Midwest Recovery Systems allegedly received thousands of complaints monthly regarding the fake debts parked on consumers’ credit reports. The company’s investigation found that 80% to 97% of the debts were inaccurate or invalid.
The FTC alleged that Midwest Recovery Systems’ debt parking scheme involves payday lending debts and medical debts, often a source of confusion and uncertainty for consumers due to the “complex, opaque system of insurance coverage and cost-sharing.”
Additionally, Midwest Recovery Systems allegedly threatened consumers with a lawsuit when they refused to pay the bogus debt parked on their credit reports.
The defendants violated the FTC Act, the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and the FCRA’s Furnisher Rule by practicing debt parking.
In a statement, FTC Bureau of Consumer Protection Director Andrew Smith said, “The defendants parked fake or questionable debts on people’s credit reports and then waited for them to notice the damage when they were trying to get a loan or a job. The defendants used this illegal ‘debt parking’ to coerce people to pay debts they didn’t owe or didn’t recognize.”
Midwest Recovery Systems settles with the FTC
According to the FTC, Midwest Recovery Systems decided to settle the allegations and agreed to a monetary judgment of $24.3 million, which is partially suspended based on an inability to pay.
