The agency says the companies included in a new lawsuit prey on people who have used online payday loan services. The lawsuit was filed against two companies and one individual. Officials say they used threats and scare tactics to get people to make payments they do not really owe.
Tuesday night, one victim says it could happen to anyone.
The federal investigators followed the money. Over eight months, they found $17,000 in transactions.
They suspect the calls were coming from India, but the money was going to California.
The money was from customers all over the U.S. who were tricked into thinking they owed debt on a payday loan.
JanLaree DeJulius had never thought she would be standing before a Federal Trade Commission press conference, but she wants to help others who may be tempted to pay on a phantom loan.
"When it's on the phone and with everything else going on at the time, it made sense; it was like, 'OK, whatever debt it is, I'll pay it. I don't want my credit to be affected,'" said DeJulius.
The FTC filed lawsuits against American Credit Crunchers, Ebeeze and Varang K. Thaker in California. The FTC alleges they fraudulently collected $5 million posing as bill collectors, but the FTC says the alleged debt was not real.
"Consumers get telephone calls demanding payment of a payday loan; callers pretend, often, to be with local law enforcement," said Steve Baker of the FTC.
The FTC found the alleged fake debt collection started with someone applying for an online payday loan. The phony debt collectors would then call the applicant demanding payment, sometimes threatening to contact employers or imprisonment.
"Often, the consumer is told they are going to be arrested and thrown in jail in the next two hours if they don't pay right then over the telephone," said Baker.
"It was intimidating enough that I didn't want to go through that, and I just said, 'Sure, yeah, I'll pay you, whatever it takes,'" said DeJulius.
Lisa McGreevy of the Online Lenders Alliance said in the statement: "The online lending industry is pleased to see the FTC take decisive action... our member companies have heard from consumers about abusive and threatening calls... demanding payment on loans that had already been repaid or were never issued."
DeJulius is out about $500. She was able to stop some of the payments when she realized she did not owe the debt.
"I'm not a stupid person, and I bought it hook line and sinker," said DeJulius. "It's out there, and it's everywhere; it's country-wide. So if I can save one person from going through it, then it's worth it."
ABC7 attempted to reach Thaker but has not heard back from him. The two companies named in a suit have been taken off the internet.
Some things to know about debt collection: you cannot go to jail for debt, and they cannot call your employer. If you are not sure about the debt, go to the lender with whom you directly contacted.
If demands for payment seem fraudulent, file a complaint with the FTC or the Illinois Attorney General's office. These investigations only happen when people come forward.
The FTC is trying to get money back for victims.