The owners of a handful of debt collection companies that operated partly in Western New York have agreed to leave the industry permanently and pay more than $60 million in restitution and penalties after their employees used illegal tactics to solicit more money from consumers.

New York Attorney General Letitia James, whose office brought litigation against the companies, announced the settlement at a press conference in Buffalo, New York, on Thursday morning.

“Not only did they force unsuspecting debtors to pay more than they owed, but they illegally threatened to have them arrested for not complying with these predatory practices,” James said.

The debt collection company owners are Douglas MacKinnon and Mark Gray. MacKinnon owned Northern Resolution Group LLC and Enhanced Acquisitions LLC. Gray owned Delray Capital LLC.

MacKinnon was represented by Dennis Vacco, a former New York attorney general under Gov. George Pataki who's now a partner at Lippes Mathias Wexler Friedman in Buffalo. Vacco declined to comment on the settlement.

Gray was represented by Joseph Makowski from the Makowski Law Office in Buffalo. Makowski said Gray did not admit any liability as part of the agreement.

“He's relieved to get this behind him and move on with his life,” Makowski said. “He's responsible for a family and he's satisfied to put this behind him.”

According to James, MacKinnon and Gray regularly allowed their debt collection companies to use a series of illegal tactics that caused consumers to pay more than they legally had to. In some cases, those consumers didn't owe anything at all, but still paid the company because they feared repercussions.

In one case, described by James, a debt collector employed by MacKinnon told a woman over the phone that her daughter owed money and would be brought to court if she didn't pay the full amount. The woman was schizophrenic, James said, and agreed to pay the full amount.

“She was so scared for her daughter that she sent the company a payment of $517 in order to prevent the company from taking her daughter to court,” James said.

That debt, according to James, was never verified.

That was a common theme among debt collectors employed by MacKinnon and Gray, James said. They would often call consumers and threaten them with legal action—and in some cases criminal charges—if they didn't pay the full amount.

They used a tactic called “spoofing” while making those claims, James said. That's when the caller makes it appear as if they're calling from a government agency or the court system. That was made worse by automated telephone dialers, which enabled collectors to send threatening messages to several people at once.

They also regularly did something called “overbiffing,” James said. That's when debt collection companies demand that consumers pay more than what they actually owe. That was on top of a common practice by the companies of automatically adding to a consumer's debt, for no legally justifiable reason, when it was placed with them for collection.

“This resulted in consumers who borrowed a few hundred dollars being hounded to pay thousands of dollars they did not legally owe,” James said.

MacKinnon closely monitored his collection shops and appeared to place pressure on their activity. If a stop wasn't collecting aggressively enough, James said, he would shut them down. Gray, according to James, regularly received complaints about the illegal tactics used by his own collection shops but didn't do anything to stop them.

Over the course of the scheme, more than 250 collection shops collected on debts acquired or controlled by MacKinnon and Gray. They placed debt with collection shops throughout the country, but most offices were in the Buffalo area.

The settlement requires MacKinnon to pay $60 million, two-thirds of which will be for restitution. The remaining $20 million will be a civil penalty, half of which will be paid to New York. The other $10 million will be paid to the Consumer Financial Protection Bureau, a federal agency.

Gray was required to pay $6 million as part of the settlement, but that's been suspended because he doesn't have the money to finance the judgment, according to the Attorney General's Office. Gray will, instead, pay $10,000.

Both men, and their companies, are also permanently banned from operating in the debt collection industry under the agreement.

The Attorney General's Office did not bring criminal charges as part of the probe. James said she couldn't comment as to why the investigation didn't result in prosecution of either MacKinnon or Gray.

“I cannot comment on any criminal investigations,” James said. “Our focus was primarily on a civil action to recover restitution for consumers who, unfortunately, had been defrauded, and particularly with a focus on vulnerable seniors.”

The settlement is subject to court approval. The litigation is in the U.S. District Court for the Western District of New York.

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