Collection Agency Charged in $10 Million Scheme

It’s quite common to hear about collection agencies scheming against consumers. Numerous collection agencies have been reprimanded, fined, or shut down by Federal agencies for collecting nonexistent debts from consumers, for charging consumers more than what they owe, or going outside the law to collect even legitimate debts. In a slight twist, one large collection agency has recently been found guilty of swindling not only the businesses that hired them, but also banks and investors.

Several executives from Oxford Collection Agency, Inc. have pled guilty to a $10 million fraud scheme spanning several years. The official charges include conspiracy to commit wire fraud, bank fraud, money laundering and bank bribery.

Oxford executives ran a Ponzi-like scheme among their clients, lenders, and investors. Oxford clients include some large banks and businesses like Washington Mutual Bank, Dell Financial Services, Cogent Communications, Labcorp and other businesses. The agency collected the debts from the consumers and was supposed to place funds on a trust account for their clients. However, funds from the collections weren’t immediately handed over to the clients to whom the debts were owed. Instead, the agents told the clients that debts were part of a backlog, actual collections were under-reported, and he collections were used for Oxford operations or kept among the company’s executives.

Bank executives falsified financial documents to obtain and increase their credit lines and to solicit money from new investors. One of the banks that extended a credit line to Oxford had received bailout funds under the Troubled Asset Relief Program (TARP), meaning taxpayer dollars went into the pockets of Oxford executives.

InsideARM reports that the scheme cost victims more than $10 million.

This isn’t Oxford’s first time being in trouble with the law. In 2009, Oxford was sued by the Federal Trade Commission and fined $225,000 for violating the Fair Debt Collection Practices Act. Collectors made illegal threats against consumers, call outside the allowable hours, violated the part of the law about contacting consumers at their workplace, informed unauthorized third-parties about consumer debts, and continued calling consumers even after receiving the written cease and desist letter.

Some of the penalties against the defendants were suspended because they were unable to pay.

Cases like this aren’t heard of often, but this may not be the only instance that a collection agency isn’t handing over funds to their clients. This type of situation can be unfortunate for consumers who actually pay their debts. If the collector doesn’t report payment to the original creditor, the debt is still outstanding. Your credit report may not reflect payment and the creditor may pass the debt along to another collector.

If you pay a debt, make sure you keep a copy of your proof of payment. That might include a cancelled check, bank statement showing the payment cleared, and certified mail or return receipts. That way, you can show the proof if there’s ever a question of whether you paid your debts.

Sources: InsideARM.com, FBI.gov, FTC.gov