Legal Action Taken against New York Debt Collection Scheme

In early November, the Consumer Financial Protection Bureau and the New York Attorney General, filed a lawsuit in a federal district court against a debt collection network based in Buffalo, New York. The complaint alleges that Douglas MacKinnon and Mark Gray operated a network of sham companies that harassed, threatened, and deceived millions of consumers. MacKinnon and Gray used these deceptive techniques when attempting to collect on debts that were inflated or were not owed by the contacted consumers. Through this action, the CFPB is seeking that the illegal operation be shut down, compensation for victims, and a civil penalty be assessed against the companies and partners involved.

The companies involved in this lawsuit include Northern Resolution Group, LLC, Enhanced Acquisitions, LLC, and Delray Capital, LLC. According to the CFPB and New York Attorney General, these three companies are interrelated collections companies based in Buffalo, New York. Between these companies, millions of dollars’ worth of consumer debt has been purchased. These companies were created, operated, and overseen by Douglas MacKinnon and Mark Gray.

According to the complaint, since 2009, Northern Resolution Group, Enhanced Acquisitions, and Delray Capital routinely inflated consumer debts and rely on illegal practices to collect as much money as possible from consumers. It also alleges that MacKinnon, set up a network of at least 60 additional “fly-by-night” debt collection firms to collect on large debt portfolios purchased by the three companies. These companies were used when other debt sellers would no longer do business with the defendants and defendant companies in this case.

The complaint alleges that the defendants violated the Fair Debt Collection Practices Act, as well as, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The actions have also been alleged to be in violation of New York law and New York State Debt-Collection Law. Allegedly, MacKinnon, Gray, and their network of debt collection companies inflated consumer debts and misrepresented amounts consumers owed. The companies added $200 to each consumer debt account they acquired, even where state law or the underlying contract prohibited such fees or charges from occurring. In some cases, debts were inflated through additional unauthorized fees and charges. In some cases, collectors quoted consumer balances that exceeded 600% of the original debt amount.

The companies also falsely threatened legal action against consumers, when in reality the collectors had no intention of pursuing such action. Threats of legal action included accusing consumers of committing crimes and claiming that consumers would be arrested if the debts were not paid. Representatives from the companies also impersonated law-enforcement officials, government agencies, and court officers. In many cases, the companies made it appear as though communication such as phone calls and emails were coming from government or court officials.

According to the complaint, MacKinnon and Gray knew, directed, and encouraged the illegal actions alleged. Additionally, they have profited significantly from these practices—amounting to tens of millions of dollars annually. Through the lawsuit, the CFPB and New York Attorney General seek to stop the alleged unlawful practice and have also requested that the court impose penalties on the company and its partners for their conduct.