Feds: Fake Debt Collectors Shook Down 600,000 People and Got More Than $5 Million

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Callers from India — often posing as U.S. police officers — called at least 600,000 people across the U.S. about fake debts and took more than $5 million in real money, the Federal Trade Commission announced Wednesday.

The FTC won an order in U.S. District Court temporarily shutting down the operation.

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Some of those who paid said they thought the money was being applied to real debt that they owed (it wasn’t) while others owed nothing, but were bullied into paying, the FTC said. One consumer told the government that the callers had threatened to take away her children. The calls started around July 2010.

Victims, many of whom were cash-strapped and had taken out payday loans, received back-to-back calls from callers using such names as “Officer Mike Johnson” or saying they represented the made-up “Federal Crime Unit of the Department of Justice,” the FTC said.

The victims who gave into the pressure were told to use prepaid debit cards, credit cards or to wire money to one merchant account controlled by the defendants, the FTC said. Those who paid didn’t necessarily get a break. Some continued to get harassed for more money.

Victims told of just how far this scam went to extract money from them. Here is what one consumer told real law enforcement officials:

“The callers threatened me and claimed they would arrest me if I didn’t pay them the alleged debt. One of the callers even contacted my neighbors and told me he was watching my house. The callers had a lot of … personal information about me, including my work address. One caller told me, ‘We just saw you walk into your office building,’ and then listed my office address. Another caller told me there were 55 warrants out for my arrest. Sometimes my caller ID would indicate that the call was from the FBI. Because the callers knew so much about me, I believed they were police officers or FBI agents. The calls scared me and I was often shaking when I hung up the phone.”

The FTC said that in addition to fabricating the debt the callers said they were collecting, they also broke other federal laws that spell out how collections can be made. For instance, collectors are forbidden from threatening those they are collecting from, misrepresenting themselves as law enforcement and from telling others about the debt.

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To help consumers avoid getting sucked into a similar scam, the FTC suggests looking for the following signs of deception, including callers who:

  • are seeking payment on a debt for a loan you do not recognize;
  • refuse to give a mailing address or phone number;
  • ask for personal financial or sensitive information; or
  • exert high pressure to try to scare you into paying, such as threatening to have you arrested or to report you to a law enforcement agency.

Suspicious consumers should ask for the name of the caller and the company’s name, address and phone number; and insist on a written validation notice that includes the amount owed, who is owed and an explanation of legal rights. Do not provide any personal or financial information and end the call.

If you believe the call you received was fake, contact the FTC and your state attorney general’s office to file a complaint.