Washington, DC - Whether it was turn-of-the-century conman George C. Parker or Peaches O’Day, Mae West’s character in the movie “Every Day’s a Holiday,” the annals of consumer protection are filled with stories of people attempting to sell the Brooklyn Bridge or other things they don’t own. Announced as part of Operation Collection Protection, a lawsuit filed by the FTC and the New York Attorney General alleges a variation on that theme.

The FTC and AG say that Buffalo-based Delaware Solutions and a network of affiliated individuals and corporations pressured people to pay debts the companies weren't authorized to collect – or in many cases, debts that were bogus to begin with. For example, according to the complaint, the defendants bought a debt portfolio supposedly originated by Red Cedar Services, a payday lender doing business as 500FastCash. After Red Cedar started to get complaints from consumers about the defendants’ collection efforts, Red Cedar’s General Counsel sent letters to the defendants telling them that “500FastCash has not authorized any third-party to sell, broker, market, or collect any debt owed to 500 FastCash.” In other words, stop your unauthorized collection efforts now.

Red Cedar’s GC followed up with a phone call to one of the defendants’ managers, reiterating what he said in the letter – that the debts were invalid and the defendants should cease collection. But according to the complaint, the defendants continued to collect on the fake debts, ignored Red Cedar’s demands to stop, and even threatened to report Red Cedar to law enforcement authorities for supposed harassment.

Consumers’ efforts to get the defendants to stop proved fruitless, too. The FTC and New York AG allege that the defendants ignored consumers who challenged the debts – even ones who produced evidence that they never authorized a payday loan from 500FastCash or that their accounts with 500FastCash were up to date.

And the purported Red Cedar portfolio wasn’t the only instance. The FTC and AG charge that the defendants also tried to collect on “loans” that online payday lenders had fabricated – and they continued their course of conduct even in the face of evidence that the loans were bogus, including FTC and CFPB lawsuits against the lenders. As a result, consumers were hit with a one-two punch: They were first victimized when the online lenders tried to collect the bogus loans and again when debt collectors harassed them for debts they didn’t owe.

The FTC-AG lawsuit alleges other violations of the Fair Debt Collection Practices Act, the FTC Act, and state law, including false threats of legal action or arrest. For example, the complaint charges that in some instances the defendants’ employees told consumers they worked for the “National Check Fraud Center” or were affiliated with the County Attorney’s Office. Other allegations: that the defendants illegally told others about consumers’ purported debts, failed to identify themselves as debt collectors, and didn’t provide required notices and disclosures.

The case is pending before a federal judge in Buffalo. A stipulated preliminary injunction is in place freezing the defendants' assets and prohibiting them from collecting debts.

Find out more about what other companies can learn from Operation Collection Protection.