FTC stops debt collection scheme, freezes assets, and seeks consumer redress

On March 3, the FTC announced it obtained a temporary restraining order to halt the operations and freeze assets of an alleged debt collection scheme following a lawsuit filed by the FTC. The scheme, operated by several individuals and their affiliated companies, allegedly used fictitious names to deceive consumers into paying nonexistent debts. According to the FTC’s complaint filed in the U.S. District Court for the Central District of California, the defendants allegedly engaged in a scheme which involved sending letters to consumers that falsely claimed they owed money on payday loans, threatened legal action, and threatened damage to consumers’ credit scores. The defendants misrepresented themselves as law firms and used various fictitious business names to lend credibility to their threats. The FTC claimed the defendants violated several laws, including the FTC Act, the FDCPA, and the GLBA. The complaint seeks a permanent injunction to stop the defendants’ practices, monetary relief for affected consumers, and other relief such as an asset freeze and the appointment of a receiver.

The order highlighted the likelihood of the FTC prevailing on the merits of the case, as shown by consumer declarations and complaints, which demonstrated the entities’ engagement in false, fictitious and fraudulent representations on debts.