Arizona scammers used threats, fake phone numbers to collect $1.6M, attorney general says

PHOENIX – Nakyah Wilson will never forget the panicked call she received from her mother-in-law last year. A sheriff’s deputy had phoned the elderly woman, threatening to arrest her son and daughter-in-law if they didn’t contact a debt collection agency and pay off an old debt right away.

When the Wilsons reached the debt collector, he demanded $6,000 immediately, then offered a payment plan when they balked.

“He said we have 24 hours to make the first payment or the sheriff will come knocking on our door and put handcuffs on us and take us to jail in front of our kids,” Wilson, 33, remembered. “That was very alarming for us.”

Only later would Wilson learn the sheriff’s deputy was fake, the debt collector didn’t have a legal right to collect money from her family and no one was in danger of arrest.

Now the suspected perpetrators of the scheme, Mark Anthony Smith and Deborah Ann Butler, are being sued in a civil case by the Arizona attorney general and accused of defrauding hundreds, possibly thousands, of people out of more than $1.6 million they didn’t owe to the defendants.

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The attorney general has accused Smith and Butler of impersonating law enforcement officers, process servers and lawyers; using fake phone numbers that appeared to come from courthouses, jails and sheriff’s offices; falsely threatening to suspend driver’s licenses, garnish wages, take away tax returns, place liens on houses and cars and freeze bank accounts; and claiming that law enforcement would visit people’s homes and jobs to arrest them.

“Debt collectors cannot pretend to be law enforcement and they cannot threaten to arrest consumers,” Attorney General Mark Brnovich said. “If consumers get phone calls threatening arrests, they should hang up the phone and report it to our office.”

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The experience was harrowing for the whole family, including Wilson’s mother-in-law, who has heart problems and previously survived a heart attack, Wilson said.

“I was completely outraged because she was really scared for us,” Wilson, an Oro Valley, Arizona, political campaign staffer, said. “I had to calm her down and get my composure as well because we all were terrified.”

The defendants, who did not return an email or voice messages from The Arizona Republic, deceived people who could least afford to be scammed, Wilson said.

“I feel like that was so wrong,” Wilson said. “I really hope the victims get their money back. I really hope (the suspects and their) accomplices get punished by the full extent of the law.”

AG: No authority to collect debts in the first place

Although debt collectors are allowed in most cases to contact people who owe debts, file lawsuits and garnish wages with a judge’s approval, there are restrictions, according to the Federal Trade Commission.

The federal Fair Debt Collection Practices Act prohibits “deceptive, unfair and abusive debt collection practices,” such as using obscene language, threatening violence or arrest, calling consumers repeatedly or at unreasonable hours, informing family members or employers of debts, pretending to be a lawyer or government representative, obtaining information through false pretenses or misrepresenting a consumer’s legal rights, according to the FTC.

The debt collector also must have the authority to collect on a debt, whether through a contract with the creditor or by purchasing the right to go after it.

Smith and Butler, a married couple in Phoenix who operated under the company names CMS Financial Group, John Lee Group & Associates and TD Financial Solutions Group AZ , did not follow the rules, according to the Attorney General’s Office.

“We allege they didn’t have authority to collect the debt in the first place,” spokesperson Katie Conner said. “And they used a number of false representations to threaten and intimidate consumers into paying their alleged debt.”

Red flags signal scam

Wilson started having doubts about paying the debt soon after the so-called sheriff’s deputy called her mother-in-law, Wilson said.

The debt collector insisted on a money order instead of a card payment and gave a mailing address that turned out to be a UPS box, she said.

“That sent up a red flag,” Wilson said.

When she checked the case number the man said corresponded to the debt collection lawsuit against her family, a courthouse employee told her it was bogus, Wilson said.

She also was sure that the $6,000 balance the debt collector claimed the family owed was far higher than the amount she and her husband had once defaulted on for a television and watch.

One sign of a debt collection scam can be an inflated amount due, according to the Attorney General’s Office. Debt collectors are not allowed to collect interest, fees or other charges on top of the original debt unless the original contract or state law says they can, according to the FTC.

After Wilson called the original creditor, she confirmed the debt had been written off and was not owed, she said.

Wilson told the debt collector she refused to pay, she said. He became angry, warned of arrest and harassed her with follow-up phone calls, she said.

“Thank God I found out,” Wilson said. “I was really about to send this man my entire paycheck. And then I was going to have to worry about: How are we going to eat the next two weeks? How am I going to afford to get gas to go to work? Those things were playing over and over in my head.”

More threats of arrest

Texas residents Sandi Lopez, 32, and James Wheeler, 23, said they had similar experiences.

Lopez, a mother of two, received a threatening phone call in May 2019 as she was walking into her job as a bank teller, she said.

“It was a police officer, or so they said,” Lopez said, recalling her heart pounding and her eyes welling up with tears. “I was initially so shocked I didn’t notice he didn’t give me his name. It’s a very small town, and if he gave me a name, I would probably know him.”

The caller said he had tried serving Lopez with court paperwork twice, which didn’t make sense.

“I was like, ‘What? I wouldn’t be dodging the law or anything. I don’t understand how you missed me. I never got anything at my door,'” Lopez said.

But when she looked at the incoming phone number, the call appeared to be coming from the nearby Karnes County Courthouse, so Lopez believed the officer was legitimate, she said.

Lopez and others were fooled, the Attorney General’s Office said because the debt collectors used “spoofing” technology more than 65,800 times to mask their real phone number with local numbers, including those associated with courthouses, sheriff’s offices and jails.

The so-called officer instructed Lopez to call a phone number to resolve the problem.

A man who answered told Lopez she owed nearly $3,700 for a repossessed car and accurately described the vehicle’s make, model and color, as well as her Social Security number, Lopez said.

If she paid within 30 minutes, he offered to lower the payment to $1,200, the amount Lopez had recently received from a federal COVID-19 stimulus check, she said. Otherwise, he would garnish her wages, Lopez said.

“He was always rushing me,” Lopez said. “His voice was always authoritative, always angry … He sounded big and aggressive.”

She was relieved that the doors to her office were locked to the public because of pandemic precautions. “At least now I have a half a second to think” if he appears, Lopez thought to herself.

High-pressure tactics, such as threatening someone or giving 24 hours or less to pay, are often signs of a scam, according to the Attorney General’s Office.

“Fear is the oldest tool in the scammer’s toolbox,” Conner said.

Officials also are investigating how the debt collectors obtained detailed debt information, such as vehicle models and Social Security numbers, if they didn’t own the accounts, she said.

After Lopez hung up, she called her wife crying and was so upset her boss sent her home, she said.

“I just kept thinking, ‘I’m going to lose my vehicle or my home or something,'” Lopez said. “I can’t afford my checks to be garnished. I’m not even making enough to get by right now.”

‘I am still traumatized to this day’

But something didn’t seem right to Lopez.

The car had been repossessed in 2015 at her request after she paid on it for 18 months, Lopez said. At the time, she had lost a job and couldn’t afford the remaining payments, she said.

“I didn’t know when I was going to find a job and didn’t want to keep something that’s not mine,” Lopez said.

The creditor had sold the vehicle and written off the remaining $3,000 that was owed, Lopez said. Her credit report showed the account as closed and owing $0, she said.

Lopez started feeling suspicious. She called the debt collector back and asked for more information on the account, which he refused, she said. Lopez called the courthouse and learned the number that had appeared on her phone from the officer was a fax. Then she called the auto lender and verified she owed nothing.

“Now I’m putting everything together,” Lopez said. “I don’t think this is real.”

Lopez decided not to pay but kept getting calls from the debt collector on her cellphone and work phone, she said. Her boss finally warned the debt collector that the bank would sue if he didn’t stop harassing her.

“I am traumatized to this day,” Lopez said.

She worries that others could fall for such scams if they don’t have access to the internet or the skills to research if a debt collector is real, she said.

“I was a split second away from sending that money,” Lopez said. “I would have had to go without bills being paid. Or if my manager hadn’t been as understanding, maybe I could have lost my job. These are all things that could affect you in a very big way.”

Not taking any chances

Wheeler wasn’t as lucky as the others. He lost $300 to the scheme this summer.

He was living with his aunt after being laid off from Subway during the pandemic, he said and was driving for a food delivery service to make ends meet.

A person claiming to be a sheriff’s deputy left him a voicemail, claiming law enforcement had visited his home without finding him and Wheeler needed to call a phone number right away, he said.

When Wheeler dialed the number, a man said he owed $5,000 for a car repossessed in 2017.

“He said if I don’t make this payment, we’re taking you to court,” Wheeler said. “It sounded like a legit thing, so I went ahead.”

Although friends and family warned it might be a scam, Wheeler said he was scared of the consequences.

“I’m trying to not take any chances. I don’t want to go to jail,” Wheeler said.

Wheeler negotiated the amount down to two payments of $150 each and borrowed money from his aunt, he said.

Complaints lead to action

Still, the situation didn’t sit right with Wheeler.

He filed a complaint online but didn’t hear anything until the Attorney General’s Office recently contacted him. Wilson also filed a complaint with the FTC, while Lopez alerted the FTC, Better Business Bureau and Consumer Financial Protection Bureau.

Their complaints and others helped spur a nationwide investigation into the debt collectors by the attorney general, the FTC and more than 50 other federal and state law enforcement agencies.

Perpetrating the scam while the country is reeling from an economic shutdown is especially disheartening, Conner, of the attorney general’s office, said.

“There are so many people under financial stress. It’s really disappointing with everything going on right now that they would exploit this pandemic,” Conner said.

The lawsuit calls for the defendants to pay restitution of $1.6 million to victims and $31.7 million in fines, plus be banned for life from working in debt collection. If the Attorney General’s Office wins restitution, it will contact victims directly, although it can take years for such cases to be resolved, Conner said.

‘All that money gone’

Wheeler said he was shocked when he found out he was targeted by the fraudsters.

“Damn, all that money completely gone. I could have used it for something else,” Wheeler said. “I was tricked, and they took money from me. It’s not right.”

Although he feels bad about falling for the scheme, he said it felt real when it was happening.

“They even had a case number,” he said. “To me, it wasn’t a scam at the time.”

What are your rights when a debt collector calls?

Debt collectors generate more complaints to the Federal Trade Commission than any other industry, the federal agency says.

Here are some of the rules debt collectors must follow under the Fair Debt Collection Practices Act, according to state and federal agencies. The regulations apply to credit card debt, auto loans, medical bills, student loans, mortgages and other household debts, but not business debts.

Debt collectors:

• May not contact you before 8 a.m. or after 9 p.m., unless you agree to it.

• Must restrict all communication to your attorney if you are represented by one.

• May not contact you at work if you or someone else tells them not to.

• May not contact you if you have informed the collecting agent that the debt is not yours.

• May not contact third-party individuals, such as friends and family, more than a single time, and the contact is limited to requests for your contact information.

• May not publicly share your debts, including by sending postcards or putting information on envelopes.

• May not use obscene or profane language.

• May not make threats of arrest.

• May not threaten property seizure or garnishment of wages, unless the collector is legally allowed to, and intends to, pursue property seizure or garnishment.

• May not make false statements in an attempt to collect a debt. This includes saying you owe a different amount than you actually owe, pretending to be from the government or an attorney if they are not or threatening to take legal action they are not allowed or don’t intend to.

• Must send a written “validation notice” telling you the amount you owe within five days after they first contact you. This notice must include the name of the creditor to whom you owe the money, how to determine the original creditor and how to proceed if you don’t believe that you owe the money.

• May not try to collect interest, fees or other charges on top of the amount you owe, unless the original contract or your state law says they can.

• May not deposit a post-dated check early.

• Must put your payment toward the debt you choose, if you have more than one.

• May not sue you and win if the debt is too old, or “time-barred.” The length of time depends on the kind of debt, the credit contract and state laws. In some states, you have to tell the court your debt is time-barred for the lawsuit to be dismissed. In other states, the clock starts ticking again if you make a payment or acknowledge you owe the debt in writing. Ask the collector when its records show you made your last payment. A collector must stop trying to collect until it gives you verification. If you pay nothing, the collector can continue to contact you unless you mail a letter asking for contact to stop.

• Must stop contacting you if you send a letter by mail asking for contact to stop. (It’s best to send the letter by certified mail and pay for a return receipt, as well as to keep a copy for yourself.) The exceptions are to confirm the collector will end communication or to notify you of a pending action such as filing a lawsuit or reporting you to a credit bureau. You should consider talking to the collector at least once to confirm it’s really your debt and to find more information about it. But be careful about sharing too much of your personal or financial information, especially if you’re not already familiar with the collector. If it is your debt, you may be able to negotiate to reduce the total amount owed or set up a payment plan. Before paying any settlement, however, request a signed form or letter from the collector that says the amount you’re paying settles the entire debt and releases you from any further obligation and keep a record of your payments.

How to protect yourself from debt collection scams

• Find out who’s calling. Write down the full name of the collector, collection company, its address and phone number. If the collector refuses to give this information, it’s a red flag.

• Ask for validation of the debt. Within five days of contacting you, the debt collector must send you a written notice of how much you owe including interest and fees, the name of the current creditor, how to find out the name of the original creditor and what to do if you don’t think it’s your debt. In most cases, the collector should be able to provide the information immediately. It is also recommended to ask what the debt is for and when the debt was incurred. Be wary if the collector refuses.

• Don’t respond to threats or immediate deadlines. If someone threatens to arrest you, suspend your driver’s license, call your employer if you don’t pay immediately or makes other threats, hang up and report it immediately. The same applies if the debt collector requires you to act immediately. You can file a complaint with Arizona Attorney General’s office at www.azag.gov/complaints/consumer or by calling 602-542-5763 in the Phoenix area, 520-628-6648 in the Tucson area or 800-352-8431 anywhere else. You can also complain to the Federal Trade Commission at www.ftc.gov/complaint and the Consumer Financial Protection Bureau at www.consumerfinance.gov/complaint.

• Do your own detective work. Check with the original creditor. Is the debt yours? Did they sell the debt or hire a company to collect it? If so, is the debt collector calling you the collector they hired?

• Dispute the debt. If you think you don’t owe some, or all, of the debt, dispute it with the collector by mail or online.

• Keep evidence. Maintain copies of any correspondence with the debt collector, including letters, emails, text messages and dates, times and phone numbers of calls. If you send a letter, use certified mail to ensure it’s received.

• Use forms to communicate with the debt collector. The CFPB has sample letters for when you do not owe a debt, need more information about a debt, want the debt collector to stop contacting you, want the debt collector to only contact your lawyer or want to specify how the debt collector can contact you. Find the forms at www.consumerfinance.gov/consumer-tools/debt-collection.

Consumer reporter Rebekah L. Sanders investigates issues of fraud and abuse involving businesses, health care and government agencies. Contact her at [email protected] or follow her on Twitter at @RebekahLSanders.

This article originally appeared on Arizona Republic: Scammers posed as cops, swiped $1.6M, Arizona attorney general says

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