Washington, DC - When something negative keeps reappearing, the old saying goes that it "turns up like a bad penny". According to an FTC lawsuit against a North Carolina outfit, those "bad pennies" in this case, phantom debts the FTC says people didn't owe cost consumers way more than pennies.
The complaint charges that in July 2014, ACDI Group, Solutions to Portfolios LLC, and owner Anthony Swatsworth bought a portfolio of purported past-due payday loans from a company called SQ Capital, arranged through debt broker United Debt Holding. The portfolio contained 2,335 records of purported consumer debts, with the lender of each listed as payday loan company 500FastCash.
According to the FTC, the detailed personal information in the portfolio was genuine, but the claim that people owed the money wasn't. In fact, as soon as the defendants tried to collect on those debts, consumers cried foul. Some offered specific evidence they had never borrowed money from 500FastCash.
In August 2014 just days after ACDI bought the portfolio ACDI contacted United Debt Holding to ask what gives. The broker told ACDI to stop collecting on that portfolio because multiple consumers had complained that the debts were bogus. A few weeks later, ACDI received a full refund of what it paid for the portfolio. So that should have been the end of it, yes? No.
As the complaint alleges and as the FTC charged in its lawsuit against SQ Capital, the portfolio was counterfeit. It listed loans that 500FastCash had not made to the named consumers. What's more, the FTC says SQ Capital hadn't acquired any right to collect any loans originated by 500FastCash which means, in turn, that ACDI had no right to demand payment.
But here's the kicker. According to the FTC, despite being told to stop collecting on those bogus debts, ACDI continued to pressure consumers to pay up for at least another seven months. And in a somewhat ironic note, although ACDI received a full refund for what it paid for the phony portfolio, the complaint alleges that the defendants haven't given refunds to consumers for the bogus debts they paid.
The lawsuit charges violations of the Fair Debt Collection Practices Act and the FTC Act. Even at this preliminary stage it serves as a reminder of the importance of listening to consumers and industry members when they sound a warning about phantom debt collection.