Feds, Madigan Shut Down Company Creating "Phantom Debts"
CHICAGO (CBS) -- Federal and state authorities have shut down a Westmont-based operation accused of harassing people around the country into paying debts they don't owe.
The Federal Trade Commission and Illinois Attorney General's office have accused three men, including an attorney, of pressuring people to pay off on payday loan debts they didn't really owe, or at least did not owe to the defendants.
The men allegedly ran six companies under the names including Stark Law, Stark Recovery, and Capital Harris Miller & Associates; and deceived and threatened consumers to collect the so-called "phantom debts."
They also allegedly sold fake debts to other debt collectors.
Illinois Attorney General Lisa Madigan said the defendants relied on scare tactics to convince their victims to pay up.
"They are concerned that there will be a lawsuit filed against them. They are concerned that they will be arrested and imprisoned. They are concerned that their employer will be called, their family members will be called," she said.
Podcast
Acting FTC Regional Director Todd Kossow said it's the second time the FTC and Madigan's office have teamed up to crack down on a company over phantom debts.
"These schemes target consumers who may have applied online for a payday loan, or who actually may have received such a loan at some point in the past. Targeted consumers are then harassed and intimidated into paying a debt they don't actually owe," he said.
Joshua Rozman, of Tampa, Florida, said he received up to 10 aggressive calls a day from Stark Law about a payday loan debt, and the caller made it sound legitimate.
"He had all of my information; my full name, my full address. He read back my entire Social Security number before even really verifying other pieces of information about myself," he said.
Rozman paid at first, but then filed a complaint with the FTC.
The FTC said there have been 1,000 such complaints about the operation, and its assets have since been frozen by a federal judge.
