FTC and Illinois AG Settle With “Phantom” Debt Collectors For $47 Million

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​On November 1, the Federal Trade Commission (FTC) and Illinois Attorney General’s Office (Illinois AG) announced (here and here) that they had reached a settlement to resolve a joint action brought against affiliated Chicago-based debt collectors that allegedly used false and misleading tactics in attempting to collect on payday or other small-dollar loans.

The stipulated final orders and permanent injunctions (herehere, and here), which have been entered by the U.S. District Court for the Northern District of Illinois, resolve a complaint filed against the six companies and their three principals in March 2016, which alleged that the companies had misrepresented to consumers that they were law firms that could sue and obtain judgments against consumers for nonpayment.  The agencies also alleged that the companies sold debt portfolios to other debt collectors, but that the debts in those portfolios were not owed.  These actions allegedly violated Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b), Section 814 of the Fair Debt Collection Practices Act, 15 U.S.C. 1692, Section 7 of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/7, and Section 9.7 of the Illinois Collection Agency Act, 225 ILCS 425/9.7.  The orders impose a judgment against the companies and their principals of more than $47 million, which will be partially suspended upon their surrender of $9 million in assets, and ban them from the industry.

This action was part of “Operation Collection Protection,” a joint federal-state enforcement effort targeted at deceptive and abusive collection practices. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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