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Northampton police warn consumers of con artists targeting online borrowers

— Police are warning residents of a loan scam in which people who borrow money online are later targeted by scammers posing as loan officers who work for the government. Northampton police have fielded several recent reports from residents who say they have received harassing phone calls from these “officers,” though none of the victims have fallen for the scam, said Detective Sgt. Anne McMahon.

“We just want people to be aware of this,” McMahon said.

One such incident occurred last month when a woman received a call while at work in Florence. The caller identified himself as officer Jack Anderson, claiming to be from the government credit council. He said he would arrest her if she did not make a payment on an online loan she took out last year.

Knowing her account was in good standing, the woman hung up on the caller and contacted police after he continued to call.

McMahon said a co-worker of the victim reported a similar incident a month earlier, in January. In that case, the woman had not borrowed money from an online company, but she did report having credit issues in the past and told police she wondered if that’s how the scammer got her information.

She told police the caller had an Indian accent and identified himself as officer Scott Brown. He called repeatedly and she hung up several times before he eventually threatened to get her fired and asked for her supervisor. She hung up again and called police.

Police said the phone numbers traced to Ohio and Michigan, respectively, but they could not determine who made the calls.

Another victim from Northampton reported being harassed by phone last summer for money the caller said she owed on a pair of online loans. She said the loans were legitimate and that she was in good standing with the companies.

She hung up several times before eventually contacting police when the calls became incessant.

A Northampton officer then took over, using the victim’s phone to return the scammer’s call. He hung up after the officer identified himself, McMahon said. Numerous online forums contain reports from people from throughout the country who are receiving similar calls that all follow the same general format.

“We’re not sure if these loan companies are selling the information or if they’re somehow hacking into databases,” McMahon said.

It’s unclear whether the state Attorney General’s Office is investigating these types of cases, but a spokeswoman said the office has settled several payday lending cases in recent years and ordered hundreds of companies offering such services to stop doing business in the state.

Payday loans, also known as cash advance loans, are small loans that carry short payback terms, and rely on the consumer’s checking account for repayment. Because the loans are short-term in nature, the cost to the consumer is enormously high, typically averaging annual percentage rates of more than 500 percent, according to the state Division of Banks.

In exchange for a loan, a borrower provides the lender with an authorization to automatically debit his or her bank account. Repayment of the full amount, along with any fees required by the lender, is typically due within 14 days or with the borrower’s next paycheck.

If borrowers do not have the ability to repay the full amount within the required timeframe, they can roll over the loan for an additional period of time for an additional fee.

“Due to the nature of these lenders operating over the internet and across the globe, they are difficult to track and verify, consequently increasing the risk of identity theft for consumers,” the Division of Banks states.

Companies that want to offer payday loans in Massachusetts must obtain a small-loan license — $6,000 or less with interest rates greater than 12 percent — from the Division of Banks.

The license requires companies to cap the annual rate of interest at 23 percent with an annual administrative fee of $20. These regulations are intended to curb the high annual percentage rates many companies charge for payday loans. Such rates are illegal.

Consumers who have a complaint or concern with a payday lender may contact the Division of Bank’s consumer hotline at 1-800-495-2265, ext. 501, or the Attorney General’s Insurance and Financial Services Division at 888-830-6277.

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