Feds: Millions Targeted by 'Phantom' Debt Collection Scheme

A Georgia firm called millions of consumers attempting to collect on “phantom” debts, and tricked consumers by citing personal information purchased from payday loan lead generators, federal investigators allege.

A lawsuit against Universal Debt and Payment solutions and a host of related companies was revealed Wednesday, alleging the firm’s tactics included purchasing personal information from data brokers that operators could use to convince victims to pay debt they didn’t owe. Agents would use names like “LRS Litigation Group,” “Worldwide Requisitions,” and “Arbitration Resolution,” and tell consumers they risked jail time if they didn’t pay immediately. The claims were bolstered by operators’ citing personal information, including bank account numbers, the CFPB alleges, that had originally been obtained by payday loan lead generation websites and sold to data brokers.

“Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed,” said CFPB Director Richard Cordray. “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.”

In one example cited in the lawsuit, a consumer complained that he received a threatening call while he was asleep.

“The caller stated that he had a ‘restraining order against (the consumer) to appear in court if I didn’t settle with them.’ The caller said the consumer had 24 hours to pay $500 on a $1,600 debt to Bank of America, or the collector would ‘contact (the consumer’s) employer to levy (his) wage, and they were also contacting the local police to serve papers,’” the lawsuit alleges. “According to the complaint, because he was scared, the consumer provided his bank card information. After making the payment, the consumer’s wife informed him that they had never done business with Bank of America.”

A phone call to the number listed for Universal Debt was answered by a man who said he was sick and was unable to answer questions about the lawsuit. Asked if he had a lawyer, he said he couldn’t afford one.

The CFPB lawsuit also names several service providers, including Global Payments, which processed the debt collector’s credit card payments.

“Payment processors provided substantial assistance … 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 alleges.

The firm did not immediately respond to requests for interview.

The CFPB also named Global Connect, LLC in the lawsuit for enabling the debt collectors to initiate millions of calls.

“(It) provided this service when it knew, or should have known, that the messages it broadcast for the Debt Collectors were unfair or deceptive, and materially contributed to the Debt Collectors’ scheme,” the lawsuit says.

Global Connect did not immediately respond to a request for comment.

The alleged scheme plays on a common problem — consumers who don’t know if a debt collection call is legitimate. If you’re worried about whether you have any debts haunting you, you can check your free annual credit reports for collection accounts. And if you want to see how a collection account can hurt your credit, you can check two of your credit scores for free on Credit.com.