The case of Mark Merola is typical of consumers targeted for debt collection fraud. His wife received a phone call at home. Someone speaking with an Indian accent informed her that her husband would be arrested and immediately imprisoned if he did not pay what he owed on a payday loan. The caller had information on where Merola worked and threatened to send police there. This rattled Merola enough that he paid $523.87 despite not being delinquent on any loan.
Debt collectors generate more complaints to the Federal Trade Commission than any other industry, Over the last two years, consumers have filmed more than 4,000 complaints with the FTC about fraudulent debt collection calls, according to its website. In the face of harassment, threats and demands for larger payments than the law allows, consumers often pay more than they owe, have their privacy invaded and fall deeper in debt.
Payday loans, for many a refuge as the economy struggles to recover, are a short-term, high interest loan that gives people access to emergency cash for unexpected expenses. Per agreement, the money is paid back on the next payday.
In the case of Merola and others, the FTC charged Varange K. Thaker, owner of the Vila Park, California-based American Credit Crunchers, LLC and an affiliated company, Ebeeze, LLC, with violating the FTC Act and the Fair Debt Collection Practices Act. According to the complaint, Thaker obtained personal information, such as Social Security or bank account numbers, from consumers who had inquired about, applied for, or obtained payday loans. He worked with telephone callers in India who called consumers and used deceptive statements and threats to convince them to pay debts that were not owed or that he was not authorized to collect, the FTC alleges.
The debt collection fraud netted Thaker tens of thousands of dollars that he allegedly withdrew from American Credit Crunchers and Ebeeze bank accounts.
A federal judge in Chicago recently issued a temporary order to shut Thacker down, Bloomberg reports. The order prohibited Taker and the companies from engaging in illegal conduct, froze his assets and those of his companies, and appointed a receiver to take over the firms.
Since January 2010, consumers who had applied online to legitimate lenders have received about eight million debt collection calls from India, Steve Baker, director of the FTC’s Midwest regional office, told Bloomberg.
What is the best way to handle callers who claim to be debt collectors? The Online Lending Alliance, is an organization formed in 2005 to represent U.S. based companies offering online payday loans, offers these tips:
Legitimate collections do not use threatening language or arrest threats
Ask the debt collector to provide official documentation or information that verifies the debt, including the amounts owed and the dates of the transaction.
Do not confirm bank account information or other personal information until you have verified that the collector is legitimate and that you have an actual debt outstanding.
If you are uncertain or are being threatened with arrest, take down the information and call the company that provided the loan. Do not call the number provided by the “scammers”.
If you suspect that the call is not legitimate, gather as much information as possible during the call (caller ID, collector’s name, company name, company phone number) and call the lender to report that you have received a threatening call.
If you determine that the call is not legitimate, report the call to your local law enforcement and the Federal Trade Commission www.ftc.gov