed to a company that repeatedly told them to stop collection efforts because the debts were invalid, and ignored consumers' evidence that they had never authorized a payday loan.
• I.P., LLC: Under a settlement with the FTC and the Illinois Attorney General, a married couple who ran a phantom debt collection scheme based in Aurora, Illinois, have agreed to a $6.4 million judgment, and a ban on working in any debt collection business.
• National Check Registry: The operators of a debt collection scheme agreed to a ban on participating in any debt collection business to settle charges brought by the FTC and the New York Attorney General's Office in June 2014 that the defendants used lies and false threats to collect millions of dollars from consumers.

Additional information communicated at the press conference:

• Illinois Attorney General Lisa Madigan stated that many of the complaints received are from people who do not have debt either because they already paid it off or never accrued the debt. Ms. Madigan stated that enforcement will target this "zombie" and "phantom" debt. Specifically, Ms. Madigan discussed a settlement with Chase Bank wherein it agreed to $50 million in restitution to consumers whose information was sold to other debt buyers with incorrect information. The settlement included reformation of collection practices and agreement to sell debt only once in order to avoid future "zombie" debt collection issues.
• Minnesota Commerce Commissioner Mike Rothman noted one area where his agency has sought to improve legislatively or otherwise was in the origination and selling of debt. Mr. Rothman stated that the companies debt is sold to can end up engaged in unlawful debt collection practices. He said he would like to "tighten up" via regulation the route from the original owner of the debt to future debt collectors.