Maybe you’ve gotten the call: Someone says they are collecting on a debt you owe and if you don’t agree to pay on the spot, the police will show up to cart you off to jail. Hopefully, if you have been on the receiving end of such a call, you weren’t coerced by the scammer to hand over vital financial information.
Real or not, getting a call from a debt collector can cause a great deal of anxiety. Make sure you know how to spot these debt collection red flags so fear doesn’t cause you to pay for what you don’t owe.
Quick Facts on Debt Collection
Debt collection can occur when a creditor sells the debt you owe to a third party –– generally after determining they will not be able to collect what you owe (usually after the payment is 180+ days late). These types of third parties purchase the debt and then take on the responsibility of contacting you for payment, usually through a combination of both letters and phone calls. Whatever they manage to collect at this point becomes theirs.
[Get more facts about debt collection here.]
First Things First: Know Your Rights
Scammers tend to rely on the fact that many consumers don’t know their rights when it comes to debt collection. Here is a high-level overview of what the Fair Debt Collection Practices Act says:
- If they do not provide it in their initial communication with you, debt collectors are required to provide certain information about the debt in question within five days after their initial communication with you.
- They are not allowed to contact you at work if they are told you aren’t allowed to get calls there.
- They are generally only allowed to talk to you or your spouse about the debt you owe. They can collect information regarding your place of employment and contact information from others –– but generally they can only contact them once.
- They are generally required to make all phone calls to you between 8 a.m. and 9 p.m. local time, unless they have knowledge that calls during such times would be inconvenient to you.
- They are barred from harassing you –– no profanity, threats of violence, or multiple phone calls intended to annoy.
- They are barred from lying about the amount you owe, who they are, and claiming legal action will be taken when that’s not the case.
Now Let’s Talk Red Flags
With that in mind, here are a few ways to spot a scam –– and a scammer –– before it’s too late.
They refuse to divulge specific information about the debt.
It is well within your rights to verify you actually owe a debt before making a payment. If they refuse to give you important information –– like the name of the debt collection agency and the original creditor –– consider this a red flag.
They don’t know key information about you, the debtor.
A real debt collector should know the name and address of the person obligated on the debt they are trying to collect. If you ask for this information and they can’t tell you or they give you incorrect information, it could be a scam.
They demand immediate payment.
It’s important to verify the validity of the debt and the debt collector before making payment. If a debt collector pressures you to make a payment immediately without allowing such verification, this could be an indication the debt is not real.
They refuse to give you their own contact information or that of the company they claim to work for.
Since it is within your rights to verify the debt, you should be able to ask for contact information to reach the debt collection company at a later date. If they do give you a call back number, listen for any indication it’s a legitimate debt collection company –– like prompts indicating there are different departments, etc.
[TIP: Try doing an internet search of the number they called you from to see if other people have identified scam calls from that number. You may also consider downloading an app like AT&T Call Protect, designed to either block scam calls or note them as such.]
They ask for sensitive financial information over the phone.
Identity theft and other forms of fraud are easy with a social security number, bank account numbers, or other financial information. Keep this information safe –– and don’t be pressured into giving it to someone over the phone before verifying both their identity and the debt owed.
They demand untraceable forms of payment.
Legitimate debt collection companies should allow you a few different options when it comes to making a payment –– all of which should be traceable. In fact, many legitimate debt collection companies offer multiple payment methods and options in their collection letters without you asking. If they tell you to use a prepaid card or money transfer, chances are they’re looking for a way to take your money and get off scot-free.
They threaten you with jail time.
Debtors prison is a thing of the past. Unpaid taxes, child support, or other court-ordered fines and fees aside, jail time should not be the result of unpaid consumer, civil debts –– like loans and credit cards. So if you get a call claiming the police will be on their way to make an arrest for unpaid consumer debt, the threat falls flat. Consider just hanging up.
They are particularly threatening.
While actual debt collectors may use intimidation as a means to collect, pay careful attention if the caller seems particularly over-the-top with threats and profane language. This, combined with other red flags, may indicate they aren’t legitimate.
[Note: If the caller is harassing you, even if they are from a legitimate debt collection company, you can report them to the Consumer Financial Protection Bureau, Federal Trade Commission, your state’s attorney general, and the Better Business Bureau.]
They say they’re from the IRS but aren’t following communication protocol.
IRS scams are nothing new, but the way they conduct the scam may be, so it’s important to know how the IRS says they will or will not communicate with you.
- They won’t send unsolicited emails or try to contact you through text or social media channels.
- They may call you, but they usually mail a notice first.
- They may make an unexpected visit to your home or place of business, but if requesting payment, it would only be to the US Treasury.
- They will not request payment in untraceable forms –– like a prepaid debit card.
- They will not threaten to have you arrested or deported.
How to Handle a Potential Scam
Ask to verify any information they give you.
When in doubt, verify, verify, verify. Don’t make a payment –– or even agree to make a payment –– until you can verify the debt collector is legitimate and the debt is one you actually owe. Under the Fair Debt Collection Practices Act, they are responsible for sending you information in writing within five days unless they provide the information in the initial communication with you.
Request contact information.
If they can’t give you a way to contact them once you have verified the debt, stop the communication right there.
Contact the original creditor.
If you don’t believe you owe the debt, reach out to the original creditor for additional information. They should be able to tell you if in fact the debt was sold and to whom. They may also tell you the debt has just been assigned to a debt collection agency to collect payment and they are still the owner. In this case you may be able to pay the original creditor directly.
Check your credit report.
One way to check the validity of the debt in question is to check your credit report. If the original creditor reported the delinquency to any of the three Credit Reporting Agencies (CRAs) –– Equifax, Experian, and TransUnion –– you may see evidence of it on your credit report(s). However, creditors are not required to report information to the CRAs so if it’s not there, it doesn’t necessarily mean it’s not owed.
[Find out how to get a free weekly credit report from all three CRAs through April 2021.]
Report the scam to the Federal Trade Commission (FTC).
If you believe you’ve been the victim –– or the potential victim –– of a scam, help prevent someone else from becoming the next target by reporting it to the FTC. This information helps guide the investigation and hopefully stop the scammer from being successful the next time around.
[Dealing with a debt collector? Learn your rights and create a plan with our complete guide to debt collection.]