FTC Settles with Operators of “Phantom” Debt Collection Scheme

The FTC recently announced a settlement with several operators of a group of debt collection businesses that caused consumers to pay non-existent “phantom debts” in violation of the FTCA and the FDCPA. 

The allegations included that the defendants misled consumers by falsely claiming to be attorneys or affiliated with attorneys to pressure consumers into making payments on debts they did not owe, and threatened to take legal action against consumers if they did not pay.  WBK previously covered the FTC’s complaint and the temporary restraining order it obtained in early 2019.

Now, pursuant to Stipulated Orders entered in the Western District of North Carolina, the defendants are permanently banned from the debt collection business and from misleading consumers about debt and whether they are attorneys. 

The settlements include more than $25 million in monetary relief, but most of that amount is suspended.  Only one of the settling defendants was determined to have the ability to pay, and that entity was ordered to pay $3.1 million in equitable monetary relief.