A phone scam in which callers in India posed as debt collectors bilked millions of dollars out of more than 10,000 U.S. residents by using threats of arrest or the loss of their jobs, U.S. authorities said Tuesday in what they described as a first-of-its-kind investigation.
Callers drew on personal data snatched from payday loan websites, Federal Trade Commission official Steven Baker said. More than 20 million calls may have been placed over the past two years, with collectors demanding between $300 and $2,000 per call.
Such a far-reaching fraud with so many millions of calls flooding in from India is something investigators haven't seen before and was fostered in part by the plummeting costs of international calls, Baker, the FTC's Midwest director, said.
While federal authorities seem to have put a halt to this one scam by freezing the assets of a California-based business allegedly involved, Baker said other similar scams are almost certainly up and running.
"We think this is just the tip of the iceberg," he said.
Authorities have received more than 4,000 complaints about debt-collection schemes in recent years, said Baker. They describe aggressive, foul-mouthed callers, some of whom claimed to be agents of a nonexistent Federal Department of Crime and Prevention.
JanLaree Dejulius, of Las Vegas, was at work at a university office when she got a call from a man who gave his name as Officer Black. He knew one of her relatives had taken out a payday loan online. If Dejulius didn't pay up, he said he would send someone to her work to arrest her, she said.
"I said, 'Yeah, I'll pay you — whatever it takes'" not to be arrested, the 57-year-old said at a news conference in Chicago. "I consider myself savvy, but I fell for it." She eventually agreed to pay $763.
Some callers threatened to call victims' bosses or sue them. The scare tactics were so effective that in some instances people agreed to pay hundreds of dollars even though they knew that neither they nor any acquaintances had payday debts, said Baker.
From 2010 to 2012, $5 million was paid in 17,000 transactions to accounts controlled by the alleged fraudsters. And the targets of included people who applied for loans by punching in personal details into a payday site but whose applications were rejected, Baker said.
Payday loans are typically small, very short-term loans with extremely high interest rates that are effectively advances on a borrower's next paycheck. It is often people cash-strapped or living from paycheck to paycheck who use the service, Baker said.
Baker said to guard against scam artists, consumers should demand a written notice with debt amounts and the names of creditors. Debt collectors never have authority to arrest anyone, Baker added.
Asked what advice she'd give to would-be victims if they get a call, Dejulius said they shouldn't give in.
"Call them on it," she said. "Call their bluff if you know you haven't taken out a loan."
Baker said many questions remain unanswered, including how callers obtained such a vast amount of payday-loan information. He said the U.S. government needs help from authorities in India, where it is thought that all of the bogus calls came from.
The FTC charged Villa Park, Calif.-based American Credit Crunchers LLC, Ebeeze, LLC and their owner, Varang K. Thaker, with violating the FTC Act and the Fair Debt Collection Practices Act. No criminal charges have been filed.
Thaker allegedly withdrew thousands of dollars paid by victims that ended up in his company accounts, though Baker said it wasn't clear if the overall scheme was directed primarily from California or India.
A U.S. district judge in Chicago has issued an order freezing Thaker's assets.
American Credit Crunchers or Ebeeze in Villa Park, Calif., did not have a current phone listing. There also was no listing for a Varang K. Thaker in the area. Federal court filings did not list an attorney for Thaker.
The Online Lenders Alliance, an industry group for companies that offer loans over the Internet, said it reported complaints about the fraudulent calls to the FTC two years ago and has worked with authorities to stop the scam.
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