PhotoA federal court has blocked a Chicago-area debt collector from allegedly threatening and intimidating consumers into paying "phantom" payday loan debts.

“It’s illegal to harass people to pay debts they clearly don’t owe, and to sell phony debts to other debt collectors,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. She said the defendants also provided portfolios of phony debts to other debt collectors.

In a complaint filed with the U.S. District Court for the Northern District of Illinois, the FTC and Illinois Attorney General said the operation used names such as Stark Law, Stark Recovery and Capital Harris Miller & Associates.

The complaint charges that the debt collectors got the names of consumers who applied for a payday loan, then went after them to pay "phantom" debts that they did not really owe.  

The defendants allegedly threatened consumers with lawsuits or arrest, and falsely said they would be charged with “defrauding a financial institution” and “passing a bad check” – even though failing to pay a private debt is not a crime.

Claimed to be lawyers

The complaint also says the defendants claimed to be lawyers with the authority to sue and obtain judgments.They also allegedly harassed consumers with improper phone calls, disclosed debts to relatives, friends and co-workers, failed to notify consumers of their right to receive verification of the purported debts, and failed to register as a debt collector in Illinois, as required by state law.

Many consumers paid the debts simply to be relieved of the threats and harassment, the complaint alleges. 

The defendants are Stark Law LLC, also doing business as Stark Recovery; Stark Legal LLC; Ashton Asset Management Inc.; CHM Capital Group LLC, also d/b/a Capital Harris Miller & Associates; HKM Funding Ltd.; Pacific Capital Holdings Inc., formerly known as Charles Hunter Miller & Associates Inc. and also d/b/a Pacific Capital; Hirsh Mohindra, also d/b/a Ashton Lending LLC; Gaurav Mohindra; and Preetesh Patel.

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