There has been an uptick in reports of debt collection scams. In 2021, the Federal Trade Commission got more than 154,272 reports. Of those, 50.1% were about unfair debt collection or debts that weren’t owed by the consumer. Don’t be a victim of such a scam! Be aware of the signs: calls, texts, or written correspondence from a debt collector that seems suspicious. Don’t hesitate to report any suspicious activity to the FTC.
There are many honest and professional debt collectors out there. However, some scammers pose as debt collectors to take advantage of unsuspecting people. It is important to be aware of the red flags that may indicate a scammer so that you can protect your finances and personal information.
A collection scam can be spotted in six ways
You may be alarmed to receive a call, email, or letter from a company claiming to be a debt collector. However, several signs can help you identify whether or not you’re dealing with a scam.
1. They pressure you
There are many ways that scammers try to trick people into paying them money. One common tactic is to pretend to be collecting on behalf of creditors. They may use scare tactics or try to make you feel guilty. They might also try to create a sense of urgency so that you will pay them quickly.
As a financial educator at Money Management International, a nonprofit credit counseling organization, Thomas Nitzsche knows a thing or two about debt collectors. He says that while some legit collectors can be aggressive, many scammers use fear tactics to get people to act quickly without asking any questions. ” threaten you with jail time or even worse, that’s a violation of your rights and a major red flag,” he warns.
Debt collectors are not allowed to use any tactics that could be considered harassing, oppressive, or abusive in an attempt to collect on a debt. This includes making threats, using profanity, or causing bodily harm. Even if you do owe a debt, debt collectors are not allowed to break the law in their attempts to collect it from you.
The IRS may call you to discuss your taxes, but they are only allowed to call between 8 a.m. and 9 p.m. in your time zone. You can tell them not to call you at work, and they are not allowed to make repeated calls intending to annoy you.
2. If you ask for their contact information, they won’t give it to you
There are a few things to keep in mind when you’re dealing with debt collectors. First, make sure that they’re coming from a reputable company. Ask the caller for the name of the company, their address, and their phone number.
It’s important to be aware of scammers when you’re dealing with debt collectors. They may try to distract you from your questions and insist that the debt needs to be paid immediately. Legitimate collection agencies will always disclose their identity and company information upon request.
3. The debt isn’t yours
It is important to be aware of debt collection scams, as they can be quite convincing. However, there are a few ways to spot a scammer. For example, they may try to pressure you into paying a debt that you don’t recognize. In this case, you can ask the supposed debt collector for the creditor’s name and the amount owed.
Debt collection agencies often purchase defaulted debts from the original lenders or creditors. Checking your credit report can help you determine which agency currently owns your debt. You can then reach out to that agency to discuss payment options.
4. No letter has been sent to you
It’s important to know your rights when it comes to debt collectors. By law, they must send you a written notice within five days of first contact. This letter will include verification of the debt. So, if you’re ever contacted by someone you suspect is a scammer, be sure to ask for this verification.
A letter from a collection agency should always disclose:
- The debt amount in question
- The creditor who is owed the debt
- A disclosure statement gives the consumer 30 days to dispute the debt.
Keep any letters you receive from scammers. They can be helpful should the same person try to scam you in the future.
5. The payment method will be a prepaid card or a money transfer
Prepaid cards, money orders, and money transfers are often the preferred payment methods for scammers. These forms of payment can’t be traced, which makes it easy for scammers to take your money with very little chance of getting caught. Be on the lookout for requests for unusual payment methods, as this may be a sign that you’re dealing with a scammer.
It is important to pay your debts in a way that you can verify and keep track of them. This will ensure that you are not scammed and that you can stay on top of your finances.
6. Debt collectors threaten to tell friends, co-workers, and employers that you’re in debt
Debt collection agencies are usually not allowed to legally share information about your debt with other people. This means that they can’t threaten to collect payment from your parents to get you to make a payment right away.
There are things that debt collectors are not allowed to do according to federal law. For example, they cannot tell your employer or family members about your debt in an attempt to pressure you into paying.
How to protect yourself from debt collection scams
There are a few things you can do to protect yourself from debt collector scams, including being aware of what to look for and taking steps to safeguard your personal information.
1. Contact your creditor
To determine whether a debt collector is legitimate, you can start by tracking the source of the debt. Reach out to your creditor to see what information they have about the debt in question. Compare the company that contacted you with what your creditor has on file. This will help you confirm whether or not the debt collector is legitimate.
It’s important to be vigilant when it comes to debt collection letters. Make sure to request a validation letter or confirmation from the collection agency. This way, you can confirm that the debt is legitimate and avoid being scammed.
2. Check your credit report
Your credit report is a good place to start when you’re trying to resolve a debt with a collector. You can get free credit reports from all three major credit bureaus — Experian, Equifax, and TransUnion — at AnnualCreditReport.com. By law, you’re entitled to one free report from each bureau every 12 months.
Not all debt is reported to the credit bureaus. This means that even though you may still owe the debt, it may not appear 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
Don’t share any personal or financial information with someone unless you’re sure about who they are. Ask for their name, the company they represent, and how to get in touch with them before giving away anything.
Before discussing your financial or personal information with a debt collector, you should verify that the collector is legitimate. A good sign that a collector is legitimate is a willingness to provide information. You can try to call the company or send it an email. However, if you get a deadline or the email bounces back, this may be a red flag indicating that the collector is not legitimate.
4. Stay calm and know your rights
Dealing with a debt in collections can be a difficult and embarrassing process, but it is important to take your time and not make any rash decisions, according to Nitzsche.
“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.”
Debt collectors must follow certain rules when contacting you about a debt. They must identify themselves, and they can only contact you at reasonable times and places. They also can’t talk to anyone else about your debt except for your attorney, the collection agency, or a consumer reporting agency.
It’s helpful to know your state’s statute of limitations on debt. This can be anywhere from three to 10 years. “Collectors can attempt to collect but cannot sue you for a debt that is beyond the statute of limitations,” Nitzsche says.
What you should do if you encounter fake debt collectors
There are steps you can take to protect yourself from being scammed and to fight back against scammers. Here are some things you can do:
1. Keep a paper trail
Nitzsche tells people to make sure they keep records of everything they say to debt collectors. This means writing down the date and time of every phone call, saving emails and text messages, and collecting letters and other correspondence from the company. In states where it is legal, recording phone calls may also be beneficial. The more information that is available, the stronger the complaint will be should the need to file a report arise.
2. Reach out to your state’s attorney general
The attorney general’s office is warning people about scammers who try to collect fake debts. These scammers often target vulnerable people and attempt to cheat them out of their hard-earned money.
3. Submit a complaint
There are a few things that can be done to combat fake debt collection agencies. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) both accept complaints about these types of agencies.
As the date for major debt collection rule changes approaches, it is important to be aware of the potential for scams. According to Nitzsche, the biggest change is that debt collectors will be able to contact you through email, text messages, and social media direct messages. This increase in communication channels leaves consumers vulnerable to more scams. Remember your rights and stay vigilant to protect yourself.
Before you agree to repay any debt that a collection agency contacts you about, do your research. Confirm that you owe the debt, as there are scammers out there who prey on innocent consumers. Familiarize yourself with common tactics used by scammers, and report any fraudsters to your state attorney general’s office, the FTC, and the CFPB.
Dealing with debt collectors can be a tricky and stressful experience. However, it is important to know your rights and to file a complaint promptly if you feel that they have been violated.