CHICAGO (CN) - The Federal Trade Commission shut down an alleged fake debt-collection scam that collected more than $5 million by threatening consumers who took out payday loans with arrest if they did not immediately pay a sum over the phone.
According to the Federal Trade Commission, Varang Thaker, president of American Credit Crunchers LLC and Ebeeze LLC, ran a "massive fake debt collection scheme that has defrauded thousands of consumers across the United States."
Through unknown channels, Thaker acquired information about consumers who applied online for a payday loan, the FTC said. Such information included home and business addresses, and partial or entire Social Security or bank account numbers.
Victims of Thaker's scam received calls from India demanding that they pay their debt immediately. Many of those contacted did owe payday loans - but to someone else.
The caller's knowledge of the consumer's personal information "lends credibility to their claims that they are collecting on debts that are actually owed and leads those who pay to believe that the callers represent a company from which they have previously obtained a loan," the FTC said.
In some cases, the callers pretended to be police and threatened to arrest the consumer if he or she did not pay. In other instances, the caller pretended to be a lawyer about to file a lawsuit against the consumer seeking a huge amount of money.
"People who receive these calls are scared by them and take the threats very seriously. The callers are threatening and belligerent and sometimes use obscene and vulgar language," the FTC said.
"Unfortunately, all too often victims pay what the defendants demand, usually by credit or debit cards," it continued.
One victim, Mark Merola, did not believe he was delinquent on any loan when he was contacted but was scared by the caller's threat to send police officers to arrest him at work. He agreed to pay $523.87 in two payments using his debit card.
"If consumers do not agree to pay immediately, the pressure continues in other ways. At times, the callers contact the consumer's place of work. If consumer either refuse to pay or ignore the calls, defendants undertake a relentless campaign of harassment by placing repeated calls to the consumers. Some consumers are subjected to ongoing calls even after they have made a payment," the FTC claimed.
In total, Thaker allegedly raked in more than $5 million in over 17,000 transactions, according to the FTC. Phone lines paid for by Thaker placed over 8.5 million calls to the U.S., including nearly 160,000 to numbers in the Northern District of Illinois.
Last week, U.S. District Judge Ronald Guzman granted an ex parte
temporary restraining order against Thaker, and his two companies.
The order forbade defendants from misrepresenting that they have the authority to collect delinquent payday loans, from implying that they are a law enforcement agency or associated with a law firm, or claiming that nonpayment of a debt will result in imprisonment.
It further froze all assets belonging to defendants, per the FTC's request to "preserve assets for eventual restitution to victimized consumers."
"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 press release
. "Consumers should not be pressured into paying debt they don't remember owing. Legitimate debt collectors must provide consumers with both written information about the debt, and instructions for protecting themselves if they don't think they owe the debt," he added.