Phantom debt collectors are hounding thousands of people nationwide for payday loan debts they don’t owe.

The scam appears to target people who have applied for or inquired about a payday loan online – regardless of whether they actually took out a loan.

In typical calls, collectors tell consumers a lawsuit or warrant is about to be filed against them unless they pay within a matter of hours.

The Greater Cleveland BBB was inundated with calls from across the country after it issued an alert about a collector that identifies itself on caller IDs as “LRS Litigation Services.”

“In the last 30 days, close to 3,000 people have checked our report,” said Sue McConnell, vice president of the BBB. “Complaints come in almost every day.”

That number doesn’t capture the true scope of the scam, because the BBB captures complaints by company name, and phantom collectors using other names also are in on the act.

Like LRS Litigation, these phantom debt collectors use spoofed names, fake phone numbers and phony P.O. boxes to keep angry consumers, lawyers and regulators from tracking them down.

Legal Aid offices are besieged with complaints about the bogus payday collection calls but can't take action because they can't track the source.

“The standard ways of dealing with aggressive debt collectors don’t work,” said Katherine Hollingsworth, an attorney at Cleveland Legal Aid.

Mike Olshewski says he gets 10 to 12 calls a day demanding payment. He said he took out a payday loan once but paid it off more than a year ago.

“They’re always threatening to come to my employer and arrest me,” Olshewski said.

Calls come from Maryland, Georgia and Illinois area codes. Once he got a call from a caller ID that said “Ohio Patrol Office.”

“I said, ‘Let me check this. I have an uncle who’s a state highway patrolman’ and he hung up on me,” Olshewski said.

The Broadview Heights resident said he applied for the loan through a website that shoots consumers’ applications to multiple payday lenders. He suspects the scammers nabbed his information at some point during the process.

The scam is strikingly similar to a bogus payday debt collection scheme the Federal Trade Commission shut down last year. In that case, the FTC sued two U.S. based companies -- American Credit Crunchers and Ebreeze – that raked in $5 million in less than a year.

The FTC’s suit said the two companies processed payments for a call center in India that frightened U.S. victims into paying bogus payday debts.

“We had a lot of people who knew they didn’t owe, but they paid anyway because they were afraid of being arrested,” said Steve Baker, director of the FTC’s Midwest regional office.

The FTC also sued Broadway Global Master, accusing it of involvement in a similar phantom payday debt collection scheme. Last August, the agency partnered with the Department of Justice to press criminal charges against Broadway Global’s owner, Kirit Patel of Tracy, Calif.

Baker said the FTC believes the latest round of bogus debt collection calls come from India.

“We’ve been making attempts to reach out to Indian law enforcement but so far we haven’t had a whole lot of luck,” Baker said.

But in the meantime, phantom debt collectors have changed their game again.

Where they were demanding credit or debit card payments, Baker said, they’re now more likely to ask consumers to make payments through Western Union, MoneyGram or Green Dot MoneyPaks, which are harder to trace.

Baker said consumers should understand they cannot be arrested for failing to pay a debt.

He also urged consumers to be cautious about applying for payday loans online.

“You’re putting in all sorts of super-sensitive information,” he said, “and you don’t know what’s happening to it.”

If you get a call, don't engage. Real debt collectors have to send you a written demand for payment within five days of calling you.

File complaints about phantom payday debt collection calls with the Better Business Bureau at www.bbb.org and with the Federal Trade Commission (1-877-382-4357 or ftc.gov). If you were bullied into making a payment on a payday debt you don't owe, complain to the Ohio attorney general's office at ohioattorneygeneral.gov or 1-800-282-0515.



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