Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC obtains injunction against collection of phony payday loan debts, (Jul 1, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC announced today that a federal district court has stopped a debt collection 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 previously ordered the defendants’ assets frozen to preserve the possibility that they could be used to provide redress to consumers, and appointed a receiver. 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 and granted the FTC’s request for a preliminary injunction on June 19, 2014.

According to its complaint filed May 27, 2014 (FTC v. Williams, Scott & Associates, LLC, Docket No. 1:14-cv-1599, File No. 132-3246), the FTC charged that 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. 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. 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 complaint stated that many consumers the defendants contacted had inquired about a payday loan online at one time, and submitted contact information, which the defendants later obtained. 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.

“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 Commission vote authorizing the staff to file the complaint was 5-0.

Companies: Williams, Scott & Associates, LLC; WSA, LLC

News: ConsumerProtection FederalTradeCommissionNews