Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC charges operation with collection of fake debts through threats and deception, (Oct 24, 2013)

By Tobias J. Gillett, J.D., LL.M.

The FTC has filed a complaint in the federal district court in Atlanta, alleging that various entities and individual engaged in a scheme to collect fictitious payday loan debts through threats of legal action and arrest (FTC v. Pinnacle Payment Services, LLC, FTC File No. 1323043, Case No. 1:13-CV-3455). The court has issued a temporary restraining order halting the operation.

According to the FTC’s complaint, since at least September 2009 the operation placed autodialed calls to consumers that consisted of prerecorded messages stating that the consumers owed money on payday loan debts. The calls would use one of a number of fictitious business names implying an affiliation with a law firm or law enforcement and would threaten that, if the consumers did not pay the debt, their bank accounts would be closed, their wages would be garnished, they would face felony fraud charges, they would have to appear in court thousands of miles from their homes, or they would be arrested at their workplace.

The FTC asserts that a typical message would state: “[T]his is the Civil Investigations Unit. We are contacting you in regards to a complaint being filed against you, pursuant to claim and affidavit number D00D-2932, where you have been named a respondent in a court action and must appear. There is a contact number on file which you must call, 757-301-4745. Please forward this information to your attorney in that the order to show cause contains a restraining order. You or your attorney will have 24 to 48 hours to oppose this matter.”

Many consumers would pay the debts to avoid the threatened actions, because they believed the debts were legitimate, or to stop repeated phone calls from the defendants to their home, cell, and work telephones. The defendants would frequently send the consumers communications claiming that their debts had been “paid in full” after the consumers made their payments.

The complaint charges the defendants with violating the FTC Act by misrepresenting that consumers were delinquent on debts that the defendants had the authority to collect; that consumers have a legal obligation to pay the defendants; that consumers will be arrested or imprisoned for failing to pay; and that defendants have taken, intend to take, or have authority to take formal legal action against a consumer who fails to pay.

The complaint also charges the defendants with violating the Fair Debt Collection Practices Act (FDCPA) by communicating with consumers at inconvenient times or places; by communicating with third parties for purposes other than acquiring location information about a consumer, without having obtained the prior consent of the consumer or the express permission of a court; by placing repeated calls to consumers with the intent to harass them; by placing telephone calls without meaningful disclosure of the caller’s identity; by falsely representing the character, amount, or legal status of a debt; by falsely representing or implying that nonpayment of a debt will result in the arrest or imprisonment of a person; by threatening to take action that is not lawful or the defendants did not intend to take, such as filing a lawsuit; by using deceptive means to collect or attempt to collect a debt; by failing to disclose that the defendants were debt collectors attempting to collect a debt and that any information obtained by the defendants would be used for the purpose of attempting to collect a debt; by using business names other than the true names of the defendants’ businesses; and by failing to provide a required written notice telling consumers how to dispute the alleged debts.

The FTC’s complaint names Pinnacle Payment Services, LLC; Velocity Payment Solutions, LLC; Heritage Capital Services, LLC; Performance Payment Processing, LLC; Credit Source Plus, LLC (Ohio); Credit Source Plus, LLC (Georgia); Reliable Resolution, LLC; Premium Express Processing, LLC (Ohio); and Premium Express Processing, LLC (Atlanta), as well as five individuals.

The court has issued a temporary restraining order against the defendants, barring further violations of the FTC Act and the FDCPA, freezing their assets, and appointing a receiver for the operation, among other actions.

Companies: Pinnacle Payment Services, LLC; Velocity Payment Solutions, LLC; Heritage Capital Services, LLC; Performance Payment Processing, LLC; Credit Source Plus, LLC; Reliable Resolution, LLC; Premium Express Processing, LLC

News: ConsumerProtection FederalTradeCommissionNews