How to Handle Debt Collection Scams
Fake debt collectors call people and try to trick them into paying up for expired or even entirely nonexistent “phantom” debts.
No one likes dealing with debt collectors. It’s rarely a fun conversation to have, especially when so much of your financial life could be dependent on whether that collections agency is reporting your account to the credit bureaus.
Unpaid debts can drag down your credit score leading to fewer options when you need a personal loan, leaving you stuck with short-term no credit check loans and bad credit loans like payday loans, cash advances, and title loans. Plus, it’s likely that additional penalties and fees that could be attached to those unpaid debts.
But much worse than dealing with a legitimate debt collector is accidentally falling for a scammer pretending to be a legit collector. That’s how you end up forking over hundreds or even thousands of dollars and coming away with absolutely nothing to show for it!
This is why it’s important to learn how to spot debt collection scams and how to overcome them.
Fake debt collectors are a real problem.
Debt collection scammers use manipulation and deceit in their attempts to fool you. It’s become such a major issue that government agencies have started to step in.
“Receiving a telephone call from a debt collector is not a pleasant experience,” acknowledged Steve Weisman, a lawyer, author, and identity theft expert who writes at Scamicide.com (@Scamicide). “Being hounded by someone attempting to collect a debt you do not owe is fraud. These non-existent debts are sometimes referred to as ‘phantom debts.’
“The Federal Trade Commission (FTC) recently obtained a temporary restraining order against Global Asset Financial Services Group, LLC, ten affiliated companies, and their six individual principals preventing them from continuing to use deceptive and threatening tactics to collect phantom debts from consumers that were not even owed by the consumers.
“In some instances, the scammers posed as attorneys and threatened lawsuits if their victims did not pay the non-existent debts. The case against Global Asset Financial Services Group, LLC and the other defendants is continuing in the Federal District Court for the Western District of North Carolina.”
Thankfully, there are ways you can tell if a debt collection call is legitimate.
Verify the debt and the debt collector.
Some of the steps to verifying the legitimacy of a debt you’re being contacted about are fairly obvious; but when faced with the pressure of someone presenting themself as a debt collector, it’s easy to get shaken up.
“First of all, work out if you actually owe any money!” urged Stephen Hart, CEO of Cardswitcher. “It’s surprising how many people don’t remember to do that.
“A simple trick is to do a simple Google search on the phone number or email address that they are contacting you from and see what comes up. You’ll often find that common scammers will be named and shamed by others. If you can’t find any information, or the website that you’re led to has an odd design, lots of spelling and grammatical errors, and just doesn’t look right, that should set some alarm bells sounding.
“While it’s obvious that a debt collector will want you to repay money quickly, they’ll usually give you a bit of breathing space and give you some options to pay back what you owe. If a debt collector is pressuring you to pay back money immediately, that’s usually a sign that they’re not a legitimate collector.”
And that’s not the only suspicious behavior a fake debt collector might exhibit.
“If the debt collector will not identify themselves by name (person and company), hang up,” advised Todd Christensen, education manager for Money Fit by DRS, Inc. (@MoneyFitbyDRS). “If the collection agency threatens to send a sheriff to your doorstep, it is likely a scam and definitely a violation of the Fair Debt Collection Practices Act.
“If the debt collector will not or cannot tell you what the debt was for, hang up. If the collection agency can’t provide you within 30 days documentation of what the debt was originally for, block their number and hang up on them.”
While some people have gone to extraordinary lengths to fight back against fake debt collectors, their path certainly isn’t for everyone. And while hanging up a suspected scammer is always a good response, there are other methods you can use as well!
Here’s how you can deal with them.
Above all else, do not give them any of your personal information.
“Do NOT give the debt collector your payment information (card and certainly never your bank account information) until you have received satisfactory proof by mail that you actually owe the money,” warned Christensen.
“Ask for the mailing address under whatever pretense you like (e.g. ‘so I can send a payment’), then, if you feel you have been scammed or are the target of a scam, contact a local nonprofit credit counseling agency or even an attorney specializing in consumer debt.
“The credit counseling agency should not charge to guide you in drafting a letter to request the organization cease contacting you. However, an attorney may charge $100 or more for the service. I’ve had a client who has been the target of repeated debt scams. The $100 paid to a local attorney ended up being well worth it to her.”
Weisman offered similar advice, as well as a recommendation to reach out to the supposed creditor directly:
“Subject to strict federal laws, legitimate debt collectors are permitted to call debtors, however, the law prohibits them from threatening imprisonment for the failure to pay a debt and attempting to collect a debt that the debt collector knows is bogus.
“It can be difficult to know when someone calls attempting to collect a debt if indeed the debt collector is legitimate or not, so the best course of action if you receive such a call is to not discuss the debt with the person calling, but instead demand that they send you a written ‘validation notice’ by regular mail which describes the debt they allege you owe and includes a listing of your rights under the Federal Fair Debt Collection Practices Act.
“Never give personal information over the phone to anyone who calls you attempting to collect a debt. You can never be sure who they are. If you receive the validation notice and it appears to be legitimate, you may be better off contacting your creditor directly because the person who called you may not be representing the creditor, but may merely have information about the debt.”
It can be scary dealing with a collections agent, but it’s important to keep your cool. Scammers are hoping to trip you up—but with this advice, it shall be they who are tripped!
To learn more about keeping your money safe from scams and fraudsters, check out these other posts and articles from OppLoans:
- 5 Steps You Can Take to Prevent Identity Theft
- How to Avoid Getting Insta-Scammed on Instagram
- 10 Common Scams: How They Work and How to Avoid Them
- Should You Freeze Your Credit?
|Author and Accredited Financial Counselor®, Todd R. Christensen, MIM, MA, is Education Manager at Money Fit by DRS, Inc. (@MoneyFitbyDRS), a nationwide nonprofit financial wellness and credit counseling agency. Todd develops educational programs and produces materials that teach personal financial skills and responsibilities to all ages. Having facilitated nearly two thousand workshops since 2004 on the fundamentals of effective money management, he based his first book, Everyday Money for Everyday People (2014), on the discussions, tips, stories and ideas shared by the tens of thousands of individuals and couples in attendance.|
|After working in the financial industry for several years, Stephen Hart left his role as Chief Financial Officer at WorldPay to launch the UK’s first payment processing comparison site, Cardswitcher. Nowadays, he helps SMEs save money on their payment processing costs.|
|Steve Weisman is a lawyer, college professor at Bentley University and author. He is one of the country’s leading experts in identity theft. His most recent book is “Identity Theft Alert.” He also writes the blog Scamicide.com (@Scamicide) where he provides daily updated information about the latest scams and identity theft schemes.|