The CFPB filed a lawsuit against a family of interconnected debt collectors in Georgia and New York to stop harassing consumers concerning phantom debts. The lawsuit includes payment processor Global Payments and its contracted parties who the CFPB faults for not stopping the fraudulent activities of debt collectors, even though the processors had monitoring systems in place. The scheme depended on the participation of the payment processors and telemarketing company Global Connect. The CFPB said both Pathfinder Payment Solutions and Frontline Processing Corp provided payment processing services to the debt collectors, and along with Global Payments failed to appropriately monitor the accounts with the named debt collectors.

"The Payment Processors facilitated the Debt Collectors' large scale fraud by enabling the Debt Collectors to accept payment by consumers' bank cards when the Payment Processors knew, or should have known, that the Debt Collectors were engaged in unlawful conduct," the CFPB stated in its complaint.

"Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed. We are taking action against the many parties that allegedly contributed to this phantom debt collection operation. The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers,” reported CFPB Director Richard Cordray.

The complaint alleges "consumers paid millions of dollars" because of the threats made by the debt collectors including Universal Debt & Payment Solutions, WNY Solutions Group, and Check & Credit Recovery. The debt collectors involved were considered "common enterprises" since some of the entities were registered under the same individuals or their relatives, specifically citing Marcus Brown and Mohan Bagga for leading the group of people named in the case for running the entities. Universal Debt Solutions, LLC; WNY Account Solutions, LLC; Credit Power, LLC; and S Payment Processing & Solutions, LLC were also named in the suit.

The suit alleges the collectors used fake business names such as LRS Litigations, IRS Equity, Worldwide Requisitions, and “Arbitration Resolution, which gave consumers the false impression they would be subject to litigation if they did not pay the debt.

"The debt collectors used collectors and automated telephone broadcasting services to contact consumers and their family members to threaten consumers with false allegations of check fraud and false claims of debt owed, which would result, according to the debt collectors, in service of a 'financial restraining order,' notification to the consumer's employer of the alleged fraud or debt, garnishment of wages, and arrest, unless the consumers paid the alleged debt," the CFPB said in the complaint.

The CFPB also named communications platform, Global Connect LLC, for "broadcasting millions of threatening and false statements to consumers" by telephone on behalf of the debt collectors. Global Connect is alleged to have broadcast these messages even though the company knew they contained unlawful content. The parties have been cited for violating the Fair Debt Collection Practices Act. The CFPB is praying the courts determine penalties and restitution. A public hearing was held April 7. A preliminary injunction issued a Temporary Restraining Orderto halt the named misconduct and freeze the assets of the individual defendants and the businesses of the operation’s leaders.

The CFPB’s complaint was filed in the United States District Court for the Northern District of Georgia. The complaint is not a finding or ruling the defendants have actually violated the law. A copy of the 64 page complaint is available at: http://files.consumerfinance.gov/f/201504_cfpb_complaint-universal-debt.pdf  For more information, visit consumerfinance.gov