FTC Action Leads to Court Order Halting Phantom Debt Collection Scheme That Took Millions from Consumers and Threatened Consumers’ Credit, Homes, and Employment

As a result of a Federal Trade Commission lawsuit, a federal court has temporarily halted the operations and frozen the assets of a phantom debt collection scheme and its operators. The scheme has operated under numerous names, including Blackrock Services, Blackstone Legal Group, Capital Legal Services, Quest Legal Group, Viking Legal Services, and others.

According to the FTC’s complaint, the operators of this scheme are Ryan and Mitchell Evans and their affiliated companies. Debt collectors working for the scheme’s operators and their affiliated companies have sent consumers deceptive warning and collection letters or called them directly, claiming that consumers owed a debt of some kind and threatening legal action, wage garnishment, negative impacts to consumers’ credit, and even arrest if they don’t pay. The debts described in these letters and calls never existed, according to the complaint, and the defendants have no basis to make legal threats toward consumers.

The complaint further alleges that the defendants have sent letters and made phone calls to consumers claiming they owed money to a payday lender, and that the purported “law firm” contacting the consumer will imminently be filing suit against the consumer if the consumer does not pay up. The letters and calls also claim that consumers’ credit will be damaged by the fictitious debt, and that if consumers agree to pay to settle that debt, the harm to their credit could be lessened.

All of the claims in these letters and calls are false, according to the complaint.

The complaint notes that the letters sent by the operators often contain a wealth of sensitive personal information about the consumer, including the last four digits of their Social Security number, leading consumers to believe the letter may be legitimate.

When consumers visit the websites set up by the defendants for the bogus debt collection companies, they are again faced with false warnings that failure to pay these fake debts could result in garnishment of the consumer’s wages, along with lawsuits and impacts to their credit. In follow-up calls, the threats increase, with collectors falsely telling consumers that they have defrauded a financial institution, could be arrested at their workplace, or that their homes could be seized if they do not settle, according to the complaint.

According to the complaint, the scheme has operated under a wide variety of names, including the names of unaffiliated existing businesses and law firms, in violation of the FTC’s Rule on Impersonating Government and Businesses. In addition, the complaint alleges that the defendants have regularly failed to follow numerous requirements set out by the Fair Debt Collection Practices Act, including disclosing that they are debt collectors when their collectors contact consumers.

The FTC’s complaint asks the court to stop the defendants’ unlawful conduct and provide redress to consumers harmed by the scheme.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

The staff attorneys on this matter are Quinn Martin and Jason Sanders of the FTC’s Bureau of Consumer Protection.