Before You Pay a Collection, Make Sure It's Not Fake

Not every debt collector who contacts you is contacting you about a real debt. Even though it’s against the law, debt collectors have been pursuing so-called phantom debts for years. These are debts that are completely fabricated with the intent of scamming consumers out of money. Surprisingly, collectors have been good enough to convince consumers to pay. Or perhaps too few consumers are aware of their rights with it comes to debt collectors.

The FTC recently shut down a collection operation that took in more than $5 million dollars over the course of two years. In the scam, the company threatened consumers with immediate arrest if those consumers didn’t pay up on a delinquent payday loan. Sometimes the loans didn’t exist or if the loans did exist, the money was owed to an entirely different company. Panicked consumers paid the collectors out of fear of being arrested.

It’s against the law for anyone, including debt collectors, to pretend to be law enforcement. And it’s also illegal for debt collectors to threaten to arrest you for a debt, especially since there’s no jail for debtors. Perhaps the consumers who paid on those debts were unaware of those rights. Or maybe the collectors’ tactics were so aggressive that consumers ignored those rights and paid anyway.

Don’t give in to the collector’s pressure to make an immediate payment. Don’t give out any your personal information to the caller until you’ve confirmed that it’s a real collection agency and that they’re collecting a real debt. Giving out your sensitive information, like a bank account number, credit card number, or social security number, gives the caller exactly what they need to commit fraud or identity theft.

Before you pay a collection account, make sure both the company and the debt are real. When a collector calls you asking for money, get the company’s name, address, and phone number. Also ask for whatever account number or control number the company uses to track your debt. Then, send a written validation notice requesting proof that you owe the debt. The Fair Debt Collection Practices Act gives you the right to ask for this information.

If the collector refuses to give you their contact information, it’s a sign that they’re not legitimate.

Don’t make payment just because you’ve been given a name and an address. You could still be dealing with a fake company, just one who has a fake name and address. Once you end the call, use a search engine to find out if that company is real. Check with the Better Business Bureau and even contact your state Attorney General to find out if that company is authorized to collect debts in your state.

Once you’ve verified that you’re dealing with a real collection agency, prepare your validation letter. The letter should simply state that you’re disputing the validity of the debt pursuant to your rights under the Fair Debt Collection Practices Act. Don’t admit to owing the debt, neither in your letter nor over the phone. Let the debt collector prove that you owe, if you really owe something.

Send the validation letter via certified mail with a return receipt request. This gives you proof of when the letter was mailed and the signature of the person who received it. The debt collector isn’t allowed to collect on that debt any further until they’ve sent proof that it’s a real debt and they’re authorized to collect it.

Whenever a debt collector contacts you about a real debt, there’s always a creditor that assigned or sold the debt to that collection agency. You can contact the original creditor to find out if the debt was assigned to a collection agency and to which one it was assigned.

Complain to the FTC and your state Attorney General if you’ve been a victim of a fake debt scam or even if company only attempted to collect a fake debt from you.

Source: FTC.gov