SACRAMENTO, Calif. March 7 2012 The calls went out by the millions to unsuspecting consumers across the country.
Phony debt collectors – based in Southern California and using call centers in India – demanded immediate payment on delinquent loans. Often posing as attorneys or law enforcement officials, they threatened consumers with lawsuits or arrests if payments weren’t made.
And they were highly effective. In 8.5 million calls tracked over four months in late 2010 by the Federal Trade Commission, the callers raked in more than $5 million in payments from intimidated consumers.
Only problem: Nobody owed them a dime.
The “phantom-debt” collection calls originated from two companies – American Credit Crunchers LLC and Ebeeze LLC, based in Villa Park, Calif. The FTC announced last month that both companies have been shut down by court order and their assets frozen while an investigation continues.
During the four-month investigation, about 17,000 payments were taken from consumers’ credit or debit cards, ranging from about $300 to more than $2,000 each. The “phantom-debt” calls occurred in virtually every ZIP code across the country.
“This is a brazen operation based on pure fraud, and the FTC is committed to shutting it down,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection, in a statement.
According to the FTC, the deceptive collection calls focused on payday loans, the short-term, high-interest loans that have been the focus of consumer complaints for years.
In many cases, the victims had not even taken out a payday loan, but had filled out an online application that disclosed their bank account, Social Security or other personal financial information.
Using that information, the callers used coercive tactics, such as threatening to sue or arrest people for failure to pay.
Why would victims pay for loans they’d never taken out?
In a recent news conference, one victim, JanLaree DeJulius of Las Vegas, said she was so rattled by the call to her workplace that she paid more than $700 just to make the caller go away.
In its complaint, the FTC said payday loan applicants are often financially stressed and “overwhelmed with bad finances,” causing them to be confused or scared into paying.
“It’s very frightening,” said Chicago-based FTC staff attorney Elizabeth Scott. “They threaten to show up at your home or workplace and arrest you. And they have so much personal information on you – your bank accounts, etc. – that they’re believable.”
The companies’ owner, Varang Thaker, could not be reached for comment.
According to the FTC, a review of Thaker’s company bank accounts shows plenty of deposits by consumers, but no money going back out to known lenders or debt sellers.
The accounts also show payments to outsourcing companies in Gujarat, India, where the call centers are believed to be located. Other company transactions show transfers to Thaker’s personal bank accounts, as well as the purchase of a Mercedes-Benz SUV, airline tickets and tens of thousands of dollars in store purchases in both California and India.
Debt collection ranked No. 2 among consumer complaints received by the FTC in 2010.
That same year, an FTC report described the country’s system for resolving disputed debt collections as “broken,” citing lawsuits filed by debt collectors that leave consumers unable to defend themselves.
The FTC recommended that states enact laws to tighten their rules on the debt-collection process.