How to Spot Debt Collector Scams, Talk to Collections and Repay Your Debt
If you have debt that’s gone from delinquency into collections, chances are you’re being hounded with calls from collectors who are urging you to pay up. While this can certainly be stressful, it’s standard practice among legitimate debt collectors.
But it can be hard to tell what is a debt collector scam from the real thing. The Federal Trade Commission’s Fair Debt Collection Practices Act prohibits debt collectors from using abusive or intimidating tactics when trying to collect a debt. Keep reading to learn the telltale signs of a scam and how to make certain a caller claiming to be a collector is real.
- How your debt goes from delinquent to debt collections
- 7 signs of a debt collector scam
- Beware these 5 types of debt collector scams
- How to stop fake debt collectors from calling
- Ways to tell a debt collector is legitimate (and what to do if they are)
- What to do when you can’t pay off debt collectors
How your debt goes from delinquent to debt collections
A debt goes to collections once it’s past due, usually 180 days after it’s late. Here’s a breakdown of the process.
- You’ll receive a debt collection letter. This will usually come from from the bank or credit card company. After the debt hits the 180-day mark, it’s usually then sold to a third-party debt collection agency.
- You’ll start receiving calls and letters from credit collection services. They’ll be reaching out to remind you about the debt and try to get you to pay it. You can work to negotiate the debt and/or work out a payment plan during this time. You can also request in writing that the debt collector stop contacting you — though this won’t make the debt go away or prevent the collector from filing a lawsuit against you.
- The debt collector may sue you. If you haven’t worked out a payment plan, the agency will likely move forward in taking your debt to court. If you don’t show up on your scheduled appearance date, you’ll automatically lose your case by default and be responsible for paying the debt. If you do end up losing, you may be responsible for other costs, such as attorney fees and collection costs, and the debt collector may gain the ability to garnish your wages or funds from your bank accounts.
7 signs of a debt collector scam
Getting a call claiming you have debt in collections can be scary, and you may be urged to make a payment. But before doing so, you should verify that the caller is legitimate and not trying to get you to fall for debt collector scam. Here are signs of a scam:
- The collector withholds information from you. A debt collector is required to tell you the name of the creditor, the amount you owe and that they will obtain verification of the debt should you dispute it. If they don’t provide this information by phone, they must do so in writing within five days of initially contacting you.
- The collector pressures you to pay via prepaid card or money transfer. These payments are often untraceable, which is why it should be a huge red flag if you’re asked to use them.
- The collector threatens you with jail time or claims to be a government official: If your debt is coming from the criminal justice system, then it’s possible you’ll be arrested if you fail to pay. But if that’s not the case, you’re most likely dealing with a scammer.
- The collector threatens to share information about your debt with your friends, family or employer: While a debt collector is allowed to ask others about your whereabouts in an effort to get in touch with you, they’re generally not allowed to disclose information about your debts without your permission.
- You don’t recognize the debt they claim you owe. If the debt doesn’t sound familiar, ask questions and research whether the debt is actually yours before agreeing to pay the debt.
- The collector asks for personal information. If you haven’t confirmed that the debt collector is legitimate, or that you actually owe the debt, don’t provide information like your bank account or Social Security numbers. A scammer could use this information to steal your identity.
- The collector calls you at inconvenient times. Debt collectors are not supposed to call you before 8 a.m. or 9 p.m., and they can’t call you at work if you’ve requested they not do so. These practices could indicate that you’re dealing with a scammer.
Beware these 5 types of debt collector scams
In addition to suspicious behaviors to watch out for, there are also various common debt collection scams you should be aware of. These include:
- Fake debt collection letter. If you don’t recognize the debt, or you haven’t received a validation notice with key information, such as the name of the original creditor, date of default, amount of principal versus interest, etc., it’s likely a scam.
- Fake medical bill. Even if you recently received medical services you knew you’d be billed for, it’s still wise to watch out for medical fraud. Check your bill to make sure it lists itemized costs for all services, accurate contact information for the hospital and insurance provider, and correct personal identifiers like your insurance policy number.
- Fake lawsuit phone call. If a caller threatens to serve you with a lawsuit today, isn’t willing to provide contact information, or is generally over-aggressive and abusive in the way they speak to you, it’s highly possible you’re not dealing with a legitimate agency.
- Card services scam. If you ever receive a robocall from someone in “card services” saying you owe a bill or offers you a lower interest rate, your best bet is to hang up, especially if they ask for your banking information.
- Credit card relief scam. While there are plenty of reputable debt relief organizations out there, there are also scammers preying on vulnerable people dealing with financial stress. If a robocaller is contacting you, or they’re demanding a large upfront fee before they help you, those should be red flags.
How to stop fake debt collectors from calling
If you believe you’re being contacted by a scammer, the best thing you can do is to ignore the calls. Don’t follow prompts to supposedly be put on a do-not-call list, as it’s likely just another tactic to continue engaging you.
You can also report the collection agency number by submitting a complaint to the Federal Trade Commission by visiting complaints.donotcall.gov or calling 1-888-382-1222 so they can investigate and work to shut it down if it’s a scam.
Ways to tell a debt collector is legitimate (and what to do if they are)
If you’re unsure as to whether a debt collector is legitimate, you can take steps to find out. Request a debt validation letter, which should detail the amount you owe and the name of the original creditor. You can then contact the original creditor to find out if the debt is legitimate and if the agency contacting you has the right to collect it.
You can also verify a debt by seeing if it appears on your credit report. It’s also a good idea to regularly check your credit report for any changes or discrepancies. You can request a free annual credit report online or by calling 877-322-8228.
If you’ve confirmed that the debt collector is legitimate and that you do in fact owe the debt, the most important thing is that you know your rights. For example:
- A debt collector can’t contact you before 8 a.m. and after 9 p.m.
- They can’t call you at work, if you’ve asked them not to
- They may not inform your friends, family or employer about your debt
- They can’t harass you or use abusive tactics to try to get you to pay
- They can’t continue to contact you if you’ve submitted a written request asking them to stop
What to do when you can’t pay off debt collectors
Seek out credit counseling
Working with a credit counselor can help you identify areas that may need work, such as budgeting and bringing past due bills to current. They can also help you with building a debt management program with your creditors. The National Foundation for Credit Counseling is a low-cost option for cash-strapped consumers.
Settle your debt
Sometimes, collectors will accept a lump-sum payment to resolve the debt. You can work with your creditors to settle your debt, reduce what you owe and arrange a schedule of affordable payments to help ease your situation.
Keep in mind, however, that debt settlement will negatively impact your credit score. This is because it involves stopping payment to your creditors. But, ultimately settling an account is better than not paying it at all, even if it puts a negative mark on your credit report.
Consider your priorities
In some cases, it may be best to first deal with the debt causing you the most stress, whether it’s a debt resulting in numerous debt collection calls, your mortgage or money you owe a friend, family member or co-worker. At the end of the day, you have to start somewhere, and if it’s affecting your quality of life, it may be best to temporarily shift your focus somewhere else while still working to reduce your overall debts.