A Sylvania debt-collection company now in the cross hairs of Ohio Attorney General Mike DeWine has been squeezing victims of credit-card fraud for years for illegal charges racked up by others on adult Web sites.
The victims include a 74-year-old Virginia lawyer, a 90-year-old Missouri grandmother, and a university administrator who needed help from attorneys general in two states to clear his name.
More than 400 consumers across the country have complained to Mr. DeWine's office and the Better Business Bureau since 2009 about Collection and Recovery Bureau.
All told identical stories: They were harassed, cursed at and threatened with ruined credit, lawsuits, or jail if they didn't pay debts they didn't owe.
Consumer advocates fear that many people paid the debt just to make the problem go away because they didn't want to be associated with pornography.
The Dispatch discovered CRB's suspect business practices during an investigation into rogue debt collectors who are using the nation's flawed credit-reporting system to place fraudulent, erroneous, and questionable debts on consumers' credit reports. At the same time, Mr. DeWine's office was closing in on the company.
Mr. DeWine sued CRB on Thursday in Lucas County Common Pleas Court, charging that its practices have violated the federal Fair Debt Collection Practices Act and the Ohio Consumer Sales Practices Act.
“Their methods with consumers have been unfair and deceptive,” Mr. DeWine said.
President Ron Burnard said he closed the firm and fired its seven employees Aug. 31 because it had become too expensive to operate in the current regulatory climate. He also said the attorney general's investigation had no bearing on his decision.
“We decided to get out of the collection business after 10 years,” Mr. Burnard said.
The CRB Web site also was shuttered. However, a recording at its phone number last week says “ERS” and gives extensions for Mr. Burnard and others who worked for CRB. Mr. Burnard had no explanation for the new phone greeting.
Mr. Burnard founded the debt-buying-and-collecting company in 2002 and carved a niche in the marketplace: buying debt from adult Web sites for pennies on the dollar.
CRB bought portfolios of debt that had been charged back — or returned — to adult Web sites by credit-card companies because they were fraudulent purchases. CRB then pursued the consumers who were defrauded.
The Dispatch spoke with dozens of consumers who said they were harassed relentlessly by CRB. Most were embarrassed that their names were connected to sex Web sites.
“[CRB] has committed unfair, deceptive acts or practices by engaging in any conduct to harass, oppress, or abuse any person in connection with the collection of a debt,” the state's lawsuit charges.
Though CRB isn’t the only debt-collection firm that buys charged-back debt, no one really knows how widespread the practice is.
But Mr. DeWine and consumer advocates are alarmed by the business model because innocent people are finding the fraudulent, charged-back debts in their credit reports.
“The practice is unconscionable,” Mr. DeWine said.
Robert Hobbs, deputy director of the National Consumer Law Center, put it bluntly: “It's basically a blackmail tactic.”
CRB has received more complaints than any other Ohio-based debt collector and trailed only Minnesota-based Allied Interstate, which last year paid a $150,000 fine to Mr. DeWine's office for pursuing consumers who did not owe debts.
Nearly 85 percent of the complaints against Allied were received before Mr. DeWine sued the company in August, 2011. By comparison, two-thirds of the complaints against CRB have been logged since January, 2011.
The Better Business Bureau of Northwest Ohio frequently heard complaints from consumers about CRB — 163 of them in the past three years.
When contacted by the Attorney General’s Office or the BBB on behalf of a consumer, the company almost always said it had made an innocent mistake and would cease collections.
“They are smart enough to know to respond,” said Dick Epstein of the Toledo-area BBB. “They know if they just keep their nose clean with the AG and the BBB ... they can operate with impunity.”
A Colorado man won a $3,437 default judgment against the company for pursuing him on a charge back to an online dating Web site called Adult Crowd. “They bully people and most just pay it,” said Jill Gookin, the man's attorney.
Ms. Gookin's client fought back and won last year but has yet to see a dime from CRB.
Joshua Morgan was among those who turned to Mr. DeWine.
About once a week, a quiet dinner with his wife would be interrupted by the same phone call, one that would make Mr. Morgan lose his appetite.
A woman representing CRB would leave a message at the speed of an auctioneer's voice claiming the Pittsburgh man owed $64.95, including a $25 fee, for using some type of Web-based porn service.
“That charge didn't belong to me and was a fraud on my account. No way was I going to just pay,” Mr. Morgan said.
Mr. Morgan, 31, a university computer administrator, first noticed the $39.95 charge on his Bank of America credit card in August, 2009. He called the bank and explained that the charge was fraudulent. Someone had accessed an email address created back when he was in high school. The credit-card company agreed that the charge was phony and removed it from his account.
Mr. Morgan thought the ordeal was over until May, 2010, when he received the first of many phone calls from CRB. It was around the same time that he and his new wife were on the verge of buying their first home.
“I feared this thing would end up on my credit report and cause me to lose my mortgage or have to pay more,” he said.
He explained to CRB that the charge was deleted from his account by Bank of America and that he had an affidavit from the credit-card company. But CRB ignored the explanation and continued to hound him.
Investigators from Bank of America's fraud unit advised Mr. Morgan to not pay the charge. He filed a complaint with the Pennsylvania Attorney General's Office, which was unsuccessful in getting the company to stop contacting Mr. Morgan.
The dispute was then transferred to the Ohio Attorney General's Office.
The letters and calls finally stopped, and Mr. Morgan hasn't heard from the company since the summer of 2011. The charge never made it on to his credit report.