A complaint filed by the FTC and the Illinois Attorney General against an operation that used names like Stark Law, Stark Recovery, and Capital Harris Miller & Associates alleges a veritable smorgasbord of debt collection violations. But the Stark Law lawsuit includes an additional allegation that should send a stark warning to those in the debt buying business.
According to the FTC and AG, in an effort to collect purported debts, the defendants unleashed a campaign of intimidation and harassment against consumers. They called incessantly, lobbed bogus threats to have people “charged” with “passing bad checks,” and yacked to third parties that consumers supposedly owed money. Even the business name “Stark Law” was a trick to make people think they faced imminent legal action.
The complaint challenges conduct that in and of itself violated federal and state law, but here’s the kicker: The victims of the defendants’ relentless barrage either didn’t owe any money or didn’t owe anything to the defendants. In other words, the outfit was a phantom debt collector.
So how could they convince people to pay up? According to the FTC and AG, a lot of folks were understandably intimidated by their aggressive tactics. But the defendants had something else up their sleeve. They typically targeted people who had applied for payday loans online and in the course of that process, had turned over lots of personal details – account data, Social Security numbers, employment, and the like. The complaint alleges that the defendants acquired that information and used it to convince consumers they were legitimate debt collectors.
The lawsuit lists a host of violations of the Fair Debt Collection Practices Act, the FTC Act, and Illinois law. But there’s an additional count that should make debt buyers and sellers sit up and take notice. The defendants also are charged with marketing and selling debt portfolios that they knew or should have known were bogus. The portfolios purport to identify consumers who have defaulted on payday loans of third-party lenders and include detailed data, such as names, contact information, Social Security numbers, loan amounts, repayment histories, and unpaid balances.
But according to the complaint, they’re fiction and the defendants knew or should have known that. They list loans that lenders never made to the identified consumers. What’s more, the defendants don’t even have a legal right to collect on legitimate debts from those lenders.
A United States District Judge in Illinois has put a temporary halt to the defendants’ operations, but even at this preliminary stage, there are takeaway tips for consumers and businesses.
If you have a friend or family member who’s been a target for illegal debt collection practices, lend a hand by sharing guidance on how they can exercise their legal rights, including steps to take to protect themselves from phantom debt collectors.
If you’re in the business, we offer a variation on a classic adage: Caveat emptor debitum. (Let the buyer of debt beware.) To avoid law enforcement consequences, keep your head in the game – and not in the sand – when selling or acquiring portfolios.