Tuesday, November 6, 2018

FTC Cracks Down On Creative Fraudsters

In its November 1, 2018 press release, the FTC announced a lawsuit against a western New York debt collection operation, allegedly owned or controlled by Robert Heidenreich, claiming use of unlawful means to collect debts. This case and a similar one are interesting for the level of the collector's lawlessness.

Heidenreich's alleged methods were inventive. Collectors used fictitious names. Heidenreich allegedly called himself "Bobby Rich" or "Collin Storm." Collectors called consumers, frequently with reference to payday loans, claiming to be a deputy sheriff and stating there was a warrant for their arrest. The collector would then tell the consumer it was possible the consumer could avoid arrest by talking to the complainant's lawyer. Another collector, not a lawyer, would pose as a lawyer and threaten the consumer with criminal liability unless payments were made. Collectors called the debtors family members and employers to exert pressure to pay, and threatened to file lawsuits they did not intend to file, and were abusive and used profanity. The collectors consciously and purposely sought payment in excess of the amount owed and for debts that had already been paid.

As a notable Massachusetts case once held, it is difficult to define the terms 'unfair and deceptive' because there is no limit to human inventiveness in this field. Debt collectors are specifically forbidden to use fictitious names, falsely invoke the threat of criminal prosecution. falsely threaten to file civil lawsuits, seek amounts in excess of the amount owed, or to use abusive or profane language. The defendant's collection methods were egregiously unlawful.

Perhaps even more inventive is the scheme of assembling counterfeit loans and selling them to unsuspecting debt collectors. Joel Tucker, via various entities, was alleged to have assembled entire fictitious loan portfolios, replete with social security numbers, and loan and payment histories, and selling them to collectors. The collectors then went on to attempt to collect from consumers for debts that never existed. Evidently one source of personal information on consumers is prior loan applications. The was the case for a Rhode Island man who was the victim of such a scam and spent literally years to get to the bottom of it.  It may not be surprising that the debt collector who had purchased the fake debt and sought payment from the Rhode Island man did not trouble itself with the niceties of lawful debt collection, and used profanity as well as threats to the Rhode Island man's wife.

Legitimate, lawful debt collection plays a vital role in the economy. The vast majority of debt collectors do their best to comply with laws regulating them, and should be aware of the consequences if they do not. Alleged fraudsters like Heidenreich and Tucker really have nothing to do with debt collection, they are criminals who only use the loan and collection context to further their unlawful schemes. Nevertheless, legitimate debt collectors have the most interest in law enforcement against alleged fraudsters like Heidenreich and Tucker, because such individuals, rightly or wrongly, are seen as the face of debt collection. Hopefully regulators like the FTC will continue to pursue egregiously unlawful debt collection scam artists for the good of consumers and debt collectors.

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