Federal Trade Commission settlement over fake debt collector calls made to millions of consumers

WASHINGTON - The Federal Trade Commission settled with a California man who worked with bogus debt collectors in India to convince Americans to hand over money they didn't owe. NewsChannel 5 first told you about this scam in November 2010. It impacted consumers who previously inquired or received a payday loan. The FTC said millions of calls were made and victims paid more than $5 million. Now, some will receive a refund.

Consumers said it sounded legitimate because the caller knew so much about them, and they felt compelled to pay because of the threats if they didn't pay. Many were told they would be put in jail.

Tim Swancer called us about his call in 2010. He was a college student working full time, and figured a payment from an online payday loan slipped through the cracks. He had no reason to doubt the debt collector, so he paid it off.

"He knew who it was from. He knew how much. He knew the last four digits of my social security number. He knew my birthday and place of employment," Swancer explained.

After he paid off the debt, he checked his records and couldn't find any records of the loan. He also didn't see it on his credit report.

The FTC said consumers paid between $300 and $2,000 to stop the calls.

Instead of paying off a debt immediately, exercise your right to request documentation of it. That way you're less likely to fall for a phony collector.

The FTC originally obtained a $5.4 million judgment, but the FTC will partially suspend that because the defendant can't pay it. Instead, an $170,000 in assets will be given to the FTC and will be used for refunds.