A network of debt collection companies in Buffalo faces allegations that it took in "tens of millions of dollars" a year by harassing, threatening and deceiving consumers.
A new lawsuit in Buffalo federal court also accuses the companies and the men behind them – Douglas MacKinnon and Mark Gray – of inflating the debts of consumers and then falsely posing as law enforcement and court officials in order to collect the debt.
MacKinnon and Gray, according to the civil suit, started their scheme by buying defaulted consumer debt for "pennies on the dollar" and then using illegal tactics to generate millions of dollars in profit each year.
The suit, filed by the federal Consumer Financial Protection Bureau and New York's Attorney General, seeks to shut down the network of companies that MacKinnon and Ray are accused of creating to carry out their scheme.
“Our lawsuit asserts that millions of consumers were harassed, threatened, and deceived as part of a massive scheme to collect inflated debts,” Richard Cordray, director of the financial protection board, said in a statement.
The lawsuit claims three companies - Northern Resolution Group LLC, Enhanced Acquisitions LLC, and Delray Capital LLC - served as the "lynchpin of a massive collections scheme."
The companies, according to the suit, also served as “window dressing” when debt sellers would no longer do business with them. The suit accuses the defendants of violating several state and federal laws covering debt collection practices.
“Living with debt is difficult enough as it is, without the added stress of being harassed and threatened by debt collectors,” Attorney General Eric T. Schneiderman said in a statement.
The suit filed Wednesday claims the defendants illegally added $200 to each consumer debt account they bought and, in the end, collected debt consumers did not owe.
In some cases, the suit claims, debt collectors quoted debt amounts that were more than 600 percent of the real debt amount.
The suit also accuses the companies of falsely threatening consumers with legal action or falsely accusing them of committing crimes. In one case, according to the state and federal officials, the defendants told a consumer she did not have time to get an attorney because she was facing arrest the following day.
The companies also asked their collectors to impersonate law-enforcement officials and court officials, the suit said, and often used fake calls and emails to make it seem as if they they were from official government agencies.
MacKinnon and Gray could not be reached for comment Wednesday.