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Federal officials shut down California debt collection operation

ConsumersCrime, Law and JusticeJustice System

WASHINGTON -- Federal officials have shut down a California debt collection operation for allegedly extorting payments from consumers by posing as process servers and using false threats of lawsuits.

The Federal Trade Commission said Thursday that it had requested the halt of what it called an "elaborate debt collection scheme" operated by four people under seven different company names in locations in Orange and Riverside Counties.

Among the companies targeted were Western Performance Group and Allied Financial Group.

But the agency said the four people involved in the operation -- Thai Han, Jim Tran Phelps, Keith Hua and James Novella -- frequently changed company names "to avoid law enforcement scrutiny."

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The agency filed suit and U.S. District Judge Dale Fischer in Los Angeles last week issued a temporary restraining order to stop the companies' practices and freezing their assets.

The suit alleged the operation used "false threats of lawsuits and calculated campaigns to embarrass consumers by unlawfully communicating with family members, friends, and coworkers."

The agency said the defendants and the firms violated the Fair Debt Collection Practices Act by improperly contacting third parties about consumers’ debt, failing to disclose the name of the company they represented or that they were attempting to collect a debt when contacting consumers, and failing to notify consumers of their right to dispute the debts and obtain verification of them.

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