Fraudsters Claiming Victims Via Payday and LinkedIn Scams

Identity Theft Prevention Analysis

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Susie Duke was a fanatic when it came to technology. She had all the latest hardware, including a smartphone, a laptop, an iPad and a Blackberry — all of which she used to communicate with friends and business associates. However, she was not sophisticated about protecting herself from fraud in a tech environment. She ended up falling for a telephone collection scam related to "purported delinquent payday loans."

Payday loans have become more common over the past few years because of the declining economy. The loans are short-term fixes, usually for two-week periods, to allow individuals to cover their expenses until the loans become due the next payday. A recipient normally is required to write a check for the cash amount of the loan plus the loan fee, which often is extremely high — ranging from 15 percent to 30 percent of the loan. The lender normally deposits the check in his account when the payday date arrives. If the loan recipient does not repay the loan, the lender usually extends it at the same interest rate. The real cost of these loans can easily reach from 300 percent to 1,000 percent of the loan if the recipient does not cover it in a reasonable time period.

Susie would occasionally get behind in paying her bills, so she would go online and apply for a payday loan to tide her over until she received her next payroll check. She recently had begun receiving telephone calls purportedly from a FBI representative who said he was collecting debts for a cash advance company. Susie was very upset and confused because she always paid off her payday loans when they became due. This fraudster had already obtained Susie's personal information, including her Social Security, driver's license and bank account numbers, from an unknown source and was attempting to use it to bilk her out of money. In the next two weeks, he harassed her with numerous calls, and he threatened her with legal action if she did not immediately pay off her debt of $2,000 by placing that amount on a prepaid Visa gift card and mail it to him. Susie became confused and overwhelmed and finally gave in and paid the fraudster.

THE DELINQUENT PAYDAY LOAN SCAM

This identity theft case is fictional, but it represents a fraud that has gained enough momentum to be reported by the Internet Crime Complaint Center (IC3) in an Intelligence Note on Dec. 10, 2010 ("Telephone Collection Scam Related to Delinquent Payday Loan"). Like the FBI, the Federal Trade Commission (FTC) and the Federal Insurance Deposit Corporation, the IC3 alerts the public when it receives numerous complaints about a new scam.

The IC3 mentioned that fraudsters in this scam typically purport that they are with either the FBI, the "Federal Legislative Department" (whatever that is), other high-level government agencies or a law firm. They say that they are calling to collect debts for Internet check-cashing companies, such as U.S. Cash Net, U.S. Cash Advance and United Cash Advance. In most cases, the victims are current or former payday loan recipients.

The fraudsters do their homework before calling their potential victims. They have the targeted individuals' Social Security numbers, dates of birth, addresses, employer information, bank account numbers, and names and telephone numbers of relatives and friends. How the personal information is collected is unknown, but the IC3 said that the "victims often relay that they had completed online applications for other loans or credit cards before the calls began."

Once a con artist gets a victim on the hook, he will accelerate the scheme by continually calling that person at work, at home, and on his or her mobile phone with threats of physical violence, arrest and legal action. An intended victim will question the con artist about the particulars of the loan, but he will refuse to respond, will be abusive and, in some documented cases, will harass the victim's family and friends. In many cases, this hard-sell strategy overwhelms the victim, and he or she gives in. Like many telephone and online schemes, the fraudsters have orchestrated scripts, and they are well trained to listen for victims' cues and respond accordingly to complete sales.

The U.S. Fair Debt Collection Practices Act provides consumer protection from illegal and unethical debt collection practices. According to Lawyers.com, the act does not allow bill collectors to: