Debt collectors, or "bullies with bogus badges"?

A debt collection company owner and six employees have been charged with running an elaborate scheme that allegedly threatened more than 6,000 victims into paying $4.1 million in debts, federal prosecutors and the FBI said in announcement Tuesday in New York.

Williams, Scott & Associates (WSA) of Norcross, Ga., was accused of being the base of scheme in which consumers whose debt the firm had purchased were threatened with arrest and other phony claims, if immediate payment wasn't made. Federal authorities said the company's employees lied to consumers by making such claims as being part of a federal task force.

"As alleged, this was nothing but a scam of total fabrication in order to coerce thousands into paying debts,"FBI Assistant Director-in-Charge George Venizelos said in a statement. "This scheme took advantage of our poorest and most vulnerable citizens from all 50 states. ... The defendants were nothing more than bullies with bogus badges."

In at least one case, an abusive collection agency actually tried to bully a man with a real badge: Richard Frankel, a top FBI official in New York City, got a call at his office from one claiming to be the IRS.

It is common for debt collectors to be accused by consumers in civil actions of various illegal tactics covered by the Fair Debt Collection Practices Act. But it is unusual to see criminal charges brought in such cases.

WSA, which the Federal Trade Commission shut down this summer over collecting payday loans debts that allegedly were never owed, "routinely attempted to trick and coerce thousands of victims throughout the United States" over the past five years, federal prosecutors said.

The scheme involved debt collectors giving themselves titles like "detective" or "investigator" and telling consumers they had committed crimes and that an immediate payment could resolve their case. They told victims WSA was affiliated with the government, or, in other cases, that it was a law firm.

"To falsely create an appearance of legitimacy, and further trick their victims into making payments, WSA employees routinely used legal terminology to invent legitimate-sounding, but completely bogus, explanations for the supposed imminent arrest of the victims," federal prosecutors said.

Those arrested include WSA owner John Todd Williams, 48, along with employees Benita Cannedy, 36; Rudy James, 32; Arthur Cook, 31; Christopher Lenyszyn, 46; Clark Smith, 39; and Titus McDowell, 38. They were charged with conspiracy to commit wire fraud. All of those arrested are Georgia residents.

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    Mitch Lipka is an award-winning consumer columnist. He was in charge of consumer news for AOL's personal finance site and was a senior editor at Consumer Reports. He was also a reporter for The Philadelphia Inquirer and the South Florida Sun-Sentinel, among other publications.