Markets Wired

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 pending trial. 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.

Norcross, Georgia resident John Williams and two companies he controls used a variety of false threats to bully consumers nationwide into paying supposed payday loan debts, the FTC charged. Williams; Williams, Scott & Associates, LLC; and WSA, LLC 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 consumers the defendants contacted had inquired about a payday loan online at one time, and submitted contact information, 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. 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.

This is the FTC’s sixth recent case charging “phantom debt” scams with law violations. Other cases include American Credit Crunchers, LLC, Broadway Global Master Inc., Pro Credit Group, Vantage Funding, also known as Caprice Marketing, and Pinnacle Payment Services, LLC.

For more consumer information on this topic, see Dealing with Debt.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division. On May 28, 2014 the court granted the FTC’s request for a temporary restraining order. It granted the FTC’s request for a preliminary injunction on June 19, 2014.  

NOTE:  The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.