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Seven Debt Collectors Sued For Allegedly Impersonating Law Enforcement

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Debt collectors in West Virginia, watch out. The state is coming for you.

West Virginia Attorney General Darrell McGraw filed suit against seven unlicensed debt collection companies in his state, according to a news release. The suits allege that the companies impersonated law enforcement, repeatedly harassed borrowers over the phone, made false threats and collected nonexistent debts or debts that were already paid.

"In recent years, my office has been flooded with complaints against companies making unlawful threats of arrest or legal action to coerce consumers to pay nonexistent debts or debts that have already been paid," McGraw said in the release. "These companies refuse to become licensed in West Virginia and often go through great lengths to keep their whereabouts hidden in order to evade regulation."

McGraw has a history of aggressively taking on debt collectors. He sued two units of a debt collection company last month, alleging that they robo-signed affidavits when they were trying to get judgments against West Virginia borrowers.

His actions come as Americans are struggling to deal with both the debts and the collectors. The number of debt collector complaints to the Federal Trade Commission spiked 17 percent in 2010 from the year before, USA Today reports. Today, one in seven Americans is being pursued by a debt collector, according to Matt Stoller, a fellow at the Roosevelt Institute.

The increased aggressiveness of collectors is in part the result of Americans struggling to repay past debts. Millions of Americans are out of work and, of those do have jobs, many more are getting by on stagnant wages.

In this climate, debt collectors are allegedly cursing and threatening people who they're trying to get to pay up, according to market research firm Marketdata Enterprises. In addition, they may be telling lies that violate the law. Those tactics have helped to push the firms' revenues to record highs.

In response, officials are cracking down. A Michigan-based debt collection agency paid $2.5 million in January to settle allegations of misconduct brought by the FTC. In addition, the FTC temporarily froze the assets of seven California debt collection companies in December, accusing them of using lies, threats and intimidation to pay up.

Another government watchdog, the Consumer Financial Protection Bureau, has also taken a hard look at the debt collection industry. The agency is cracking down on debt collectors as part of its increased scrutiny on “nonbanks.”

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