Two years after initially filing a argument, federal and state regulators on Monday shut down what they called a “predatory debt collection operation” in Getzville, saying it “used deceptive and abusive tactics to illegally collect millions of dollars from hundreds of thousands of consumers. “
The US Consumer Financial Protection Bureau and State Attorney General Letitia James said the businesses inflated the amount of debt that was owed, falsely threatened harsh consequences if consumers didn’t pay up and harassed victims by contacting their friends, family members and employers. Those actions violate both federal and state debt collection and consumer protection laws.
The operation was comprised of five companies, all owned by chiropractor Scott A. Croce and his wife, Susan, and by sales professional Christopher L. Di Re, who co-owns a Williamsville water filtration business. The entities were managed by Brian J. Koziel and Marc D. Gracie.
“This debt collection operation used illegal and deceptive tactics to prey on consumers, and now they are paying the price for the harm they caused,” James said. “Predatory debt collectors make their profit by targeting hardworking consumers and then illegally saddle them deeper into debt. These debt collectors used harassing calls and false threats to coerce consumer to pay, actions that are both illegal and downright shameful.”
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Under terms of the stipulation agreement with regulators, the owners and managers will share $4 million in penalties and damages – equally split between the federal and state agencies – and are permanently barred from the debt collection industry.
The agreement permits Gracie to work for a company providing telephone and internet services that indirectly serves a debt collector, while also allowing the parties to still collect debts owed directly to them as a landlord.
The state AG said several Amherst-based debt collection companies allegedly used illegal methods to demand payment of debts.
“It is illegal for debt collectors to orchestrate smear campaigns using social media to extort consumers into paying up,” said CFPB Director Rohit Chopra. “Our action with the New York Attorney General bans the ringleaders of this operation from the industry to halt further misconduct.”
The companies include JPL Recovery Solutions, Regency One Capital, ROC Asset Solutions, Check Security Associates, Bluestreet Asset Partners and Keystone Recovery Group. ROC does business as API Recovery Solutions and Northern Information Services, while Check Security does business as Warner Location Services, Pinnacle Location Services and Orchard Payment Processing Systems.
The settlement resolves a prior lawsuit that regulators filed against the companies, owners and managers in September 2020 and again in December 2021, alleging 14 violations of federal and state laws. The defendants neither admitted nor denied the settlement as part of the settlement, but have set aside $1 million of the fine in escrow. If they do not pay the full amount of penalties within six months, they must pay an extra $1 million penalty.
“Today’s action should send a strong message to debt collectors nationwide that we will not hesitate to use the full force of the law to hold them accountable if they hurt consumers,” James said.
Croce is the founder and clinic director of Erie County Chiropractic, which he started in 1996 and which operates offices in Buffalo and Amherst. He is the brother of Mark Croce, the prominent former Buffalo restaurateur, entrepreneur and developer who died in a January 2020 helicopter crash. But Scott Croce has also developed buildings in Buffalo.
This is the latest in a long line of actions taken by state and federal regulators against companies engaged in illegal debt-collection practices – many of them in the Buffalo area. James’ office last year banned debt collector Andrew Fanelli and his Northwood Asset Management Group from the industry, and won a $60 million judgment against Douglas MacKinnon in 2019.
In the current case, according to regulators, the businesses bought past-due consumer debt “for pennies on the dollar,” and then sought to collect on the debts from as many as 293,000 consumers. The defaulted debt of personal loans, payday loans, credit cards and other loans, and the operation generated about $93 million in gross revenues from 2015 to 2020.
Regulators asserted that collectors working for the companies falsely threatened to have consumers arrested and jailed for not making payments, and also threatened to take other legal action, such as garnishing wages or seizing property.
They also lied about how much was owed, inflating the amount to convince people that paying the actual amount was “a substantial discount.” They said the offer was only available for a limited time, “to coerce consumers even further.” And they “used insulting and belittling language and engaged in intimidating behavior.”
The firms called consumers “multiple times every day” for a month or more, and let consumers hang up each call so they could claim they were disconnected and try again the next day. They also conducted what regulators and victims called “smear campaigns” and “emotional terrorism” by contacting immediate family members, grandparents, in-laws, ex-spouses, employers, colleagues, landlords, Facebook friends and others – even after being told to stop .
And they either failed to provide – or even refused to provide when asked – notices of consumer rights as required by debt collection law.