At the request of the Federal Trade Commission, a U.S. district court has halted a Georgia-based operation from using deception and threats to collect $3.5 million in phantom payday loan “debts” that consumers didn’t owe. The court had previously ordered the defendants’ assets frozen to preserve the possibility that they could be used to provide redress to consumers, and appointed a receiver.

John Williams, and two companies he controls — Williams, Scott & Associates, LLC and WSA, LLC — used a variety of false threats to bully consumers nationwide into paying supposed payday loan debts, the FTC charged. Collectors with the companies falsely claimed to be affiliated with federal and state agents, investigators, members of a government fraud task force, and other law enforcement agencies, and pretended to be a law firm, according to the FTC complaint. The defendants also allegedly told consumers their drivers’ licenses were going to be revoked, and that they were criminals facing imminent arrest and imprisonment.

The FTC alleges that many of the consumers the defendants contacted had inquired about a payday loan online at one time. Consumers submitted their contact information through web-based lead generation portals which later found its way into the defendants’ hands.

“Many consumers in this case were victimized twice,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “First when they inquired about payday loans online and their personal information was not properly safeguarded, and later, when they were harassed and intimidated by these defendants, to whom they didn’t owe any money.”

The FTC alleged that the defendants’ tactics violated the Federal Trade Commission Act and the Fair Debt Collection Practices Act (FDCPA). In addition to the deception and false threats, the defendants violated federal law by telling consumers’ family members, employers, and co-workers about the debt; failing to identify themselves as debt collectors; using profanity; making repeated inconvenient or prohibited calls; failing to provide information in writing about the debt; and making unauthorized withdrawals from consumers’ bank accounts.

The case marks the latest in series of crackdowns on the part of federal regulators against debt collection scammers, mostly operating in the online payday loan space. This is the FTC’s sixth recent case charging “phantom debt” scams with law violations. Other cases include American Credit Crunchers; Broadway Global Master; Pro Credit; Vantage Funding; and Pinnacle Payment Services.


Next Article: Interactive Intelligence Positioned in the Leaders Quadrant ...