FTC Reaches Settlement With Debt Collection Company for “Debt Parking” Scheme

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[author: Kelly Grosshuesch]

On November 30, 2020 the Federal Trade Commission (FTC) announced ​that it had reached a settlement with a debt collection company for its “debt parking scheme” (also known as “passive debt collection”)​​ in which the company allegedly placed bogus or questionable debts on consumers’ credit reports in an attempt to coerce them to pay the debts.

According to the FTC, the company ​itself determined that as much as 97% of the debts it ​investigated were inaccurate or not valid. The FTC alleges that the company placed invalid debts on consumers’ credit reports and waited for consumers to notice the debts when applying for a job or loan in hopes that the practice would coerce the consumers into paying debts that they did not owe or recognize. The company allegedly parked significant quantities of payday loans and medical debt on consumers’ credit reports, resulting in the company collecting more than $24 million from consumers.

The settlement with the FTC prohibits the company from engaging in debt parking and requires the company to delete the false debts it previously reported to credit reporting agencies. The settlement also includes a $24.3 million monetary judgment, which will be partially suspended based on an inability to pay. The company must surrender its remaining assets to the FTC to pay a portion of the monetary judgment. According to the settlement, the owner of the debt collection company must pay $56,758 and sell his stake in another debt collection company and pay the proceeds of the sale to the FTC.

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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