A federal judge in Chicago moved to shut businesses that allegedly used illegally obtained personal financial data to make threatening debt collection calls from India to thousands of consumers who didn’t owe them money.
U.S. District Judge George W. Lindberg issued a temporary order after the Federal Trade Commission sued Varang K. Thaker of Villa Park, California, and affiliated companies American Credit Crunchers LLC and Ebeeze LLC, claiming the firms browbeat victims to make payments on non-existent loans.
The FTC said the companies found their targets by somehow obtaining Social Security numbers, bank account numbers and other information submitted by people who had applied online for payday loans.
The FTC alleged in court documents that the companies hired callers in Ahmedabad, India to pose as debt collectors and law enforcement officials, who harassed the applicants into paying more than $5 million.
The FTC said that Thaker and the companies, in which he serves as an officer, violated laws against unfair and deceptive practices and fraudulent debt collection.
“This is a brazen operation based on pure fraud, and the FTC is committed to shutting it down,” David Vladeck, director of the FTC’s bureau of consumer protection, said in an e-mailed statement today. “Consumers should not be pressured into paying debt they don’t remember owing.”
The judge in his order dated Feb. 14 prohibited Thaker and the companies from engaging in illegal conduct, froze Thaker’s assets and those of the two companies, and appointed a receiver to take over the firms. The FTC held a press conference announcing the action today.
Eight Million Calls
Thaker and the companies didn’t respond to requests for comment by phone and e-mail. A court hearing on the matter is scheduled for Feb. 28, said Steve Baker, director of the FTC’s Midwest regional office.
Since January 2010, consumers have received about eight million debt collection calls from India, Baker said. Those getting calls had applied online to legitimate lenders for short-term credit, known as payday loans because they are usually repaid when the borrower gets his or her paycheck.
Baker said the FTC doesn’t know how the businesses affiliated with Thaker obtained the financial information and said the agency hasn’t been able to obtain cooperation from Indian law enforcement officials. “We’re at the beginning” of the investigation, he said.
The Online Lenders Alliance, a trade association of companies involved with Internet-based loans, last year hired Freeh Group International LLC, a company founded by the former director of the Federal Bureau of Investigation, Louis Freeh, to investigate after receiving widespread complaints from consumers about threatening calls. The callers “are making the whole industry look bad,” said Peter Barden, a spokesman for the group said.
“Since the beginning of this scam we have been working with the FTC and issuing consumer alerts warning our customers about fraudulent debt collectors and what consumers can do to protect themselves,” Lisa McGreevy, the head of the group, said in an e-mail.