FTC v. Federal Check Processing: the fraud division that was a collection agency
A group of collection companies near Buffalo, New York, called people about old payday loans and told them they were under investigation for check fraud. They used names like Federal Check Processing and threatened arrest. The Federal Trade Commission sued in 2014, a federal court banned the owners from debt collection and ordered $10,852,396 disgorged in 2016, and the Second Circuit affirmed in 2019.
A public record, not a client of this firm. Everything on this page comes from the court decisions and the Federal Trade Commission releases cited at the end. Usher Law Group did not represent anyone in this matter, we publish no results of our own, and nothing here predicts the outcome of any other case.
The scripts the FTC obtained under a court restraining order read like messages from a police department. One began with a caller "w/ the fraud division" saying a complaint had been "filed & Formalized" and that the person was "listed as primary respondent in regards to allegations of fraud." Another said, "You are being investigated for fraud," and offered a chance to resolve the matter "before any charges are filed."
None of it was true. The callers were debt collectors working in an office on Transit Road in East Amherst, New York, a suburb of Buffalo. The debts were mostly old payday loans the companies had bought. The court found the accusations and threats false.
The companies behind these calls were started by two men, Mark Briandi and William Moses. The first, Federal Recoveries, LLC, was founded in 2009. Twelve more followed between 2010 and 2013, with names chosen to sound official: Federal Check Processing, Federal Processing Services, State Check Processing, Nationwide Check Processing, US Check Processing. The Federal Trade Commission said the names were meant to suggest a connection to the government.
What the court found they did
In its 2016 report, the magistrate judge reviewed about 1,500 pages of evidence: consumer declarations, call recordings and transcripts, and the scripts collectors used. Nearly all of the FTC's facts about the companies' practices went undisputed. The companies received nearly $11 million from consumers between May 2010 and March 2014.
- They posed as law enforcement. Collectors called themselves "processors," "officers" or "investigators" from a "fraud unit." One transcript shows a collector answering the phone "Fraud Division."
- They accused people of crimes. Transcripts show collectors telling people they faced a "Class A check violation," a "hot check violation," or charges of defrauding a financial institution. One told a consumer she was a "named respondent" in pending tax fraud.
- They threatened arrest. One collector, using the title investigator, told a consumer he wanted his side of the story "before you are picked up on charges," then said he had to contact the district attorney.
- They called family and employers. Collectors told relatives, co-workers and employers that the person owed a debt, had committed a crime and faced legal action.
- They padded the balance. The debt portfolios the companies bought did not list interest rates. Moses created a formula that applied the rate from one sample loan contract to other debts from the same lender.
When people asked for more information about the debt, the Second Circuit noted, collectors typically refused to give it. The FTC also alleged that many of the debts were disputed, already paid, or not the collectors' to collect.
A promise to the Attorney General, then more of the same
This was not the first time the owners had been caught. The New York Attorney General's office began investigating after a litany of consumer complaints. On February 3, 2013, Briandi and Moses signed an Assurance of Discontinuance with the Attorney General. Without admitting fault, they agreed the companies were subject to the FDCPA, agreed to dissolve some of them, and promised to tell the office if they formed new ones. In May 2013 they signed an affidavit saying they had hired a compliance officer.
The Second Circuit described what happened next. Shortly after the agreement took effect, and without telling the Attorney General, the owners incorporated new companies, some in other states, and the calls continued.
What the courts did
The FTC sued in February 2014 as part of a national crackdown it called Operation Collection Protection. On February 24, 2014 the court entered a temporary restraining order, froze the defendants' assets and appointed a receiver. At the time, the companies employed twenty-five collectors in the East Amherst office. Collection stopped that month.
In April 2016, Magistrate Judge Michael J. Roemer recommended summary judgment for the FTC on every count. District Judge William M. Skretny adopted the recommendation.
FTC v. Federal Check Processing
The owners and their companies were ordered, jointly, to pay the amount the companies received from consumers, and were banned from debt collection. A relief defendant, a racing company, was ordered to pay $92,000.
Source: Second Circuit opinion (Jan. 11, 2019); FTC press release. A public record of someone else's case, not a result of this firm and not a prediction.
Briandi appealed. He did not contest that the companies broke the law. He argued he did not know what the collectors were doing and that the amount was too high. On January 11, 2019, the Second Circuit affirmed. It held that he controlled the companies, knew of the illegal practices, and had been put on notice by the 2013 agreement he signed. Moses filed no brief, and his appeal was dismissed. This page does not report how much of the judgment was collected.
What it means for you now
A government case like this one stops a company and can take back what it collected. It does not replace your own claim. The FDCPA forbids exactly what these collectors did: threatening arrest that is not lawful and intended (15 U.S.C. § 1692e(4)), falsely implying you committed a crime (§ 1692e(7)), and telling your family or employer about the debt (§ 1692c(b)). A consumer can sue for actual damages and up to $1,000 in statutory damages per case. Our page on threats of arrest or jail covers the rules.
- Write down the words. Fraud unit, investigator, charges, warrant, respondent. Note the date, the number and the name the caller used.
- Ask for the notice in writing. A legitimate collector must send a written validation notice. Refusing to identify the debt is itself a warning sign.
- Do not pay to make a threat stop. Paying a caller who threatens arrest can mean paying someone with no right to collect at all.
- Keep a log. The call log keeps dates, times and what was said in one place.
The FDCPA requires a collector found liable to pay the consumer's reasonable attorney's fees and costs. In New York, GBL 349 can also apply, and in Florida the FCCPA forbids communications that simulate legal process or appear to come from a government agency. Our New York, New Jersey and Florida pages cover the state rules.
The pages this story points to
Threats of arrest or jail
What a collector may never say, and the laws that say so.
Read →Fake lawyer or police
Callers who pretend to be the government, a court or an attorney.
Read →Calls to family and employer
Who a collector may contact, and what it may not tell them.
Read →Sources. FTC v. Moses, 913 F.3d 297 (2d Cir. 2019), No. 16-3811, opinion (govinfo); FTC v. Federal Check Processing, Inc., No. 14-CV-122 (W.D.N.Y. Apr. 13, 2016), report and recommendation; FTC, press release (Mar. 13, 2014); FTC, press release (Oct. 2016); 15 U.S.C. § 1692e.
Common questions
Can a debt collector say I committed check fraud or will be arrested?
No. The FDCPA forbids a collector from saying or implying that you will be arrested or jailed for not paying unless that is lawful and intended, and from falsely saying or implying that you committed a crime. Failing to pay a consumer debt is not a crime. A collector that uses the words fraud unit, investigator or pending charges to get paid is using the tactics the court condemned in this case.
Did the people who paid get their money back?
The court ordered the defendants to pay $10,852,396, the amount the companies received from consumers, and that order was affirmed on appeal. This page does not report how much was actually collected from the defendants or paid back to consumers.
The FTC sued here. Can I sue a collector myself for threats like these?
Yes. The FDCPA gives consumers their own right to sue for actual damages, up to $1,000 in statutory damages per case, and attorney's fees and costs. The claim must be filed within one year of the violation. Keep notes of each call, including the name the caller used, and any voicemails.
Tell us what they did.
One conversation with an attorney, in your language. We tell you which laws the collector or the credit bureau broke, which deadline runs first, and what to save this week. If it is not a case we can take, we say so and tell you where to go.
(718) 484-7510The FDCPA and the FCRA require a company found liable to pay the consumer’s reasonable attorney’s fees and costs. Our fee arrangement is confirmed in a written retainer before we begin. English, Russian and Spanish in-house; an interpreter for any other language.