Officials: Debt collectors, some in New York, cited for abusive tactics

New York State and federal officials announced on Tuesday a "sweep" in which they cited a number of debt collection companies for using abusive and coercive tactics to obtain phantom and real debts.

Five of the companies are located upstate and the subject of enforcement actions by State Attorney General Letitia James, officials said. Two North Carolina firms have been sued by the Federal Trade Commission, officials said.

Billed as "Operation Corrupt Collector," the combined actions are the latest in a series of enforcement efforts to combat debt collection abuse, said Andrew Smith, head of the FTC’s consumer protection bureau.

The "sweep" targeted debt collectors who engaged in the unauthorized collection of real or fake debt through abusive and threatening practices, Smith said during a virtual news conference.

"These are the most egregious types of violations, these are collectors who harass people to pay debts they don’t actually owe or that the collectors are not authorized to collect," said Smith. "Often these collectors convince people to pay by threatening them with arrest or prosecution unless they pay right then and there."

At times the collectors used illegal tactics to intimidate people into paying, he said, including masquering as government officials, process servers, investigators and lawyers or threatening them using profanities and racial slurs.

As part of the operation, officials initiated numerous enforcement efforts in New York and across the country, including two criminal actions, Smith said. As part of the sweep, officials have obtained $26 million in judgments and barred 30 defendants from operating in the debt collection field, Smith said.

Over the past 10 years the FTC has gone after more than 320 debt collection companies and obtained $600 million in judgments, according to Smith.

Two of the latest actions involved federal lawsuits against a pair of companies in the Charlotte, North Carolina area that are alleged to have tried to collect fake debt, he said.

James' office had five cases against New York State companies accused of debtor intimidation, including two near Buffalo, in partnership with the FTC, the attorney general said. Three of the cases were successfully resolved with two ongoing, as well as another initiated independently by the state.

James said technology used to disguise telephone numbers is a tactic sometimes employed to trick consumers into falling prey to illegal collection schemes.

In addition, James said consumers in New York who think they have been victimized can call her office's consumer protection bureau at 1-800-771-7755.