PayDay Loan Scam

The Connecticut Department of Banking is warning debtors to be aware of a new scam in which people posing as debt collectors threaten arrest unless payday loans are repaid.

“This is kind of a new low,” Banking Commissioner Howard Pitkin said.

The scammers, who appear to be located offshore, gain information on people who apply for payday loans online. They then call the debtor and harass them at work, at home and sometimes contact neighbors. They even say they are going to send federal agents to the person’s home or office to arrest them for fraud.

Pitkin said his office started receiving complaints about this new gambit about six months ago, and the problem is growing with about 40 complaints filed a month.

These fake collectors claim to have purchased the loan, but the department found no evidence of that. And it reported that those who have paid continue to be harassed. It’s creating more hardship and fear for people who can least afford it.

One department staffer had to talk to a victim’s boss to help the person keep a job after phone calls poured into the business, according to the department. Another woman was so concerned after receiving a call, she turned herself into police.

The department is investigating the matter with federal authorities. So far, the scam is limited to payday loans.

Connecticut does not license payday lending operations. Pitkin said the department is encouraging more small-scale lending. and the department advises people who need personal loans to visit small banks and credit unions.

Those who get a call from an aggressive debt collector should push back and get their name and where they’re located, and if they refuse, it is a scam, Pitkin said, adding they should report the incident to law enforcement.

If you have been victimized, call the Banking Department’s Consumer Affairs Division, at 860-240-8170, or toll-free at 800-731-8225.

For those who struggling to buy food or cover other basic costs, information on charitable programs can be found by calling 211, the United Way’s information line.

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