The Masked Ringer

Some forms of masquerading are just good clean fun. Consider The Masked Singer, a surprise TV hit in which a panel of celebrities tries to guess the identity of other celebrities who sing karaoke while wearing elaborate disguises. (We’re not making that up. It’s a thing now.) But other forms of masquerading are based in deception, as the FTC alleges in a lawsuit against Global Asset Financial Services Group, LLC, and 15 Buffalo- and Charlotte-based defendants.

According to the FTC, the defendants are part of a large phantom debt collection operation. (That’s the pernicious practice of pressuring people to pay debts they don’t owe.) Some of the named defendants are debt brokers who sold portfolios of bogus debt. The rest are debt collectors who bought those debts and targeted consumers with a barrage of illegal tactics, including groundless threats of imminent legal action or even arrest.

Turning to the allegations against the debt brokers, the FTC says the brokers received numerous warnings that the portfolios they sold were toxic – everything from complaints from collectors that personal information didn’t match up to solid proof from consumers that they didn’t owe any money. Another red flag the FTC says the brokers failed to heed was that the source of the portfolios was Joel Tucker, an FTC “frequent flier” involved in multiple phantom debt cases, or others affiliated with him. One common Tucker tactic was to misappropriate sensitive information about consumers and then combine their personal data (bank accounts, social security numbers, etc.) with fabricated loan amounts, loan dates, repayment histories, and unpaid balances to create fictional portfolios. Tucker also sold payday lending leads – including consumers’ bank information – to lenders who, in turn, used that data to make unauthorized withdrawals from consumers’ bank accounts for loans they never agreed to, an illegal practice called “autofunding.” And yet despite alarm bells warning the brokers they were trafficking in phantom debt, the FTC says they continued to sell the portfolios.

The lawsuit also challenges the conduct of debt collectors who bought those poisonous portfolios and pressured people to pay. According to the FTC, a common first step was a robocall to the consumer or their friends and family, falsely stating that a lawsuit had been filed against them or soon would be. Consumers who called the number on the robocall were told they were talking to “County Mediations” or a representative of a law firm. Some were warned that the district attorney was going to file charges against them for intent to defraud or for processing hot checks. It was all a masquerade, of course, carried out by debt collectors trying to squeeze money from consumers who didn’t owe anything.

The complaint charges the defendant debt brokers with the unfair distribution of counterfeit or unauthorized debts and with providing debt collectors the means and instrumentalities through which they deceived consumers. The defendant debt collectors are charged with multiple violations of the FTC Act and the Fair Debt Collection Practices Act.

A federal court in North Carolina has temporarily halted the operation, appointed a receiver, and frozen assets. But even at this early stage, the lawsuit is a reminder to industry members to scrutinize what you’re buying and selling. If collectors are complaining about factual discrepancies, if consumers are saying “But I don’t owe that money,” or if the source of the portfolio is someone with a history of dealing in questionable debt, brokers and collectors shouldn’t look the other way.