The Federal Trade Commission announced today that a U.S. district court has stopped an operation that allegedly collected millions of dollars in payday loan debts that consumers did not actually owe.
The FTC alleges that personal information about consumers who turned to payday loans during hard times found its way into the hands of the defendants, who then used it to threaten to arrest and jail consumers if they did not agree to make payments on a supposedly delinquent loan.
From the FTC:
Claiming to be law enforcement, such as a local police department, the “Federal Department of Crime and Prevention,” or simply a “federal investigator,” the callers typically demanded more than $300, and sometimes as much as $2,000. At other times, the callers said they were filing a large lawsuit against the consumer because of the delinquent payday loan or would have the consumer fired from his or her job, according to the FTC.
The FTC says that the consumers who were contacted did not actually owe any money, either because the payday loan didn’t actually exist, or because the person on the phone didn’t have the authority to collect the debt.
In the “typical” case provided by the FTC, a caller with an Indian accent reached a consumer’s wife at home and told her that her husband would be arrested and immediately imprisoned if he did not pay what he owed on a payday loan. The caller later said he knew where her husband worked and threatened to send police there to arrest him. Despite not being delinquent on any loan and not owing money to the caller, the couple was afraid of the threatened arrest, so the husband paid $523.87 to the defendants.
Here at Consumerist, we’ve been hearing about similar behavior from “debt collectors” since at least 2008. Our favorite part of the scam was the way in which the callers would sometimes say they were from “Steve Martin’s office,” and explain that they were from a semi-secret government agency that had the authority to arrest people. It sounds silly when you read about it, of course, but because the person on the other end of the line had access to personal information that often included Social Security or bank account numbers, the calls were actually quite terrifying and effective.
Court Halts Alleged Fake Debt Collector Calls from India, Grants FTC Request to Stop Defendants Who Often Posed as Law Enforcement [FTC]
FTC Complaint (PDF) [U.S. District Court for the Northern District of Illinois Eastern Division]
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Isn’t this already fraud? I feel like we’re just making bandaid fixes for a larger issue.
Prosecution in court is a bandaid for a bigger issue? If you’re talking about stopping these people before they con millions of dollars out of innocent people then yes, I agree with you there.
Sounds more like extortion to me. Criminal charges and conspiracy charges may be in order.
Putting this kind of language in a settlement is VERY common, and yes, the acts stipulated are already criminal violations. But putting it in the settlement is important still. The reason is that it now adds a second easier to prosecute crime if they keep doing it, namely contempt of court. So for example, take the restriction on representing themselves to be lawyers. That’s generally a state crime, not federal. But with this federal court order, now it becomes federal contempt of court for them to represent themselves as lawyers, without the need to involve state attorneys general, and only requiring the evidence that they represented themselves to be lawyers, without having to prove the harm of that representation, or that they aren’t in fact lawyers.
Wait… let me check…
WHAT HAPPENED TO MY HOUSEHOLD HINTS BLOG??!!!
(Hi, Megan. We miss you.)
A tear just rolled down my cheek…
Why, thank you.
I’m going to assume that you’re not being sarcastic, of course. I’m an optimist.
*clings to Meg’s leg*
NEVER LEAVE US AGAIN
What I’m doing is technically not called “clinging”, but I’m definitely on the other leg.
Meg’s a cutie.
Don’t be a pervert, you may spook her!
He’s not being sarcastic. Yesterday was “household hints from hell” for us! Can you thwap Phil with a keyboard for us?
I’m an optimist.
Twelve ways to overcome being an optimist are…
As far as I’m concerned, you and Ben are The Consumerist, so it’s good that you’re still here, at least we get some of the kind of posts I come here for. I actually scrolled up to the top of the article to see who posted it when I realized it was something solid.
What you said! Yay Meg!
Add them to your contacts and set a silent wav file as the ringtone.
Caller ID can be trivially spoofed. I know that those “cardholder services” calls come from a different number each time.
Here’s a link to a column telling exactly who “Rachel” is.
http://articles.latimes.com/2011/nov/29/business/la-fi-lazarus-20111129
I hate to bash the people who got ripped off, but if you don’t know that the police don’t arrest people for civil issues (loans) and that the police can’t have you fired, and that police don’t call you on the phone to tell you they’re going to arrest you, then it’s partly your own fault.
We used to be able to say this, until some local kangaroo courts in America started imposing “contempt of court” charges against debtors who didn’t pay up after a court order (which may or may not have been properly served to begin with) and then police come and haul of debtors to jail for those charges.
And it’s the reason we need federal laws that specifically prohibit imposing contempt of court charges in civil cases.
Perhaps not contempt of court, but people have been sued for debts, never notified, so court awards the amount due to non-appearance. The courts then send the cops to arrest the “debtor”, who is then jailed and the bond is set at exactly the amount “owed”. The person jailed pays to get out and the money goes to whoever filed the lawsuit. This is definitely a debtor’s prison, and it’s common in some western states. The judges probably get a cut of the amount as well. This is a gross misuse of the judicial system, but the courts really don’t care if people know how to work the system to get what they want. Justice is no longer important to most judges these days.
If the boss gets irritated that the police are stopping by… the result is that you get fired.
Ok, perfect. So all the people who were laughing at the need for this can STFU now?
Since it’s such a non-issue and all?
Perfect, I actually came here to see if anyone was going to use the courts stepping in and putting an end to behavior that was already illegal as justification for another bloated government bureaucracy.
There are good reasons for the CFPB (or so I am told) but this article doesn’t show any of them
So I guess it’s only screamingly obvious to me then? The point of having these businesses under oversight would be to PREVENT shit like this from happening in the first place. Maybe you’d like to wager a guess as to whether all of these people are going to get their money, time and attorney’s fees back?
No Government bureau can prevent things from happening, they can only present guidelines and impose penalties. The FCC doesn’t prevent nipple slips or live profanity during broadcasts, the EPA doesn’t prevent companies from polluting, and the CFPB won’t stop people from resorting to scummy tactics to get deadbeats to pay their bills.
We get 2-3 calls a week on the station phone line like that. They tend to hang up pretty damn quick when I tell them they’re on the air.
Ha! I may try that next time I get an annoying survey call or telemarketer.
More than half of these calls are not even real debt collectors. They are scammers that bought account listing files from hackers who broke into debt collector databases (which are among the most insecure computer systems around).
Would someone please tell me how effective these laws and regulations are when the call center is in India?
In this instance the owner of the companies lives in California. The india call centers only work for the asshat in question as contractors.
Ah, but where is the bank account the victims’ $ gets sent to? That’s what counts…
My question is if your that dumb how did you get money in the 1st place?
If “your” that dumb, then companies will prey on you.
One of the worst is for-profit colleges. They convince vulnerable poor people to pay $20-40k for a certification that they could get at the local community college for a few hundred dollars, promising a great career and all kinds of riches. And by the way, we can loan you the money, and you don’t have to pay it back until you graduate and have a job. If there’s a job at all, the job the certificate leads to is actually a $14/hour job answering phones somewhere. When the person inevitably can’t pay the student loan, the loan company sends the collections guy in to get what he can get, any way possible.
And the court needed to do that? How come these bastards weren’t arrested they already committed a crime.
The only way to stop these people is to make the punishment so severe they’d never even try to scam people out of “debt” they really don’t owe. Like double restitution and about 10 years in state prison for every person in the company, from the owner right down to the mailroom guy. Otherwise, a little fine or tap on the wrist from the FTC will just allow them to go out of business as one company name and pop up somewhere else with a new name.
I had a debt collector call me and threaten me with an arrest by local police. I invited him to sit in while I initiated a 3-way call to the police department. Needless to say he didn’t stay on the line.
Great idea – I’ll tuck that info away in case I get a call like that.
Might be more profitable to ask where to send the money, then sue. It would take more time, but might be more fun.
Yay!!! Meg’s back!!!
I’ve had these smarmy crooks try calling about delinquent payday loans – and I’ve never taken one out in my life!
I’ve had this happen a few times at work. The sad thing is that they never seem to take the bait when they say they’re going to send the police or the sheriff and I ask if they need directions. They just hang up, because they know that I know they’re bluffing. What makes it even more funny is that the extension they’re calling is for a person who doesn’t even work here anymore. I know this because they asked for that person one time, and when I told them they don’t work here, I was called a liar.
I had one of these leave me a long voice mail. He said he was going to send the sheriff over to take all of my possessions. He had a foreign accent.
I just laughed my ass off. Really? I can’t imagine any law enforcement officer wanting the job of going into someone’s home and taking their stuff on behalf of a private company. First of all, the chances of getting shot must be pretty good. So I can’t image there is anything in that person’s house that is worth getting shot over.
I so wanted to call him back and give him directions to my house and tell him all about my firearms at home. And then invite him to come over and claim his “stuff”.
If they didn’t owe the money, and threatened people to get it, doesn’t this call for a lot more than a simple injunction? Like extortion charges? (Not to mention that impersonating law enforcement is illegal in all cases)