Today’s personal finance hack is about protecting yourself from debt collection scams.

It is very likely that you (or someone you know) has been contacted by a debt collector if you live in the United States. Debt collection agencies are very common in America, where creditors can sell debt (and the right to collect​ it) to different companies​ that personally contact debtors to demand repayment. 

If you received a call from a person claiming to be a debt collector and demanding money, your first step should be to determine the authenticity of the caller. Before committing to sending any money to the caller, make sure he/she is a legitimate agent and that you are not being subjected to a debt collection scam or hoax, which is pretty common, unfortunately.

 

P.S. These tips are specifically for debtors living in America; if you happen to live elsewhere, be sure to read up on the consumer protection and debt collection laws in your country and contact a lawyer for additional help.

debt collector scam, debt collection fraud, signs of debt collection hoax

5 ways to determine if your debt collector is real or part of a debt collection scam

There are many indications of a debt collection scam and we cover 5 of them today:

1. Incomplete identification of debt collector and agency

Run the full name and address of the debt collection agency as well as the name of your debt collector through Google to see if they have a proper website and a physical office. If it’s​ a scam, the debt collector will be reluctant to share their full address, telephone number and other details that every business registers. Fake debt collection agencies might simply have a post box registered through which they collect debt repayments, instead of a proper office. If the caller refuses to share full details of the agency name and address, you can be certain it’s a scam because the caller is required by law to properly identify themselves.

2. The debt being claimed is non-existent

Check your credit report to ensure the debt being discussed by the debt collector is valid. Sometimes debt collection scammers call up people and harass them into paying a non-existent debt. If you have outstanding dues, it should generally show up on your credit report so use that to verify the claims of the debt collector to determine if you are dealing with a hoax or a legitimate debt collection agency. Remember that credit reports can contain mistakes too, and they should be disputed and corrected to improve your score if it matters to you.

3. Debt is valid but proof of debt ownership is missing

Debt can be sold and resold in America. This means if you took out a consumer loan from Bank A, the bank may sell your debt to Bank B, who may decide to later sell it to Bank C or a debt collection agency. As a result, the right to claim money against that debt can belong to different companies​ from time to time. You originally owed money to Bank A, but the following year, you owed it to Bank B and then Bank C, and eventually, you are legally obligated to pay the money to the debt collection agency that is the present owner of your debt.

Therefore​, even if you know that an outstanding debt exists, you must ask the debt collector to prove he/she has the legal right to claim that debt.  In order to determine that you are paying the right party, you must request the debt collector to furnish evidence that he/she now owns the debt and is responsible for collecting it.

4. Fake Debt collectors ask you the wrong questions

Debt collection scammers have incomplete information about your debt and may ask you details about it which they already ought to have if they had purchased your debt. They could ask you about the original creditor, the amount of debt, when you acquired that debt, and that’s a sign that they are not real collectors and do not own the right documents to collect the debt.

Scammers may also ask for personal identifiable information, such as your Social Security Number or bank account number, which you should not disclose over telephone, as a general rule. There are exceptions to this rule and we’ll cover that in another blog post soon.

5. Agressive debt collection practices and tactics

Debt collection agencies are not permitted to harass,verbally abuse or threaten consumers in order to collect debt. Even though legitimate debt collectors have been known to harass clients (and they run the risk of being reported to authorities) scammers often rely on unusually aggressive collection practices to improve their  chances of receiving money. They may threaten to take legal action or warn of​ debtors of dire consequences if the money is not paid immediately.

Scammers use a variety of scare tactics in an attempt to frighten debtors so they are more likely to impulsively transfer the money to make the ‘problem’ go away.

Of course, one should be aware of the possibility that a fake debt collector can come accross as professional and honest.

In conclusion, it is important to keep a cool head and watch out for red flags. If you know the debt collector is legally approaching you for the money, you have nothing to worry about. However, if you feel you are being scammed, do not reveal your anxiety to prevent further harrassment, ignore future calls and report the incident.

Good luck and be safe 🙂

References and further reading: 

Fair Debt Collection Practices Act – Federal Trade Commission

Debt Collection Resources – Consumer Protection Financial Bureau

Debt Collection FAQs – USA.gov

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