How to know if a debt collector is a scam
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If you recently received a call, text or written correspondence from a debt collector, it could be a scam. According to the Federal Trade Commission, over 154,272 debt collection reports were received in 2021, with 50.1 percent of these reports relating to abusive debt collection activity or a debt not owed by the consumer.
Not all debt collectors are scammers. Still, it’s important to be on the lookout for red flags to protect your finances and prevent your personal information from being compromised and used by fraudsters.
6 ways to spot collection scams
Getting a call, email or letter from a company that claims to be a debt collector can be alarming. Here are six telltale signs that you’re dealing with a credit collection services scam:
1. They pressure you
A credit collection scam might use scare tactics and threats. The scammer might also pull the emotional card, making you feel like a bad or irresponsible person. They also might try to create a sense of urgency so you move quickly and do what they want.
“Legitimate debt collectors may sometimes be aggressive, but scammers often use fear to get you to act quickly and not ask any questions,” says Thomas Nitzsche, a financial educator at Money Management International, a nonprofit credit counseling organization. “If they’re threatening you with jail time — or worse — that’s a violation of your rights and a major red flag.”
The Fair Debt Collection Practices Act expressly prohibits debt collector conduct meant to “harass, oppress or abuse” you to collect on a debt — regardless of whether you owe the debt or not. They can’t threaten you with jail time, bodily harm or use profanity.
Should they call your home or workplace, they can only call between 8 a.m. and 9 p.m. in your time zone and ask about your whereabouts. They must stop if you tell them not to call you at work. Furthermore, repeated phone calls intending to annoy you are also prohibited by federal law.
2. They won’t give you their contact information
Real debt collectors are from reputable companies with websites and reviews, and you can contact them if necessary. Ask the caller for the debt collector’s company name, address and phone number.
If a scammer is on the other end, they might distract away from your questions and insist that the debt needs to be resolved. If they refuse to disclose their identity and company information, that’s a telltale sign that it’s not a legitimate collection agency.
3. The debt isn’t yours
If the supposed debt collector is trying to strong-arm you into paying a debt you don’t recognize, you might have a scammer on your hands. You can ask the debt collector for the creditor’s name and the amount you owe. By law, they must provide this information to you.
Also, check your credit report for accounts in your name to see if it shows which debt collection agencies your defaulted accounts have gone to. You can also reach out to the original lender or creditor to see if your debt has been sold off and, if so, where your debt has been sold to.
4. You didn’t receive a letter in the mail
If a debt has gone to a debt collector, you should receive formal, written notification in the mail. If you’re contacted by someone who you suspect is a scammer, ask them for verification of the debt. This is a letter that all debt collectors must send within five days of first contact with a consumer.
The letter from the collection agency should disclose:
- The debt amount in question
- The creditor who is owed the debt
- A disclosure statement giving the consumer 30 days to dispute the debt.
When you do receive such letters, hold on to them. You can refer to them should a scammer contact you.
5. You’re asked to pay by prepaid card or money transfer
Scammers almost always prefer non-reversible payment — think a prepaid card, money order or money transfer, Nitzsche says. These forms of payment can’t be traced, and scammers take off with your money with very slim chances of getting caught. Be alert if they ask for payment methods that seem out of the norm.
If you go to pay a legitimate debt collector, pay in a way that you can use to verify that you have paid and the amount you paid.
6. They threaten to tell your co-workers, friends and employers about your debt
By law, debt collection agencies typically aren’t allowed to share details about your debt with most people. For example, they can’t threaten to collect payment from your parents to coerce you into making an immediate payment.
Any suggestion they might tell your employer or family members that you have debt to get you to pay is illegal. Federal law only allows them to inquire about your whereabouts.
4 ways to protect yourself from debt collection scams
If you’re worried about becoming a victim of debt collector scams, here’s how you can protect yourself, your bank account and your personal information:
1. Contact your creditor
Track the source of the debt by reaching out to your creditor to see if it has any information about the debt in question. If the company that contacted you matches what your creditor has on file, you’ll know it’s a legit debt collector.
Always ask for a validation letter or confirmation about the debt. That way, if you do receive fake debt collection letters, you’ll be able to check them against the legit one from the actual collection agency.
2. Check your credit report
Look at your credit reports to see if the debt the collector is referring to is on your report. You can order free credit reports from all three major credit bureaus — Experian, Equifax and TransUnion — at AnnualCreditReport.com.
While most debt is reported, not all debt collectors relay information to the credit bureaus. The debt could still be yours but not show up on your credit report. In this case, you may need to do more research to look into the alleged debt.
3. Don’t disclose any financial information
When someone asks for personal and financial information, don’t share anything the potential scammer doesn’t already know. Instead, ask for the caller’s name, the collection company and contact information such as a phone number or email address and its physical address.
If the collector is willing to provide information, that’s a good sign. Next, try to call the company or send it an email. If you get a dead line or the email bounces back, that’s a red flag. Save any discussion of your financial or personal information until you have verified that the debt collector is legitimate.
4. Stay calm and know your rights
Dealing with a debt in collections can be stressful and embarrassing, but don’t be hasty, Nitzsche says.
“A legitimate debt collector should be able to provide you with documentation that shows where the debt came from, when they acquired it and how they arrived at your current balance,” he says. “Always ask for this verification as soon as collection attempts begin.”
Under the Fair Debt Collection Practices Act, legitimate collectors must identify themselves and can’t try to contact you at any unusual time or place. They also can’t communicate with anyone about your debt except for your attorney, the attorney for your creditor or the collection agency and, in some cases, a consumer reporting agency.
It’s also helpful to know your state’s statute of limitations on debt, Nitzsche says. This can be anywhere from three to 10 years. “If the debt they claim you owe — legitimate or not — is beyond the statute of limitations, the collector can attempt to collect but cannot sue you,” he says.
How to report fake debt collectors
If you think you’ve been scammed or there’s been an attempt to scam you, there are ways you can fight back.
1. Keep a paper trail
Nitzsche recommends keeping records of all communication with the collectors. Takes notes on the date and time of every phone call, save emails and texts and gather letters and any other correspondence you receive from the company. If it is legal in your state, record any phone calls. The more information at your disposal, the stronger your complaint will be if you file a report.
2. Reach out to your state’s attorney general
Your attorney general’s office is on the alert for scammers and aims to put a halt to fraud such as debt collector scams.
3. Submit a complaint
You can report a fake debt collection agency to the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).
With major debt collection rule changes slated for November 30, 2021, one of the biggest changes is that debt collectors will be allowed to contact you through email, text message and social media direct messages, Nitzsche said.
“There’s a really good chance that scams will increase with all of these new methods of communication, so be vigilant and remember your rights.”
If a debt collection agency contacts you, do your research before agreeing to repay what you allegedly owe. Start by confirming you owe the debt, as you could be dealing with a scammer looking to prey on innocent consumers. Also, familiarize yourself with common tactics used by scammers, and if you find that you’re dealing with a fraudster, file a report with your state attorney general’s office, the FTC and the CFPB.
But if you determine that the debt does belong to you, know your rights when dealing with debt collectors and file a complaint promptly if they’re violated.