The Consumer Financial Protection Bureau and the Attorney General of New York have reached a settlement with two individuals referred to as collection “kingpins” and a network of companies, with fines totaling $60 million and permanent bans from ever operating in the collection industry again.
The settlement ends a lawsuit that the CFPB and New York AG filed in 2016 against Douglas MacKinnon and Mark Gray as well as companies they operated — Northern Resolution Group, LLC, Enhanced Acquisitions, LLC, and Delray Capital, LLC.
Under the terms of the settlement, MacKinnon, Northern Resolution Group and Enhanced Acquisitions will pay $40 million in restitution to consumers and $10 million each to the CFPB and the New York AG, for a total of $60 million. Gray and Delray Capital have been fined $4 million in restitution to consumers and $1 million each to the CFPB and NY AG, but those fines have been reduced to a $1 civil money penalty and $10,000 in consumer restitution because of an inability to pay the full amount. The amounts of the fines represent the amounts that were taken from individuals as a result of this scam.
Referring to the pair as “kingpins” during a press conference yesterday, Letitia James, the Attorney General of New York, said the pair were essentially running debt collection franchises that operated “an elaborate and unscrupulous rip-off scheme that defrauded hundreds if not thousands of individuals across the nation who could least afford to be cheated out of their money.”
The defendants were accused of setting up more than 250 collection operations across the country — most of them in Western New York — and using threatening tactics to try and collect on debts, spoofing numbers of courthouses and government agencies, making false threats of arrest, while also adding $200 to the balance owed. From the original complaint:
An August 2014 audit of Delray conducted by a debt-seller from whom the company both acquired debt and did third-party collection highlighted the rampant misconduct Delray collectors engaged in. Among other things, the audit found that Delray collectors (a) threatened “pending court action, garnishment,” and suits for fraud or breach of contract; (b) falsely claimed to be “a paralegal”; (c) gave “false and misleading information”; (d) “inflated the current placed balance, at times quoting a balance exceeding 600% of the debt amount”; (e) failed to give required notice letters to consumers upon initial contact; and (f) failed to provide consumers with “mini-Miranda” warnings and disclose that calls were being recorded.
After they had been sued by the CFPB and New York Attorney General, the defendants were accused of dragging their feet in responding to requests from the regulators for more information about their operation.