Calls from debt collectors are bad news in any circumstances, but, what’s even worse, many of those calls are not legitimate. The caller may not be authorized to collect the debt, it may not be a debt incurred by the person receiving the call or the debt may not even exist. Fake debt collectors have many ways of getting your information, and they use high-pressure tactics in an effort to get you to make a quick payment through a cold call.
Federal Reserve research discovered that Americans are currently late on more than $600 billion in bills, and almost one person in 10 has a debt in collections. Although some debt collection activities are legitimate, according to Bloomberg, “The (collection) agencies recoup what they can and sell the rest down-market, so that iffier and iffier debt is bought by shadier and shadier individuals. Deception is common. Scammers often sell the same portfolios of debt, called ‘paper,’ to several collection agencies at once, so a legitimate IOU gains illegitimate clones. Some inflate balances, a practice known as ‘overbiffing.’ Others create ‘redo’ lists—people who’ve settled their debt, but will be harassed again anyway. These rosters are actually more valuable, because the targets have proved willing to part with money over the phone. And then there are those who invent debts out of whole cloth.”
All this means that the debt that nasty caller is trying to collect may not even exist and, if it does, it may not belong to the person being called. AARP identified the following warning signs of a collection scam:
- The caller threatens to have you arrested, something legitimate collectors should not do.
- The caller demands immediate payment.
- The caller wants you to pay via wire transfer or prepaid debit card. These are methods favored by scammers because they’re difficult to trace.
The Fair Debt Collections Practices Act prohibits a number of abusive practices by debt collectors such as calling before 8 a.m. or after 9 p.m. Of course, a thief who is breaking the law by trying to collect an invalid debt is unlikely to observe the niceties of those rules.
What can you do if you receive a suspicious call from a debt collector? The Federal Trade Commission recommends these steps:
- Ask the caller for his or her name, company, street address, and telephone number and refuse to discuss any debt until you get a written “validation notice.” The validation notice must include the amount of the debt, the name of the creditor to whom it is owed, and your rights under the federal Fair Debt Collection Practices Act.
- Stop speaking with the caller. If you know the caller’s address, send a letter demanding that they stop contacting you, and keep a copy for your files.
- Do not give the caller personal financial or other sensitive information. If you are dealing with a scammer, you do not want to give them even more information than they already have.
- Contact the creditor. If you believe the debt may be legitimate contact the creditor. Find out who, if anyone, the creditor has authorized to collect the debt.
- Report the call. Contact the FTC and your state Attorney General’s office with information about suspicious callers. They can help you determine your rights.
