FTC bans phantom debt collectors from industry

On December 13, 2021, the Federal Trade Commission (FTC) announced that, under the terms of a settlement, a group of phantom debt collectors were permanently banned from the debt collection industry. The term "phantom debt" is generally used to refer to debt that doesn't exist or has already been paid.

In its related complaint, the FTC alleged that the defendants collected on debt that was not owed or that the defendants had no right to collect.  The complaint further alleged (1) the defendants used robocalls to leave deceptive messages claiming consumers faced imminent legal action, and (2) when consumers returned these robocalls, the defendants falsely claimed to be from a mediation or law firm, again threatened legal action, and then used the consumers' personal information to convince them that the threats were real.

Under the terms of the settlement, the defendants were permanently banned from engaging in debt collection of any kind. They were also banned from buying or selling debt, and from making any misrepresentations to consumers about any goods or services.  The settlement also included a monetary judgment of $12,098,760.

The FTC's complaint was taken as part of its ongoing "Operation Corrupt Collector" initiative, a nationwide law enforcement and outreach program launched in conjunction with over 50 federal and state law enforcement partners aimed at protecting consumers from phantom debt collection and abusive and threatening debt collection practices. To date, Operation Corrupt Collector encompasses more than 50 enforcement actions against debt collectors engaged in these illegal practices brought by the FTC and its federal and state partners.