It’s ‘Debt Parking’: When Faux Money owed Finish Up on Your Credit score Report
In an example cited in the complaint, a consumer applying for a mortgage was told that a medical debt of $ 1,500 on his credit report by Midwest Recovery had lowered his creditworthiness and jeopardized his credit approval. The borrower contacted the hospital and was told they only owed a $ 80 copayment, which they then paid. Despite the finding, the FTC said, Midwest Recovery refused to remove the larger debt and threatened the consumer with lawsuit if they didn’t pay.
In some instances, the company appears to have re-reported debt that it removed from the consumer’s credit report – sometimes after the borrower paid the company and was reassured that the debt would be removed from the credit report.
The FTC settlement, filed in the US District Court for the Eastern District of Missouri, prohibits Midwest Recovery and its owners from parking debts and prosecuting consumers with no “reasonable basis” for debt. Midwest Recovery must also contact the credit bureaus that keep consumer credit reports and request that all debts reported by Midwest Recovery be cleared.
Midwest Recovery and The three owners, Brandon M. Tumber, Kenny W. Conway and Joseph H. Smith, neither admit nor deny the allegations contained in the complaint according to the settlement. A lawyer representing the company and Mr. Tumber did not respond to a request for comment. Attempts to reach the co-owners on a phone number provided for Midwest Recovery have been unsuccessful.
The settlement includes a financial judgment of $ 24.3 million. However, payment is partially on hold because Midwest Recovery “cannot pay,” according to the FTC. Therefore, the company has to pay about $ 57,000. One of the owners must also sell their stake in another debt collection company and pay that amount to the FTC. If the defendants are found to have misrepresented their solvency, the full verdict is due.
The settlement will be final when the judge officially enters the decision, said an FTC spokesman, Jay Mayfield. A court conference is scheduled for next week.
Rohit Chopra, one of the five members of the trade commission, voted against the deal, criticizing it as inadequate. In a statement, he said he disagreed with the terms because the defendants were not prevented from working in the debt collection industry and consumers “received almost no help at all”.