The Federal Trade Commission recently took action against a Missouri collection company and its owners, alleging that they collected more than $24 million from consumers, largely by placing “bogus or highly questionable” debts on their credit reports, the New York Times reported. “The defendants used this illegal ‘debt parking’ to coerce people to pay debts they didn’t owe or didn’t recognize,” Andrew Smith, director of the FTC’s bureau of consumer protection, said in prepared remarks about the agency’s settlement with the company, Midwest Recovery Systems. The FTC said in a related blog post that the case was its first legal challenge to debt parking under the Fair Debt Collection Practices Act. In debt parking cases, collectors don’t contact the consumer before reporting the debt to credit bureaus. That means people learn about the debt only when it is flagged as they are applying for a mortgage or a car loan or even a job. Because they don’t want to lose the loan or the job offer, consumers may feel pressured to pay off the “bad” debt quickly. Midwest Recovery received thousands of complaints from consumers each month, the FTC’s complaint said. When the company itself investigated the complaints, it found that as many as 97 percent of the debts were inaccurate or not valid, the agency said.
