With the pandemic still wreaking havoc on the economy, many people are struggling to pay their monthly bills and meet their debt payments. Unfortunately, scammers are exploiting the financial downturn by tricking unsuspecting victims into paying for debts that don’t actually exist, or by using abusive tactics to collect legitimate debts.
Don’t be the next victim of a debt-collection scam. Here’s all you need to know about these scams:
How the scams play out
In a debt-collection scam, a caller claiming to represent a creditor or a debt-collection agency demands immediate payment for an alleged outstanding debt. The caller insists on specific means of payment and may even threaten to tell the victim’s family and friends about the outstanding debt. The alleged debt may be completely fabricated, or the scammer has hacked the victim’s accounts to learn of its existence. In either scenario, the caller does not represent the creditor and will pocket any “collected” money.
These scams can also take the form of abusive debt collection. In this variation of the scam, a caller collects money for a legitimate debt, but uses abusive and illegal practices to complete this task.
How to spot a debt-collection scam
You might be looking at a scam if an alleged debt collector does any of the following:
- Withholds information — a legitimate debt collector is able and willing to tell you the name of the creditor as well as the exact amount owed.
- Threatens the debtor with jail time — barring criminal fines or restitution, there’s no jail time for an overdue debt.
- Insists on specific means of payment, such as prepaid debit card or money transfer.
- Asks you to share personal financial information — a legitimate debt collector will not ask you to provide your Social Security number or account numbers.
Know your rights
When outstanding debts go unpaid, a lender is legally allowed to sell the debt to a collection agency. The agency can then attempt to collect the debt through letters and phone calls. The agency is not allowed to employ abusive practices or harassment when attempting to collect the debt.
The Fair Debt Collection Practices Act (FDCPA) is an amendment to the Consumer Credit Protection Act, which protects consumers from abusive debt-collection practices.
According to the FDCPA, debt collectors cannot:
- Contact borrowers at unreasonable hours, generally before 8 a.m. or after 9 p.m.
- Call borrowers at their workplace if the borrower said they cannot accept phone calls at work.
- Harass borrowers about a debt, including using threats of violence and obscene language, publishing the debtor’s name and calling the debtor multiple times each day.
- Engage in unfair collection practices, such as collecting more than is owed, depositing post-dated checks early, or seizing property when it is not legally allowed.
- Lie about the money owed.
- Falsely represent themselves as an attorney, government official or another party.
- Threaten the debtor with jail time or other unwarranted legal action.
- Falsify the name of the agency they represent.
If you are unsure of whether you are being targeted by a debt-collection scam, there are steps you can take to protect yourself.
Ask the caller for a callback number. A legitimate collector will not hesitate to share this information. You can also ask for the caller’s name, as well as the name and street address of the company they represent. Be sure to try the number the caller shares, as they may have rattled off a nonfunctioning number in the hopes that you wouldn’t actually dial it.
Ask the caller to confirm basic information about the debt. The collector should know the exact amount owed and be able to tell you the name of the company behind the debt.
If you still believe you are being scammed, contact the creditor the collector is claiming to represent and ask if the debt collection has been outsourced to another company.
If you’ve been targeted
If you believe you’ve been targeted by an illegitimate debt collector, let the FTC know. Report the scam at ftc.gov/complaint. You can also block the scammer’s phone number on your phone and let your friends know about the circulating scam. If a falsified debt appears on your credit report, you will need to dispute the charge as well.
If you’ve confirmed that a collection agency has been legitimately hired by a lender, but you believe the agency is employing abusive tactics, or you’d like them to stop contacting you, there are additional steps you can take. According to the FTC, under these circumstances, it’s best to send the collection agency a written letter asking it to cease all contact. Once the agency has received the letter, it can only reach out to the debtor to let them know there will be no further contact, or to inform the debtor of a specific action being taken against them.
If the debt collector continues to contact you for any other purpose after receiving your written request to desist, you may want to consider filing a lawsuit against the agency in state court.
[If you are having trouble meeting your financial obligations, we can help! Call, click, or stop by Advantage One Credit Union to speak to a member service representative today.]
Your Turn: Have you been targeted by a debt-collection scam? Tell us about it in the comments.