The Federal Trade Commission has permanently banned Blackstone Legal Group from the debt collection industry after the company extorted millions from Americans by threatening lawsuits and garnishments over debts that never existed.
Key Takeaways
- The FTC has permanently banned Blackstone Legal and its owners from the debt collection industry for collecting on non-existent “phantom debts”
- Consumers were falsely threatened with lawsuits, credit damage, and wage garnishment, resulting in over $8.2 million in fraudulent collections
- A monetary judgment of $8,254,368 has been imposed, partially suspended due to defendants’ inability to pay, but will become fully payable if financial disclosures prove false
- The case represents ongoing aggressive enforcement by the FTC against predatory collection practices that exploit vulnerable Americans
Phantom Debt Collection Scheme Shut Down
The Federal Trade Commission has taken decisive action against predatory debt collection by permanently banning Blackstone Legal and its owners from the industry after uncovering a massive “phantom debt” scheme. The agency filed charges in February 2025, revealing how the company systematically deceived and harassed consumers to collect on debts they never owed. The final order, filed in the U.S. District Court for the Central District of California, follows a unanimous 3-0 vote by FTC commissioners to approve the settlement terms, which include significant financial penalties and operational restrictions.
“This operation collected on false debt and harassed consumers with fake threats of lawsuits and damaged credit if they refused to pay,” said Christopher Mufarrige from the FTC.
Deceptive Tactics and Financial Penalties
The FTC’s investigation revealed that Blackstone Legal employed a range of deceptive tactics to intimidate consumers into paying debts they never owed. Collectors falsely threatened consumers with imminent lawsuits, credit score damage, and wage garnishment to create fear and urgency. These aggressive tactics yielded over $8.2 million from unsuspecting victims who believed they were resolving legitimate financial obligations. The court has imposed a judgment of $8,254,368 against the defendants, though it’s partially suspended due to their claimed inability to pay. The FTC has included provisions that will make the full judgment immediately due if the defendants have misrepresented their financial condition.
“On April 30, 2025, the FTC filed an amended complaint and final order in the U.S. District Court for the Northern District of Georgia against a debt collection company in connection with allegations that the company engaged in deception and coercion to pressure consumers into paying debts they did not owe, in violation of the FTC Act, the Fair Debt Collection Practices Act (FDCPA), Regulation F, the Gramm-Leach-Bliley Act (GLBA), and the FTC’s Impersonation Rule,” stated by FTC.
Similar Action Against Global Circulation Inc.
This case parallels another recent FTC action against Global Circulation, Inc. (GCI) and its owner, Kenneth Redon III, who collected over $4.5 million through similar deceptive practices. In November 2024, the FTC obtained a temporary restraining order against GCI, effectively shutting down their operation. That case resulted in a similar permanent ban from debt collection activities and a judgment of $9.68 million. The FTC established a receivership to manage the defendants’ assets, ensuring that funds would be available for potential consumer redress.
“Last year, the Federal Trade Commission (FTC) filed suit in the U.S. District Court for the Northern District of Georgia, alleging Global Circulation, Inc. (GCI) and its owner, Kenneth Redon III, violated the FTC Act, Fair Debt Collection Practices Act and its associated Regulation F, § 521 of the Gramm-Leach-Bliley Act, and the FTC’s Trade Regulation Rule on Impersonation of Government and Businesses,” stated by Federal Trade Commission (FTC).
Expanding Regulatory Enforcement
The actions against Blackstone Legal and GCI highlight the FTC’s intensified efforts under President Trump’s administration to crack down on predatory financial practices that exploit hardworking Americans. Beyond the permanent industry bans, the enforcement actions include requirements to destroy consumer data obtained during these schemes and impose 20-year compliance and recordkeeping obligations. The FTC has directed consumers who believe they’ve been victims of similar scams to report fraud and deceptive practices through their ReportFraud.ftc.gov portal, signaling the agency’s commitment to identifying and prosecuting additional offenders.
These aggressive enforcement actions serve as a warning to other potential bad actors in the debt collection industry that deceptive practices will not be tolerated. While legitimate debt collection serves an important economic function, phantom debt collection schemes undermine market integrity and prey on vulnerable consumers. The permanent bans and substantial monetary judgments reflect the seriousness with which federal regulators view these violations and their determination to protect American consumers from financial exploitation through deceptive practices.
