CFPB and New York Attorney General Shut Down Debt Collection Ring
Companies and individuals used social media to smear consumers and threaten them with imprisonment
Washington, D.C. – The Consumer Financial Protection Bureau (CFPB), in partnership with the New York Attorney General, filed a proposed stipulated judgment in federal court to settle its case against a debt collection enterprise and its owners and managers. The judgment would order all participants in the scheme, based in upstate New York, to exit the debt collection market after their history of deception and harassment. Their debt collection companies would also be shuttered and required to pay a total of $4 million in penalties.
“It is illegal for debt collectors to orchestrate smear campaigns using social media to extort consumers into paying up,” said CFPB Director Chopra. “Our action with the New York Attorney General bans the ringleaders of this operation from the industry to halt further misconduct.”
“This debt collection operation used illegal and deceptive tactics to prey on consumers, and now they are paying the price for the harm they caused,” said Attorney General Letitia James. “Predatory debt collectors make their profit by targeting hardworking consumers and then illegally saddle them deeper into debt. These debt collectors used harassing calls and false threats to coerce consumer to pay, not only is that illegal, it’s also downright shameful. Today’s action should send a strong message to debt collectors nationwide that we will not hesitate to use the full force of the law to hold them accountable if they hurt consumers.”
The defendant companies are JPL Recovery Solutions; Regency One Capital; ROC Asset Solutions, which does business as API Recovery Solutions and Northern Information Services; Check Security Associates, which does business as Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems; Keystone Recovery Group; and Blue Street Asset Partners. The individual defendants are owners Christopher Di Re, Scott Croce, and Susan Croce, as well as Brian Koziel and Marc Gracie, who acted as managers of some or all of the companies.
The companies are interrelated collections businesses based out of a single location in Getzville, New York. Together, they purchased defaulted consumer debt for pennies on the dollar. The debt came from high-interest personal loans, payday loans, credit cards, and other sources. The network then attempted to collect debts from about 293,000 consumers, generating gross revenues of approximately $93 million between 2015 and 2020.
The CFPB and the New York Attorney General allege that the network used deceptive and harassing methods, violating the Fair Debt Collection Practices Act and the Consumer Financial Protection Act. Specifically, the complaint alleges that the owners, managers, and companies used the following illegal tactics to collect debt:
- Falsely claimed arrest and imprisonment: The collection companies threatened people with arrest and imprisonment if they did not make payments. In fact, people are not subject to arrest or imprisonment for failure to pay debts.
- Lied about legal action: The companies falsely threatened people with legal action, including wage garnishment and property seizures. In reality, the network never sought or obtained any legal judgments.
- Inflated and misrepresented debt amounts owed: The defendants lied about debt amounts owed to convince people that paying the amounts they actually owed represented a substantial discount. To press people even further, collectors said it was the offers would only be available for a short period of time.
- Created “smear campaigns”: Using social media and other methods, the collectors pressured people to pay by contacting and disclosing the debts to their immediate and distant family members, grandparents, in-laws, ex-spouses, employers, work colleagues, landlords, Facebook friends, and other known associates. The network did this even after collectors were told by victims to stop contact. Victims described these tactics as “emotional terrorism.”
- Harassed people with repeated phone calls: The collectors repeatedly called people multiple times every day over periods lasting a month or longer. The network, in fact, instructed its collectors to let the person hang up on each call, so they can maintain a pretense in their call logs that they were disconnected, and then call back as soon as the next day. The collectors also used insulting and belittling language, and engaged in intimidating behavior when calling.
- Failed to provide legally mandated disclosures: The network did not provide people with statutorily-required notices, which detail their rights. When individuals asked for the notices, some collectors refused to provide them.
Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals that engage in unfair, deceptive, or abusive acts or practices. The CFPB also has authority over debt collection practices under the Fair Debt Collection Practices Act. The proposed stipulated judgment filed today, if ordered, would require that the companies, as well as their owners and senior managers, exit the debt collection market. The defendants also must pay a $2 million penalty to the CFPB, which will be deposited into the CFPB’s victim relief fund, and a $2 million penalty to the New York Attorney General. If the defendants fail to make timely payments, however, each penalty amount due would increase to $2.5 million.
Today’s order follows the CFPB and New York Attorney General’s lawsuit in September 2020.
Read today’s proposed stipulated judgment and order.
Consumers can submit complaints about debt collection activities, or about financial products or services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.