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From the Bureau: How to spot phony debt collection
Here’s what’s legal and what’s a scam
By Bobby Hansen, - From the Bureau columnist
Jul. 7, 2024 5:00 am
Debt collection scams can be one of the most frightening and persistent scam types. Victims often report that scammers harass them, both at home and at work, trying to get them to pay a debt they don’t even owe.
The Better Business Bureau receives numerous reports of con artists who change tactics to collect information and steal identities, account information or money.
The scammer makes contact indicating they work for a loan company, law firm or government agency and claim to be collecting an overdue payment. After a victim says they are not aware of owing any money, the “collector” starts threatening to file a lawsuit, garnish wages, request an arrest warrant or demand a court appearance.
All of these claims are nerve-racking, leaving the consumer not even sure they owe anything and contemplating how this happened. Despite ominous threats, these “collectors” don't have any legal power. In most cases, the alleged overdue amount doesn't even exist.
Don't give in and pay money that isn’t owed, or the scammers will be incentivized to ask for more.
How scam works
An unsolicited caller (or emailer) claims there is an unpaid debt from long ago that is about to go to court. They are polite at first and appear to sincerely want to help.
If you actually owe something, an out-of-the-blue contact would not be the first notification. If payment is made on a debt that is not legitimate, the scammer likely will take the funds and disappear. Any future efforts at contact will be in vain, especially if debit cards, gift cards or other payment platforms are used.
How to spot a scam
- Ask the debt collector to provide an official "validation notice" of the debt. Debt collectors are required by law to provide this information in writing. The notice must include the amount of the debt, the name of the creditor and a statement of rights. If the self-proclaimed collector won't provide the information, hang up.
- Ask for proof of the debt and of the agency calling. If you do owe money and aren’t sure if the caller is real, ask for their name, company, street address and telephone number. Do not provide any bank account, credit card or other personally identifiable information. If the collector is legitimate, they should have details on the accounts in question.
- Be calm and rational. Debt collectors are not allowed to harass people even if money is owed.
Protect yourself
- Just hang up. If you don’t have any outstanding loans, do not engage. Don’t press any numbers or speak to an “agent.”
- Check your credit report. Check with one of the credit reporting companies, Equifax, TransUnion or Experian, to determine if there are outstanding debts or suspicious activity. A free credit report is available at annualcreditreport.com.
- Place a fraud alert on your credit report. If the scammer has personal information, place a fraud alert with the three credit reporting companies and consider other identity theft protection measures.
What’s allowed
Debt collectors:
- CAN contact you by phone, letter, email, text message or social media as long as they identify themselves as debt collectors.
- CANNOT pretend to be someone else, like a government agency or credit reporting company or use a false company name.
- CAN contact you at work unless you tell them you are not allowed to get calls there.
- CANNOT call before 8 a.m. or after 9 p.m., unless agreed to.
- CAN contact others to find an address, phone number and place of employment for you, but CANNOT contact them more than once or discuss the debt, except with a spouse or an attorney.
This practice is also known as “zombie” debt and can be used as a phishing technique to gain personally identifying information.
Remember that while most collection agencies are legitimate, there may be times when there is fraudulent contact.
If you need to dispute a debt, request a debt validation letter or ask the collection agency to cease contact. You also can use the free templates and resources available on consumerfinance.gov.
Bobby Hansen is regional director for the Better Business Bureau Cedar Rapids office. Comments: (319) 365-1190; info@dm.bbb.org
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