OC Debt Collectors Scammed Consumers Out Of $20M, Judge Says

ORANGE COUNTY, CA — A federal judge temporarily shut down an Orange County debt collection operation that allegedly used false threats to collect over $20 million in often-fictitious debts from consumers, according to court papers obtained Monday.

A complaint filed in Santa Ana federal court alleges that McDonnell & Associates LLC and owners Oscar Gerardo Gonzalez Martin and Oscar Ruiz Canela falsely claimed to be a law firm or affiliated with attorneys and used high- pressure tactics to coerce consumers to make payments on debts that the consumers often did not owe, a practice known as phantom debt collection.

McDonnell & Associates also does business as First Capital Group, Maxwell & Bryant Group, and Lewis McDonnell & Associates, according to the Federal Trade Commission.

A message sent to Maxwell & Bryant Group in Tustin requesting comment was not immediately answered.

The complaint alleges that defendants left deceptive voicemail messages to get consumers to respond and threatened to contact consumers' employers and family members if they did not. The FTC contends that when consumers did call back, the defendants would make threats designed to coerce payment.

As an example, the defendants are alleged to have threatened legal action if those contacted did not pay the alleged debt, garnish consumers' wages and put a lien on their properties. Yet, as the complaint contends, the threats were deceptive because defendants did not take these actions, nor did they intend to, the FTC said.

"Pretending to be a law firm or affiliated with attorneys and threatening to contact consumers' employers and family members to induce consumers to pay debts they do not owe is illegal," Christopher Mufarriage, director of the FTC's Bureau of Consumer Protection, said in a statement. "We are pleased that the court stopped this scheme -- sending a clear message that the FTC will not tolerate bad actors using unlawful debt collection tactics to coerce consumers into paying."

Most consumers did not owe the alleged debts, the FTC said, and the defendants lacked the authority to collect or act on the debts they claimed consumers owed. Nevertheless, because of the defendants' tactics, consumers often paid hundreds of dollars or more to satisfy the purported debts. In total, consumers have paid more than $20 million to defendants, according to the FTC.

On Thursday, U.S. District Judge Mónica Ramírez Almadani issued a temporary restraining order freezing the defendants' assets and placing the company under the control of a court-appointed receiver while the case continues.

The FTC alleges that the allegedly deceptive conduct violated the FTC Act, the Fair Debt Collection Practices Act and the Gramm-Leach-Bliley Act.