A federal court has granted a request from the Federal Trade Commission and the Illinois Attorney General to temporarily force a series of six companies that were allegedly threatening and intimidating individuals into making payments on phantom payday loans that were not owed, or not owed to the defendants to stop operating. The companies were also allegedly selling portfolios of fake loans to other debt collectors – the first time the FTC says it has made such an allegation.
The charges against companies, which included names like Stark Law, Stark Recovery, and Capital Harris Miller & Associates, were part of Operation Collection Protection, a joint municipal/state/federal initiative aimed at abusive and illegal debt collectors. The companies had been operating the scam for five years, according to the FTC. The companies targeted borrowers who had obtained or applied for either payday loans or other forms of short-term loans, and pressured them into making payments that either were not owed, or were not owed to the company making the call. Borrowers were allegedly threatened with arrest or lawsuits and were allegedly told they would be charged with “defrauding a financial institution” or “passing a bad check,” according to the FTC. The companies also misrepresented themselves as a law firm with the authority to sue and obtain financial judgments.
Taking the scam a step further, the companies allegedly created fake portfolios of payday loans and sold them to other debt buyers, which then tried to collect on the debts.
According to the FTC, the defendants are Stark Law LLC, also doing business as Stark Recovery; Stark Legal LLC; Ashton Asset Management Inc.; CHM Capital Group LLC, also doing business as Capital Harris Miller & Associates; HKM Funding Ltd.; Pacific Capital Holdings Inc., formerly known as Charles Hunter Miller & Associates Inc. and also doing business as Pacific Capital; Hirsh Mohindra, also doing business as Ashton Lending LLC; Gaurav Mohindra; and Preetesh Patel.
Along with this update, the FTC also announced a number of other actions as part of Operation Collection Protection. Those include:
- The Consumer Financial Protection Bureau has resolved four debt collection law enforcement actions and issued supervisory highlights, a report highlighting debt collection supervision work generally completed between September and December of 2015.
- The Minnesota Department of Commerce took eight actions, imposing 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., doing business as 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 prohibits RoTech from collecting debt from Indiana consumers, and orders it to pay nearly $5,000.