How not to get caught in a debt collection scam

What is a debt collection scam?

A debt collection scam, or a phantom debt scheme is when a scammer poses as a debt collector to get money from people. They can contact you by phone, email, or text, just like a real debt collector would for a past-due payment. Dealing with a bill in collections is stressful, so some people may not think twice when making a payment to a fake debt collector. Fake debt collectors can come off as aggressive and may even threaten legal action if you do not pay them.

How to tell if a debt collector is fake

Being in debt is unsettling, but a fake debt collector who’s trying to take advantage of you is even scarier to think about. Here are some ways to tell if you’re dealing with a debt collection scam:

Access your credit report

If you know how to access your credit score online, you can take a peek at your credit report as well. A credit report has everything regarding your credit information, which can involve credit card accounts, current debts, loan payment history, and more. There are free credit report websites available that let you access a copy of your credit report every year.

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Ask for a debt validation

You know yourself and your spending habits best. If a debt doesn’t sound familiar to you, it may not be real at all. The most surefire way to check the legitimacy of your debt is to get a validation of your debt. If you don’t recognize a loan or are sure you paid it off, you are legally obligated to receive a document or phone call with information regarding your debt. You can dispute the debt within 30 days of receiving debt validation if you still feel that it is not yours.

Get familiar with the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) protects you from unfair debt collection practices. Reading the FDCPA will educate you on how debt collectors can approach you and what constitutes as prohibited behavior. Under the FDCPA, debt collectors are not allowed to harass you or contact you during certain hours. If you feel that a debt collector is going against the FDCPA, they may be a scammer.

Assess how the debt collector speaks to you

Fake debt collectors will often withhold information about your loan or ask you to make payments through methods that aren’t easy to trace, like Visa gift cards and P2P money transfers. They may also appear to be pushy when asking for payments and threaten to tell your friends or family about the debt. Real debt collectors will not ask for specific payment methods and are required to give you any available information regarding your loan.

It is also important to be wary of the information they are asking for. Debt collectors should already know some personal things about you, like your name, date of birth, or Social Security number. A fake debt collector may be asking for your personal information to obtain it, not to confirm it.

What to do if you fall for a debt collection scam

If you’ve made a payment to a fake debt collector, you’re not alone. Thousands of people fall for debt collection scams each year. If you suspect that you’ve come across a fake debt collector, you can report them to the FTC and law enforcement. Document everything that happened and contact your bank to ensure that you have enough information for your case.

Debt collector scams may be tricky, but being informed about your rights will help you know how to avoid them altogether. Find more budgeting tips to keep your money management skills on point.