A U.S. district court has halted an operation that the Federal Trade Commission alleges collected phantom payday loan “debts” that consumers did not owe. 

The FTC charged Villa Park, Calif.-based American Credit Crunchers LLC, an affiliated company called Ebeeze LLC, and the companies’ owner, Varang K. Thaker, with violating the FTC Act and the Fair Debt Collection Practices Act.

According to the FTC’s complaint, Thaker obtained information – often including Social Security or bank account numbers – about consumers who had inquired about, applied for or obtained online payday loans.  Thaker worked with telephone callers in India who called consumers using deceptive statements and threats to convince them to pay debts that were not owed or that he was not authorized to collect, the FTC alleged.

Consumers received millions of collection calls from India, and since January 2010 the operation took in more than $5 million from victims, according to the FTC. The FTC alleges that information submitted by consumers who applied online for the fake payday loans found its way into the hands of the defendants.    

Often pretending to be law enforcement or other government authorities, the callers working with the defendants would falsely threaten to immediately arrest and jail consumers if they did not agree to make a payment on a delinquent payday loan, the FTC’s court papers stated. 

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 often 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. 

But the consumers did not owe money to defendants – either the payday loan debts did not exist or the defendants had no authority to collect them because they are owed to someone else, according to the FTC.  The court order tops the illegal conduct and freezes the operation’s assets while the FTC moves forward with the case.

“This is a brazen operation based on pure fraud, and the FTC is committed to shutting it down,” says David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “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.”

 

Thaker has withdrawn tens of thousands of dollars from the American Credit Crunchers and Ebeeze bank accounts, the FTC alleged.

According to the complaint, Thaker and his companies:

  • falsely told consumers they were delinquent on a loan, they must pay it, and the defendants had the authority to collect it.
  • falsely claimed to be law enforcement authorities or attorneys.
  • made false threats against consumers who refused to pay the alleged debts, including threats of arrest or imprisonment.
  • harassed and threatened consumers so that they often paid the alleged debts out of fear of being arrested or sued.

 

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