Beware of These Common Debt Collection Scams

Americans are piling up the credit card debt, just as many believe the economy is headed towards a recession. With credit card debt in the US reaching the trillion dollar mark, aggressive debt collection tactics will be on the rise. 

While debt collection is a legitimate tool to recover money that is owed to lenders, consumers are often the victim of scams. 

In this post, we will give a quick overview of how to spot fraudulent debt collectors. If you want one rule to follow to protect yourself from a bad outcome, it’s this: never give out your personal financial information over the phone unless you are 100% sure who you are dealing with.

Always ask for proof of a debt in writing.

4 Common debt collection scams 

Debt collection scams have been a growing problem in recent years, and unfortunately, they are not showing any signs of slowing down in 2023.

These scams can ruin lives and force families into bankruptcy, and it’s important to be aware of the signs so you can protect yourself.

The two biggest signs of a fake debt collector who is trying to pull a fast one are: 

• Way too aggressive 
• Lacking identity 

#1. Fake phone calls 

Scammers posing as debt collectors may get a bank of phone numbers and call unsuspecting families hoping to scare them into giving up confidential financial information. Sadly, seniors are often targeted in this way.

Illegitimate collectors may use scare tactics, such as threatening legal action or arrest, to try to get a payment right away. 

#2. Threatening letters 

Another common scam involves sending fake collection letters or emails that appear to be from legitimate companies. These letters may include threats of legal action or damage to your credit score if you don’t make a payment. It’s important to carefully examine any collection letters you receive and verify the legitimacy of the company before making a payment.

Here is a link to a template you can use in response to a threatening letter from a collector.

#3. Posing as law enforcement 

In some cases, scammers may even pose as law enforcement officials and claim that you have outstanding warrants for your arrest due to unpaid debts. They may demand payment over the phone or ask you to wire money to them. However, it’s important to remember that law enforcement officials will not make these types of demands over the phone, and they will never ask you to wire money.

This example is based on a real-life case from Georgia, where an unscrupulous debt collector pretended to be collecting as a police officer.

According to the FTC website, the scam debt collectors took things very far:

According to the complaint, the company’s collectors threatened not only to arrest and jail consumers who refused to pay immediately, but also to garnish consumers’ wages, revoke their drivers’ licenses, or lower their credit scores. In addition, the collectors allegedly contacted consumers at their workplaces or notified their families about the supposed debt, shared consumers’ personal information, and threatened serious legal consequences.

FTC Website

#4. Reaching out via social media 

One newer tactic that scammers are using is social media. They may send messages to individuals on platforms like Facebook or Twitter claiming to be debt collectors and demanding payment. It’s important to be cautious when receiving messages from unknown individuals on social media and to verify the legitimacy of any debt collectors before making a payment.

How to protect yourself from debt collection scams 

If you suspect that you have been targeted by a debt collection scam, there are steps you can take to protect yourself.

#1. Never provide payment information over the phone 

First, do not make any payments or provide any personal information over the phone or through email unless you are absolutely certain that the debt collector is legitimate. You can ask for their name, company name, and contact information, and then verify this information independently before making a payment.

#2. Contact the original creditor 

Next, get the name of the original creditor and contact their office. Even if the original creditor has written off the debt, they should still have a record of it. 

#3. Check your credit report 

You can also check your credit report to see if any debts have been reported that you are not aware of. If the debt doesn’t show up on your credit report, you may not be responsible, or the collector may be making up the debt altogether. 

Be aware though, that this can work both ways. A scammer might get access to your credit report and contact you trying to collect a debt you do owe. When in doubt, contact an attorney.

#4. Report the collector 

Finally, you can report any suspected debt collection scams to the Consumer Financial Protection Bureau, Federal Trade Commission (FTC) or your state’s attorney general’s office. This can help to prevent others from falling victim to the same scam.

The Bottom line 

In conclusion, debt collection scams are a serious problem that individuals need to be aware of in 2023. Scammers may use a variety of tactics to try to pressure you into making a payment or providing personal information, but it’s important to remember that debt collectors are required to follow certain rules and regulations.

If you suspect that you have been targeted by a scam, take steps to protect yourself and report the incident to the appropriate authorities.