The masterminds of a scheme that allegedly directed robo-calls to frighten and confuse consumers into paying debts they didn't owe are being sued by the Consumer Financial Protection Bureau (CFPB), the agency said on Wednesday.
The lawsuit was filed March 26 and kept under seal until after a judge on Tuesday issued a temporary restraining order against the defendants and froze their assets. In addition to those who concocted the scheme, the CFPB said it wants to hold accountable the telemarketers and payment processing companies that were used to place the calls and collect the money.
"Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed," CFPB Director Richard Cordray said in a statement. "The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers."
New York resident Marcus Brown and Mohan Bagga of Georgia allegedly put together the plan to collect the so-called phantom debt -- debt that isn't payable to those collecting it or isn't owed at all. Using a variety of names they allegedly placed millions of robo-calls that threatened consumers with arrest or having their wages garnished, violations of the Consumer Financial Protection Act and the Fair Debt Collection Practices Act.
When collectors talked to the consumers they were able to convince some that they were legitimate because of the amount of personal information they had including Social Security numbers, employer names, dates of birth, and family members' names. The information, the CFPB said, had been purchased from debt brokers and other companies that sell such data.
In addition to Bagga and Brown, the CFPB accused some of their family members and named the debt collection companies they used: Universal Debt and Payment Solutions, Universal Debt Solutions, WNY Account Solutions, WNY Solutions Group, Check & Credit Recovery, Credit Power and S Payment Processing & Solutions.
The CFPB also named telemarketer Global Connect and payment processors Global Payments, Pathfinder, Frontline, and Electronic Merchant Systems. The companies turned a blind eye to "numerous red flags of the debt collectors' illegal conduct," the CFPB said.