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Fake debt collectors in scam targeted thousands

Arizona residents struggling to make ends meet and pay their bills may be familiar with the abusive practices of debt collectors - continuous harassment through phone calls and often even threats of more to come. They may also be aware that filing for bankruptcy protection, whether it is Chapter 7 or 13, puts an end to creditor harassment.

However, they may not be aware of the massive scam that targeted hundreds of thousands of people struggling with debt across the country. The scam involved gathering information from online sources and pretending to be debt collectors, then calling debtors and threatening legal action if they did not pay back their loans. The scam targeted not only debt ridden Americans, but also those who never owed a dime in the first place.

Called the "phantom debt collection scam," fake debt collectors dialed more than 2.5 million numbers from international call centers and collected more than $5 million from people already struggling with their finances. They targeted individuals who had gone online for payday loans and got their information from their applications. Creditor harassment at its best, the fake collectors called houses around 12 times an hour.

The Federal Trade Commission received numerous complaints about these fake collectors and began to investigate the scam, tracking the phone calls and following the money. Their investigation led to the arrest and federal indictment of a 68-year-old man who is currently undergoing a trial in California.

When repaying their debts, Arizona residents should ensure their payments are going to the right place. Arizona residents facing overwhelming debt have enough on their mind as it is, and they do not need the additional stress that comes with creditor harassment. They should keep in mind, however, that filing for personal bankruptcy not only wipes out most bills and taxes, but also puts an end to creditor harassment, wages garnishment and also foreclosure proceedings. Some Arizona residents may need to take any step necessary to regain control of their financial life.

Source: ABC News, "ABC News investigations of the year: phantom debt collectors," Dec. 31, 2012