The law does require every person who owes a debt to settle it within the rules of the loan agreement. In case of defaulting or delays in repayments, the financier has legal ways of collecting the dues. However, the law is very clear on the extent and the methodology used to collect funds from loan defaulters. The federal law and various state laws prohibit the use of pressure tactics, harassment and blackmail to coerce the defaulter to settle his or her dues. Using such tactics is a criminal offense that may attract a jail sentence. This is the position that a Georgia debt collector firm, Williams, Scott and Associates found itself after using deception and coercing techniques for debt collection.
Using Criminal Tactics for Collection
Williams, Scott and Associates bought out over 6000 defaulted loans from various financial institutions including banks and payday loan providers at a very low rate of a few cents per dollar – since these were defaulted debts. In 2009 after the transfer of these debts, the firms started to use illegal tactics including posing as detectives or agents of the Federal Bureau of Investigation, the U.S Marshals, Local Sheriff or Justice Department. They threatened the victims with arrest and jail terms in a bid to have them settle their debts speedily. By use of these illegal tactics, the debt collector was able to collect over $4 million dollars from its victims.
According to some of the victims of this scam, the employees of Williams, Scott and Associates posing as FBI agents gave the debtors 15 minutes to settle their debts failure to which an arrest warrant would be issues. They even sent their collection letters with a seal from the US State Department. The letters stated that the victim has exhausted the statute of limitation of civil legal rights and therefore, the defaulted debt was now a criminal issue. Some victims said that many of these collection letters had too many typo errors that raised an eyebrow as to the origin of the letters.
Employees and Management Charged
When some of the victims reported the issue to the local authorities, the FBI department raided the debt collector’s office that was located at Norcross, Georgia. However, this did not stop the debt collector but instead, the firm opened new offices and continued with its illegal debt collection tactics. Eventually though, the FBI was able to get to Williams, Scott and Associates and now, the employees and management of the firm have been charged with conspiracy to commit fraud. The offenders now face a potential jail term of up to 20 years – if found guilty.
According to the FBI agent in-charge of the case, this was a case of a collector using mafia like tactics to speed up collection. In somewhat comical relief, he noted that the employees who had threatened victims with fake arrests and jail terms were not under real arrest and were facing the reality of a jail term.
The District Attorney that charged the offenders stated that indeed, loan providers had a right to collect legitimate debts but such collections needed to be within reasonable values. He condemned the use of terrorist and black mail tactics and warned any other agent using similar tactics that the law was against them.
Financial Struggles Result in Rising Loan Defaulters
Over the years, there has been a rise in small debt defaults and especially those of payday loans. According to official statistics, there were over 12 million Americans who had taken out payday loan in 2010 and the trend was rising. Many Americans who were facing financial challenges had taken these high interest loans and were defaulting on the loans due to various financial struggles. Unfortunately, such defaults only worsened the situation as the penalties and interest keep the debt rising thus trapping the borrower in a debt cycle.