Feds Arrest and Charge Seven in Nationwide Debt Collection Scam

Federal officials with the Justice Department and FBI announced Tuesday the arrest of seven people for their roles in a fraudulent debt collection operation that over the course of five years targeted more than 6,000 consumers in all 50 states and brought in more than $4.1 million.

The Justice Department, led by U.S. Attorney for the Southern District of New York Preet Bharara, said that Williams, Scott & Associates (WSA) operated as a both a third-party debt collector and debt buyer based in the Atlanta area. The criminal complaint alleges that WSA and its collectors routinely posed as federal agents or attorneys and used the threat of arrest to coerce consumers into making payments.

Bharara said, “As alleged, the defendants – third-party debt collectors acting under the guise of government authority – illegally and repeatedly threatened arrest, prosecution, and prison for countless Americans. Now, after years of threatening false arrest, these defendants are the ones who now find themselves in handcuffs, facing the loss of their own liberty. We are far from finished looking at the seedy side of debt collection. It affects too many people.”

FBI Assistant Director-in-Charge George Venizelos added, “As alleged, this was nothing but a scam of total fabrication in order to coerce thousands into paying debts. The defendants were nothing more than bullies with bogus badges.”

The unsealed criminal complaint joins a civil action launched by the FTC against the firm and its principals earlier this year. The FTC’s complaint alleged that the firm primarily chased online payday loan debt, some real and some imagined. The Feds thanked the FTC for their work on the case, as well as the CFPB, which initially referred the matter to Justice.

Federal prosecutors say that between approximately 2009 and May 2014, employees working for WSA used aliases, sometimes referring to themselves as “Detective” or “Investigator,” falsely advised consumers they had committed purported crimes such as “check fraud” or “depository check fraud,” and told consumers that if they failed to make an immediate payment to WSA to resolve the matter, a warrant would be issued for their arrest.

WSA employees also falsely claimed that WSA had contracts with certain federal or local law enforcement agencies, including the Department of Justice and the United States Marshals Service, as well as non-existent government agencies such as the “Federal Government Task Force” and the “DOJ Task Force.” To further create the appearance that it was affiliated with the federal government, WSA at times sent victims correspondence containing the seal of the United States Department of State and the following language: “Warrant Services Association, A Division of the Federal Government Task Force.”

When victims expressed doubt or sought more information, WSA employees intensified the pressure and created a heightened sense of urgency by imposing false deadlines.

There are scripts recovered from a May 2014 raid of the WSA offices available in the government’s press release. NPR this morning is also running a story that contains a recording of at least one call, the contents of which are disturbing, to say the least, to legitimate debt collectors.

The formal charge against the seven “collectors” is one count each of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison.