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Outraged consumers have charged collection firms with creditor harassment for decades. From Los Angeles to Miami, the federal government is targeting those collection operations that are wildly deceptive–sometimes, illegal–in their tactics.

Currently, the Federal Trade Commission (FTC), in a civil action, is attempting to shut down a California-based collection firm that has, apparently, ventured beyond creditor harassment. Calling the firm a “shake-down debt-collection enterprise that has misrepresented themselves as “process servers, lawyers or legal office staff,” to collect over $9 million in debt–some of which may not even exist–the government hopes to shutter their operation permanently.

Stating that collectors phoned people across the US falsely representing themselves as legal personnel, the callers “advised” people they were facing lawsuits because of unpaid debts. Threatening wage garnishment or property seizure, they sometimes told individuals that the firm was part of the law enforcement community and, even, warned of the individual’s impending arrest.

Closely following written scripts, they smoothly dealt with hard questions or challenges from the unsuspecting consumers. They then advised their marks that they could successfully “settle” their case by making an “immediate” payment. Collecting almost $10 million in only two years, it appears their tactics–though illegal–were successful.

FTC and news outlet attempts to contact the firms two apparent principals were met with incorrect or disconnected telephone numbers. Cases like these reinforce the critical importance of the creditor harassment prohibitions of federal law and the welcome protection offered by bankruptcy filings. While even legitimate collection firms sometimes push the envelope, this operation apparently went beyond creativity; into illegality.

Source: Collections & Credit Risk, “Government Seeks To Shut Down Bogus Collection Operation,” Oct. 20, 2011