A big reminder of why we need stronger rules for debt collectors — and the CFPB to write and enforce them

A lawsuit filed by the CFPB earlier this month underscores the importance of its efforts to take on the abuses of the debt-collection industry, both by enforcing the law, and through a rulemaking process that is already underway.

The lawsuit – against two debt-collection magnates operating out of Buffalo, N.Y. – involves a nationwide operation that is said to have engaged in outrageous practices, causing massive harm to millions of people. In its filing, the Consumer Bureau describes the two men, Douglas MacKinnon and Mark Gray, as the “ringleaders” of a network of companies that “harassed, threatened, and deceived” consumers, making tens of millions of dollars a year in the process. Since 2009, the action charges, McKinnon, Gray and their companies have been buying up payday loans and other defaulted debt for pennies on the dollar, routinely adding $200 to each acquired debt (regardless of whether the law allows that), and using a variety of illegal practices to collect. Some consumers have reportedly been pressured to pay as much as six times more money than they really owed.

Employees of MacKinnon’s and Gray’s companies, the lawsuit charges, impersonated law-enforcement officials (sometimes using “call-spoofing” programs to create the impression that they were phoning from government offices) and threatened legal action they had neither the power nor the intent to actually take – arresting a consumer for “check fraud,” for example.

According to the suit, MacKinnon and Gray manage three Buffalo-based debt collection companies – Northern resolution Group, LLC (NRG), Enhanced Acquisitions, LLC (Enhanced), and Delray Capital, LLC (Delray), and have set up a network of at least 60 firms “to collect on the debt portfolios that NRG, Enhanced, and Delray purchased.” The defendants directed and encouraged these illegal acts, and profited significantly from them, the lawsuit holds, adding that “tens of millions of dollars annually” were “funneled back to MacKinnon, his relatives, and Gray through payments to various sham companies controlled by them.

The lawsuit charges MacKinnon and Gray with violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Acts, which prohibit unfair and deceptive acts or practices in the consumer financial marketplace. The Bureau is seeking to shut down their operation and secure compensation for victims as well as a civil penalty against the companies and its partners. “[T]his suit sends the message that debt collectors that employ abusive tactics will be held accountable,” New York Attorney General Schneiderman said in a joint announcement of the action.   — Veronica Meffe

 

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