The Consumer Financial Protection Bureau announced Wednesday that it had filed a federal lawsuit aimed at shutting down a network of major national debt collectors that it described as illegal and abusive.
With New York Attorney General Eric Schneiderman, the agency is seeking to stop the debt collection protections of a group of “fly-by-night” debt collection companies run by Douglas MacKinnon and Mark Gray, using existing consumer protection laws.
Separately, the agency recently proposed new federal rules for the $14 trillion debt collection industry.
“Our lawsuit asserts that millions of consumers were harassed, threatened and deceived as part of a massive scheme to collect inflated debts,” bureau Director Richard Cordray said. “Today we are taking action against the ringleaders of this operation so they can no longer prey upon vulnerable consumers.”
The agency’s suit charges that MacKinnon and Gray have abused debtors through a network of companies, including Buffalo-based Northern Resolution Group LLC, Enhanced Acquisitions LLC and Delray Capital LLC.
Among the tactics the debt collectors used, according to the suit: Inflating debt amounts, including routinely adding $200 to the amount owed, falsely threatening legal action, and posing as law enforcement or government officials.
In one example mentioned in the suit, an employee of one of the companies contacted a debtor posing as an agent from “Los Angeles County Courts.” The employee told the consumer that she would be arrested for check fraud the next day if she didn’t pay what she owed and that she didn’t have time to contact a lawyer.
MacKinnon and Gray have run such schemes since at least 2009, according to the bureau. Little public information about the duo was immediately available, although some business journals and consumer sites appeared to have noted their debt collection practices at different points.
