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Federal Trade Commission chases phantom debt collectors with lawsuit filed in Chicago

Wednesday, February 22, 2012   (0 Comments)
Posted by: Liz Jones
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Scam operators used personal data from consumers who had applied for short-term loans from payday lenders, bullying, threatening them into paying debts they didn't owe, FTC alleges
By Gregory Karp, Chicago Tribune reporter


One of the newest consumer scams involves debt collectors who bully consumers into paying debts they don't owe.

One scheme, which has bilked U.S. consumers out of some $5 million so far, involved about 8 million phone calls originating in India. They were placed to American consumers over an eight-month period, the Federal Trade Commission said Tuesday.

In the first case of its kind in the United States, the FTC's Midwest office filed suit in Chicago against American Credit Crunchers, related company Ebeeze and their owner Varang K. Thaker, all related to an allegedly phantom debt-collection operation that somehow obtained personal information for thousands of Americans who applied for short-term loans through payday lenders.

The scam operators often pretended to be law enforcement officers or government authorities and would threaten to arrest and jail consumers if they refused to make a payment on a delinquent payday loan. They also threatened to file lawsuits and to call the consumer's employer to get them fired. Scammers, officials said, demanded payments of about $500, but as high as $2,000.

Some consumers complied even when they knew they didn't owe money, just to avoid a potentially embarrassing situation or potential arrest, authorities said.

That was the case with JanLaree DeJulius, 57, of Las Vegas, who said she was embarrassed getting such harassing phone calls at work. The caller, posing as a police officer and armed with her personal information, threatened to have her arrested, face a lawsuit and have her wages garnisheed.

"The gentleman who called knew everything about me … I don't think I'm stupid, but I fell for it," DeJulius said. "I agreed to set up installments because I didn't want attorneys coming to my place of work. I didn't want to be arrested."

She said her ex-husband applied for a payday loan using her personal information. But even after the $763 debt was being paid in installments, she received calls twice more asking her to pay the amount again. "They're scum," she said.

So far, the FTC has received thousands of complaints from across the country about the scam. "We think we have a really serious problem," said C. Steven Baker, director of the FTC's Midwest Region, based in Chicago. "As economies have globalized, so has fraud."

A U.S. district court judge in Chicago ordered the operation to cease and froze its assets while the FTC moves forward with the case. "I wish I could tell you that bringing this case is going to stop this kind of conduct. Unfortunately, it's not," Baker said. "There are clearly other people who are continuing to do this."

According to the FTC's complaint, Thaker, of Villa Park, Calif., allegedly obtained information — often including Social Security or bank account numbers — about consumers who had inquired about or applied for online payday loans. Thaker allegedly worked with telephone callers in India who called consumers using lies, threats and abusive language to persuade them to pay debts that were not owed or that he was not authorized to collect.

"Nobody actually owed them a dime," Baker said. Phone calls were placed using Internet-based phone calling, which made the calls appear to caller-ID systems as if they were coming from within the U.S., he said.

Thaker could not be reached for comment. Baker said that as of Tuesday morning, Thaker had not responded to court documents, which were filed Feb. 13.

The scam had been ongoing since at least January 2010, officials say. Baker said the FTC doesn't yet know how criminals got the personal information of people who applied for payday loans. Some received payday loans, while others applied but did not get loans, he said.

At least one online payday lenders group said it supports the FTC's action. "The online lending industry is pleased to see the FTC take decisive action against this fraudulent debt collector," said Lisa McGreevy, president and CEO of the Online Lenders Alliance. 

"For over two years, OLA and our member companies have heard from consumers about abusive and threatening calls demanding payment on loans that had already been repaid or were never issued. 

Since the beginning of this scam, we have been working with the FTC and will continue to work with them, along with other law enforcement agencies, until this scheme is stopped," McGreevy said.
The FTC has set up an informational Web page for consumers, called "Who's Calling? That Debt Collector Could be a Fake." It's at tinyurl.com/phantomdebt.

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