Court Halts Collection of Alleged ‘Phantom’ Payday Loan Debt

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Imagine being told that your driver’s license would be revoked and you would face prison time if you didn’t settle your payday loan debt. Intimidation techniques and illegal threats are bad enough, but what if the debt wasn’t real?

According to the Federal Trade Commission, two Georgia-based companies were “using deception and threats to collect $3.5 million in phantom payday loan ‘debts’ that consumers didn’t owe.” At the FTC’s urging, a U.S. District Court judge this week halted the two debt collection operations in question.

The FTC complaint said that John Williams of Norcross, Ga., and two companies he controls – 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.”

Victims were allegedly threatened with a revoked driver’s license, arrest and prison time if they didn’t pay the phantom debt, the agency said.

According to the FTC, the victims had inquired online about a payday loan at some point, and their contact information ended up with the companies.

The FTC said the tactics used by Williams and his companies 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.

Have you or someone you know fallen victim to a debt collection scam? Share your comments below or on our Facebook page.

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