Authorities: Debt-Collector Scam Bilked Millions
New Debt Collection Scam Fools Thousands While Making Millions
A fraudulent debt collection operation which allegedly cheated over 10,000 Americans out of millions of dollars is under investigation. U.S. authorities indicate that the scale of the latest phone scam is one of a kind, using callers from India to pose as debt collectors and harass U.S. citizens into paying off loans which never existed.
Personal information was taken from payday loan websites, according to Federal Trade Commission official Steven Baker. “Phantom collectors” then used each call to gather information and demand between $300 and $2,000 in payments. Victims have testified that threats of arrest and potential lawsuits were sufficient motivation to pay for the loans that they did not owe.
The Federal Trade Commission (FTC) suspects that California based American Credit Crunchers LLC, Ebreeze LLC and their owner Varang K. Thaker are involved in the scheme, and have charged them with violation of the Fair Debt Collection Practices Act. Since October of 2010, the FTC alleges that Mr. Thaker and his companies received over $5 million from consumers across the U.S.
Unfortunately, such scams are not uncommon. Consumers across the country complain to the FTC that they receive telephone calls demanding payment of loans that were never created. This government body is designed to offer many protections, and one of their duties is to protect consumers from creditor harassment.
Rights Related to Illegal Debt Collection Practices
The FTC enforces the Fair Debt Collection Practices Act (FDCPA), which prohibits collectors from using abusive, unfair or deceptive practices to collect debts owed. This act applies to collection agencies, lawyers who regularly collect debts and companies which purchase and attempt to collect delinquent debts.
It extends to personal, family and household debts. Household debts include credit card, car loans, medical bills and mortgage payments. It does not cover business debts.
The act provides consumers with many levels of protection. For example, it limits the times of day a collector can attempt to make contact regarding a debt to between eight in the morning and nine in the evening. Also, if unable to receive calls at work a request to cease these calls can be made. A letter is required specifically telling a collector not to call work. The collector is then required to respect the request.
Additional practices that are not allowed include:
- Harassment and abuse
- False statements
- Telling others that you owe an outstanding debt
A consumer should automatically be suspicious if a debt collector threatens arrest, uses obscene language, falsely claims a crime was committed or makes contact by postcard.
Common Debt Collection Scam Tactics
Companies will make hundreds of calls in attempts to find people that might be confused or scared about unpaid debts. The practice, called “debt tagging” allows the company to find potential victims and harass them until payments on fake debts are made.
David Vladeck, director of the FTC’s Bureau of Consumer Protection, states that consumers should not feel pressured into repaying debt they do not recall owing. Any legitimate collector must provide written information and instructions related to fair collection practices.
This written notice must be provided within five days of initial contact. An email is not sufficient. If the document is not received in the mail within this time period, the calls may be part of a false operation.
Debt collection companies are also observing an increase in scammers targeting individuals with below average credit ratings. Experts think those running these operations believe individuals will be more likely to pay off debts to avoid additional credit trouble.
There are some practices that can offer debtors additional protection. For example:
- Ask for a collector’s name, company name, street address and telephone number. Then refuse to provide any information until that collection agency provides written validation notice, which is required under the FDCPA. A valid organization will comply.
- Do not give any personal financial information.
- Contact the creditor – the debt may be legitimate, but the collector may not.
After completing the call, it is important to report the potentially fraudulent, unfair business practice to the FTC. Following these steps help debtors to avoid becoming a victim of fraud.
Remedies Against Debt Collection Companies
In addition, if you suspect that you are the target of a debt collection scam, report it immediately with the state attorney general’s office and a local Better Business Bureau. Public law authorities like the state attorney general’s office will take legal action against the scammers if enough complaints are filed.
Victims can also receive direct aid through filing a lawsuit in state or federal court. Claims must be made within one year after the fraud has occurred. If your claim is successful, a judge will require the collector to pay damages. A judge may also require reimbursement for attorney fees and court costs.
Unfortunately, sometimes legitimate debt collections agencies violate the law and use overly aggressive tactics. This can be hard to discern from a fraudulent attempt, but may still violate the FDCPA. As a result, remedies may be available.
If you or a loved one has been a victim of a debt collection scam or is receiving threatening calls, it is important to contact a lawyer experienced in creditor harassment to help you stop the harassment and help to ensure that all your legal rights are protected.