FTC Shuts Down “Phantom Debt” Collectors

The Federal Trade Commission took action recently to shut down the abusive debt collection practices of a company that used fake identities and threatened consumers with lawsuits and arrest for debts they probably didn’t owe in the first place.
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The regulator took the company to court, and secured a $9.3 million award against the firm – which has been suspended because most of the listed defendants can’t pay it.

Wouldn’t it be great if more debts and judgments were suspended simply because the debtor couldn’t afford it? While the FTC deserves credit for pursuing action against so-called “Phantom Debt” collectors, the principles of general fairness requires this firm to be held accountable.

But as our Miami consumer rights lawyers see time and again, financial institutions, debt collectors and large corporations are consistently held to a different standard.

This case, involving a company called Pinnacle Payment Services, LLC, centered on several illegal debt collection practices, not the least of which included pressing consumers for collection of so-called “phantom debts.” The moniker stems from the fact that many of these “debts” no longer exist or never existed in the first place.

This is a prime example of why consumers should always consult with an attorney regarding collection action for suspicious debts. If you don’t believe you owe it, there’s a strong chance you probably don’t.

But even if you do legitimately owe a debt, the Fair Debt Collection Practices Act bars collection companies from engaging in abusive tactics to coerce you into making payments.

Here, the FTC alleged the defendant company threatened consumers by telling them:

  • Their bank accounts would be closed;
  • Wages would be garnished;
  • They would be arrested for felony fraud.

The FTC called the regulatory violations in this case “flagrant.”

The agency first filed a complaint against the company in 2013. The firm, with operations in both Georgia and Ohio, often gave consumers fake business names. Sometimes, they even pretended to be lawyers or police officers. The company also employed “robocalls” that left voice messages threatening legal action and arrest of consumers who failed to respond to their demands within a certain number of days.

In essence, they broke almost every consumer protection law listed in the FDCPA. The tactics resulted in a flood of complaints to federal consumer regulators, who tallied a total of about 3,000. Still, the firm was successful in collecting millions of dollars this way – in debts that were never actually owed.

The company was ordered by the U.S. District Court in Atlanta to halt operations, at least temporarily.

The case names as defendants the company itself, as well as seven corporate officers. As part of the settlement, those individuals are barred from engaging in any kind of debt collection activities – including selling debts or working for any other company in debt collection actions. The company has been ordered to destroy all consumer information it currently has on file. The judgment requiring the seven defendants to pay the $9.3 million has been suspended for five of those because they don’t have the money to pay it.

If you’re battling foreclosure in Miami or the surrounding areas contact Bruce Jacobs & Associates for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

Additional Resources:
FTC Stops Abusive Debt Collection Operation That Threatened Consumers with Legal Action and Arrest for Not Paying ‘Phantom’ Debts, Sept. 23, 2014, News Release, Federal Trade Commission
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The “Great Wage Slowdown” Has Hindered American Workers, Oct. 20, 2014, Miami Consumer Attorney