A U.S. district court in Atlanta has stopped a Georgia-based firm from using deception and threats to collect $3.5 million in phantom payday loan “debts” that consumers didn’t owe pending trial, according the Federal Trade Commission, which made the request.
In its order, the court found that the defendants, John Williams of Norcross, Ga., and two companies he controls – Williams, Scott & Associates LLC and WSA LLC (which also does business as Warrant Services Association) – had engaged or were likely to continue to engage in acts and practices in violations of the FTC Act and the Fair Debt Collection Practices Act. It also feared consumers would suffer immediate and continuing harm from the defendants’ ongoing violations unless preliminarily restrained by the court’s order.
The court earlier froze the defendants’ assets in case they would be needed later to provide redress to consumers, and it appointed a receiver.
Williams and his two companies allegedly used a variety of false threats to bully consumers nationwide into paying supposed payday loan debts. Moreover, they falsely claimed to be affiliated with federal and state agents, investigators, members of a government fraud task force, and other law-enforcement agencies, and they pretended to be a law firm, according to the FTC complaint.
Moreover, 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 said in announcing on July 1 that the court halted the collection of allegedly fake payday debts.
Many consumers the defendants contacted had once inquired about a payday loan online, and they submitted contact information that later found its way into the defendants’ hands, the FTC alleges.
“Many consumers in this case were victimized twice,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement. “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.”
Besides the alleged 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, the agency said.
The case is the sixth in which the FTC charged “phantom debt” scams with law violations. Others involved American Credit Crunchers, LLC, Broadway Global Master Inc., Pro Credit Group,Vantage Funding, also known as Caprice Marketing, and Pinnacle Payment Services, LLC.