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How To Identify A Debt Collection Scam

Recently a phony debt collection operation has been charged by the Federal Trade Commission with taking people’s money for fake debts they did not owe by posing as lawyers and falsely threatening to sue or have them arrested if they did not pay.  The methodology the scammers used were to call people without identifying themselves as debt collectors, they proceeded to say a lawsuit or criminal action has been filed or soon would be filed against them.  The scammers even gave a false “case number” and a phone number to call.  These scammers would go even further as to threaten callers with prison time or claimed police would come to their house to arrest them.

Often, these cyber criminals posed as legitimate small businesses and disclosed information on supposed debts to third parties which may have harmed those businesses’ reputation and caused angry consumers to call the businesses to complain about their debt collection activities.

These scammers also illegally disclosed false debts to third parties, failed to send consumers required written notices with the debt amount and the creditor’s name, and failed to give them an opportunity to dispute the debt.

The agency charged the defendants with violating the FTC Act and the Fair Debt Collection Practices Act and has entered a temporary restraining order to freeze their assets and seek equitable relief.

There are a few questions you should ask to identify that the person on the phone is a legitimate debt collector.

What is the name, address, and phone number of the company you’re calling from?

If you are speaking with a legitimate debt collector, they should be able to provide you with this information. WARNING: Don’t let them proceed until they answer this question. Scammers will avoid an answering the question or will provide vague information, this question forces them to reveal who they are and how they can be reached.

The less information you know about a fake debt collector, the better their chances are of tricking you into giving them your money or personal information. Even if a caller gives you an answer, you should never discuss debts over the phone. Inform them you require a “validation notice,” a letter that is required to be sent within five days of first contacting you.

What is the name and address of the debtor you’re trying to reach?

Legitimate debt collectors should know who they are trying to reach and state that at the beginning of the call. However, a scammer will rarely be able to provide you with an answer to this one, and if they do manage to answer this question, the answer will more than likely sound suspicious.

If the “debt collector” on the phone can’t provide you with your own name and address, it should be an immediate red flag that something is wrong. Authentic debt collectors will have the information and, under federal law, are required to provide truthful information if you ask. If by some chance you are able to get the caller to answer this question more than likely you will be provided with the wrong information or incomplete information,(which is good)  do not correct the person speaking, again just ask them to send the verification letter to the address they have on file. Then hang up.

 What are the last four digits of the debtor’s Social Security number? 

This may seem like a bad question to ask but in fact is the number 1 way you will be able to differentiate between a real debt collector and a scammer. A legitimate debt collector will never answer this question because if they do, they are violating the Fair Debt Collection Practices Act (FDCPA).

However, a scammer will more than likely attempt to answer this question – especially if they have the last four digits of your Social Security number. In some cases, they may simply claim they don’t have any info in their file and have no way of knowing it.

ATTENTION: Never confirm personal information with any debt collector legitimate or not over the phone. Social Security number, banking information, and other personal details can be collected and used to steal your identity.

It is always good practice to never provide personal information even if collectors attempt to scare you into paying, threaten to have you arrested, or pose as a government official. These are all violations of the FDCPA and a clear indication the collector is not legitimate. Again ask for the verification letter and proceed once that has been received.

Fake debt collectors will go to great lengths to get you to buy into their scams.

The McAfee Institute says:

  1. When you are actually sued for a debt, you won’t get a call. You will be served with a legal notice (typically a complaint and summons) that contains instructions for responding. A variation on this scam is when someone calls and says that a lawsuit will be filed immediately if you don’t pay. That can also be a red flag: Under the federal Fair Debt Collection Practices Act, collectors can’t threaten to take action they can’t legally take or don’t intend to take. If you are sued, you must be given time to respond.
  2. You CAN NOT be arrested simply because you can’t pay a debt. (There are times when consumers are arrested in conjunction with debts, but it is because they failed to appear in court when summoned, or failed to pay legal fines.)
  3. If the caller offers to give you his or her “badge number.” This is almost a certain sign of a scam: Local law enforcement is not going to call you to try to collect a personal debt, and the FBI certainly won’t.
  4. While an accent isn’t by itself a sign that you are (or aren’t) talking to a collection scammer, many are based overseas. The phone number that appears on caller ID may make it seem that they are calling from the United States, but that’s because that number is fake.
  5. Applying for a payday loan online puts you at immediate risk because these sites are designed to collect personal information for identity theft It is easy to think the debt is legitimate because these scammers have such detailed information from the borrower – including Social Security number, place of employment, etc.

If you are suspicious of unlicensed activity by a lender, report directly to your state regulator: find your state regulator(link is external).

If you feel you have been the victim of a loan scam please contact the Federal Trade Commission at 1-877-FTC-HELP (382-4357) or online at is external); or contact the Consumer Financial Protection Bureau (855) 411-CFPB or online at is external). Because the scammers have access to bank account information and social security numbers, victims should consider themselves victims of identity theft and take appropriate precautions. The Federal Trade Commission has information for victims of identity theft available online at is external).

If you feel you have been the victim of a loan scam involving the Internet please contact the Internet Crime Complaint Center online at is external).

If you feel you have been the victim of a loan scam and are concerned about your personal financial information, contact your banking institution, and the three major credit bureaus.


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