Minnesota regulators pounced on six debt collection firms Thursday for hiring felons, harassing consumers who owed money and stealing their financial information.

Commerce Commissioner Mike Rothman said the firms employed "dozens and dozens" of felons who gained access to financially strapped consumers' credit card numbers, bank accounts and other financial information. The firms have agreed to pay hundreds of thousands of dollars in fines and fix the problems.

"Basically, the wolves were allowed to get in," Rothman said.

The Star Tribune revealed debt collectors' pattern of hiring criminals last year in the investigative series "Hounded," which reported that 743 criminal offenders in Minnesota had been registered as debt collectors since 2005. State regulators warned companies in January that they faced enforcement action for not doing background checks.

On Thursday, the Commerce Department singled out Allied Interstate LLC, one of the state's largest debt collection firms, for hiring numerous convicted felons as registered debt collectors. The state didn't give a number, but the newspaper's investigation found 81 collectors registered at the company from 2005 to 2010 who had felony or gross misdemeanor convictions.

One woman hired to collect debts by Allied had convictions for financial card fraud and for being a lookout in a burglary and was arrested driving away in a stolen vehicle, according to the department. Another collector for the Plymouth-based company used a code phrase -- "The meat is on the grill" -- to tell a co-worker he had just stolen a debtor's personal credit card information, the department said.

Allied fired employees for harassing debtors over the phone, using profanity, forging documents and other serious misconduct -- but failed to inform the Commerce Department, as required by law. A year ago, Allied agreed to pay $1.75 million to settle claims by the Federal Trade Commission that it tried to collect debts people didn't owe and threatened legal action it didn't intend to take, in violation of federal law.

Two other debt collection firms faced enforcement action Thursday for misconduct other than hiring felons.

Facing $900,000 in fines

Altogether, the eight firms are subject to more than $900,000 in fines. All but one signed consent orders agreeing to pay the penalties. In such orders, companies don't explicitly admit to the misconduct, but agree to stop doing it and to take corrective action. One company's fine was stayed as part of its corrective efforts.

The five other firms caught hiring felons were Bureau of Collection Recovery LLC, Eden Prairie; AllianceOne Receivables Management Inc., Eagan; Van Ru Credit Corp., Park Ridge, Ill.; IC System Inc., St. Paul, and General Revenue Corp. of Cincinnati.

Rothman said he didn't have an exact number of felons who worked at the firms, and it is unknown how many consumers were victimized by the criminal collectors.

All the Minnesota-based firms were among the top five that the "Hounded" series identified as having the most criminals registered as collectors. State data showed that those four firms had a total of 275 collectors with felony or gross misdemeanor convictions from 2005 to 2010.

Only one firm returned calls seeking comment. Michael Iseyemi, chief security officer for Bureau of Collection Recovery, said that the hiring of felons occurred under previous owners and that the criminals and the company's management had been replaced.

"We don't have any felons working there now," said Iseyemi, who asserted that the company is committed to complying with regulations and has "taken a leadership approach to clean up the industry."

Firms 'looking the other way'

In Minnesota, debt collection firms not only are forbidden from hiring criminals but also must conduct background checks and submit documentation to regulators.

Mark Schiffman, spokesman for ACA International, a Minnesota-based debt collection trade group, said he didn't know the details of the companies' conduct, but said "none of these agencies deliberately, as far we know, tried to hire felons.

"This isn't reflective of all debt collectors," he added. "This isn't an acceptable type of behavior." Schiffman said it's a good sign that almost all of the companies are taking corrective action.

But consumer attorney Patrick L. Hayes of Minneapolis said the crackdown is long overdue and hardly enough.

"It's about time they do something," Hayes said. "They are just scratching the surface. These companies are major companies, but there are a lot more smaller companies that are operating underneath the radar."

Rothman, the commerce commissioner, said some companies "were inappropriately looking the other way in terms of who they were hiring" while others were "asleep at the switch" or "just terribly bad managers." He said the department is still investigating one collections company, which he declined to name.

The company that topped the "Hounded" series list for the most registered collectors with criminal backgrounds -- 96 over five years -- was not a subject of Thursday's enforcement action. A reporter's call to that company, Financial Recovery Services Inc. in Edina, was not returned.

Among other findings of the Commerce Department investigation is that firms fired workers for lawbreaking without telling regulators, failed to properly report instances of criminal identity theft and doctored financial documents.

Commercial Recovery Corp. was accused of collecting payments but not turning the money over to its clients and of other misconduct, but it did not consent to pay a fine or correct problems.

The company could no longer be reached at its old phone number, and the department said it had been evicted from its Blaine office. It has a right to a hearing before an administrative judge.

David Shaffer • 612-673-7090

HOUNDED: MINNESOTANS

IN DEBT

The Star Tribune produced a series examining the aftermath of a credit boom that left many people in financial trouble, facing a collections industry that uses aggressive methods to obtain payments. Read the stories at startribune.com/hounded.