That's what the Federal Trade Commission says has happened to thousands of American consumers — including Marylanders. The FTC says it's trying to shut down one such operation that has collected more than $5 million from consumers in the past two years. But the agency warns there are others running similar phony collection schemes.
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Consumers have lodged more than 4,000 complaints about fraudulent debt collectors with the FTC in the past two years. Maryland's Office of the Commissioner of Financial Regulation, which oversees debt collection and payday lending, says it hasn't had any complaints involving the operation at the center of the FTC's case. Still, the Maryland agency plans to post a consumer alert on its website to warn of the problem.
Perhaps one of the best ways to protect yourself is to know your rights, which could help you fend off a bogus collector or a legitimate one violating the law. Debt collectors generally must provide a written notice of the debt, for instance. If you request this information from a bogus collector that can't provide it, you're less likely to fork over any money. And if a collector threatens you with arrest — a blatant violation of the law — you'll be more confident about hanging up on the caller, as you should.
The FTC case involves payday loans, which allow workers to borrow against their next paycheck at an effective annual interest rate of a couple hundred percent or more.
Maryland essentially bans payday lending by capping the interest rate on small loans. Still, that doesn't prevent Marylanders from going online and getting a payday loan.
The FTC claims that Varang K. Thaker and two companies, all based in Villa Park, Calif., somehow gained access to personal information that consumers submitted to online payday lenders when taking out a loan or inquiring about one.
That information, the FTC says, was forwarded to a boiler-room operation in India that used consumers' personal details to convince them they owed money. Sometimes the callers falsely claimed they were attorneys or law enforcement personnel and threatened to sue or arrest consumers, regulators say.
It worked with JanLaree DeJulius, a Las Vegas resident who told her story during an FTC news conference last week.
DeJulius says her ex-husband used her personal information a couple of years ago to take out a payday loan, which she paid off.
In the spring of 2010, she says, a man called her claiming to be from the "Federal Government Department of Crime and Prevention" — no such department exists — to collect on that debt. She says the caller knew details about her life, including her Social Security number, birth date, where she worked and the days she got paid. The caller also threatened to have her arrested at work if she didn't pay $763.
Afraid of being arrested or sued, she agreed to pay the money in installments and gave the caller her credit card information. Two charges totaling $263 appeared on her card statements.
But the calls didn't stop. DeJulius grew suspicious when another caller later tried to collect on the same debt. And her suspicions were confirmed, she says, when she heard a news report about other consumers getting harassing calls to repay payday loans and other debt they didn't owe.
The FTC's Baker says Thaker's operation made 8 million calls in eight months, so Maryland residents likely got some of them. The callers, the FTC says, usually bullied consumers to pay more than $300, although their demands in some cases were as high as $2,000. This was money that consumers didn't owe or that the callers had no authority to collect, the FTC says.
This month, a U.S. District Court in Illinois temporarily halted Thaker's operations while the FTC pursues its case. Thaker could not be reached for comment.
The FTC said there are a few ways to spot fake debt collectors: You don't recognize the debt. The callers won't divulge their name, company, address or telephone number. They try to coerce bank account and other personal information out of you.
Phony collectors — or real ones violating the law — also will threaten you with arrest or other action.
"If a collector threatens you in any way, hang up and file a complaint with our office," said Cynthia H. Jones, assistant commissioner with the state Office of the Commissioner of Financial Regulation. Call 410-230-6097 to file a complaint.
Collectors have up to five days after contacting you to provide a written notice of how much you owe, the name of the creditor, and a statement on what to do if you dispute the debt. If you challenge the debt within 30 days in writing, collection activities must stop until the collector verifies the debt.
Also, in Maryland, debt collectors can't collect on a debt that violates the state's 33 percent interest rate cap on small loans — which means they can't collect on payday loans.