Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC action leads to halt of fraudulent debt collection operation, (Jul 21, 2014)

By Linda O’Brien, J.D., LL.M.

A federal district court has halted a Buffalo, New York-based operation, froze its assets, and appointed a temporary receiver to take over the operation’s business pending trial, the FTC announced today (FTC v. National Check Registry, LLC, File no. 132-3215, Dkt. 1:14-cv-00490).

In June 2014, the FTC and the New York Attorney General filed a joint complaint and request for a temporary restraining order in the U.S. District Court for the Western District of New York.

The complaint charged that the operation with using lies and threats against consumers in violation of the FTC Act, Fair Debt Collection Act, and various New York state laws. The defendants misrepresented that consumers had committed check fraud or another criminal act; falsely threatened to arrest or imprison consumers, sue them, garnish their wages, or put a lien on their property; failed to back up their claims that consumers owed the debt; charged illegal fees; and improperly revealed consumers’ debts to third parties.

The enforcement agencies have charged three individuals—Joseph C. Bella, III, Diane Bella, and Luis A. Shaw—and nine interrelated companies they control. Going by various names including National Check Registry, the operation began using another name—eCapital Services, LLC—to evade detection and continue its illegal activity after signed an agreement in October 2013 with New York authorities that prohibited it from violating federal and state debt collection laws. Operating since February 2010, the defendants have collected at least $8.7 million dollars in payments for purported debts, the complaint charged.

According to the complaint, the defendants: (1) told one consumer in Washington State that they would have the “Washington County Police” issue a warrant for her arrest, and another serving in the military that they would bring an action against him under the Uniform Code of Military Justice; (2) said the only way to avoid arrest, imprisonment, lawsuits, wage garnishments, and seized assets would be to make an immediate payment over the phone; (3) continued to accuse consumers of check fraud and other crimes even after they produced evidence showing they didn’t owe the debt in question; (4) contacted friends, family members, and co-workers of consumers whom they claimed owed a debt, and in some cases, not only revealed the supposed debt but also said the consumers had committed check fraud, and would be arrested or imprisoned if the debt was not paid; (5) added an illegal $8 “processing fee” when consumers made payments on supposed debts over the phone; (6) failed to provide consumers with debt collection notices and disclosures that are required under state and federal law, making it difficult for consumers to determine whether they owed the debt, and how they could dispute its validity; and (7) continued trying to collect a debt from a consumer who had discharged the debt in bankruptcy.

“These debt collectors continued to harass consumers and violate the law after the validity of the debt was called into question, and after the New York Attorney General’s office ordered them to stop,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “By working together with our state partners, we can leverage our resources to stop these illegal tactics.”

New York Attorney General Eric T. Schneiderman said in a statement, “All too often, innocent New Yorkers are relentlessly harassed by predatory, abusive debt collectors. My office, along with partners like the Federal Trade Commission, will keep fighting to protect hardworking consumers and put a stop to unfair financial bullying once and for all.”

The Commission vote authorizing the staff to file the complaint was 5-0.

Companies: National Check Registry, LLC

News: ConsumerProtection FederalTradeCommissionNews