A $24 million judgment has been entered against a collection agency and one of the agency’s co-owners has been ordered to divest himself of his ownership stake in the company that purchased the collection agency in question after it was accused by the Federal Trade Commission of collecting on “phantom” payday loans, “purported” medical debts, and other debts that the agency could “consistently” not verify.
A copy of the complaint in the case of FTC v. Midwest Recovery Systems, Brandon Tumber, Kenny Conway, and Joseph Smith can be accessed by clicking here. A copy of the stipulated order for permanent injunction and monetary judgment can be accessed by clicking here.
All of the documents in the case, filed in the District Court for the Eastern District of Missouri, were submitted last Wednesday.
The defendants were accused of reporting more than $98 million of unauthorized or counterfeit payday loans to credit reporting agencies, as well as debts that were the subject of unresolved fraud claims, debts in bankruptcy, debts in the process of being re-billed to a consumer’s insurance company, and debts that had already been paid to the defendants. The defendants were also accused of “parking” debts by reporting the unpaid debt to a credit reporting agency without first attempting to communicate with the individual in order to try and collect on it. The defendants were accused of collecting $24.3 million in revenue as a result of the “unlawful” collection practices, according to the complaint.
The defendants allegedly received “thousands” of complaints and disputes every month, of which between 80% and 97% of the disputed debts were found to be inaccurate or invalid. More than 24,000 complaints were specifically related to debts originated by Joel Tucker, who has been the subject of numerous criminal and civil actions for selling fake payday loan portfolios.
In agreeing to the order, the defendants neither admitted to or denied the allegations, although Tumber said the allegations were “totally false” in a published report. Tumber said in the report that he and his partners “ran out of money” trying to fight the FTC and that the government “took every dollar I had to my name.” Tumber was also ordered to pay $56,748.
Midwest Recovery Systems was sold to Consumer Adjustment Company, Inc., or CACi, last year.
Along with the monetary penalties, the defendants are permanently barred from engaging in unlawful collection practices, misrepresenting that a consumer has a legal obligation to repay a debt, making unsubstantiated claims, disclosing inaccurate information to a credit reporting agency, and violating the furnisher rule.