How to Recognize Debt Collection Scams

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Updated on Tuesday, November 6, 2018

debt collection scams

If you are receiving calls from a debt collector threatening dire consequences if you don’t pay up now, you may be dealing with a scammer. Unfortunately, abusive tactics aren’t completely unheard of in the debt collection industry, so there’s a chance you could be speaking with a real debt collector, too.

The Federal Trade Commission (FTC) receives more complaints about debt collectors than it does about any other industry. To help weed out both scammers and bad apples, the agency enforced the Fair Debt Collection Practices Act (FDCPA), a law that prohibits abusive, deceptive or unfair debt collection practices and details your rights as a debtor. The FTC reports that in 2017, it obtained more than $64 million in judgments regarding FDCPA violations, and banned 13 companies and individuals from ever working in debt collection again.

Telling the difference between a scammer and a real debt collector isn’t always easy, but you can learn to notice the telltale signs of a scammer and which questions to ask to help you figure out if you’re dealing with a scammer or a real debt collector.

How a debt collection scam works

When a scammer posing as a debt collector calls you, their goal is to get your money quickly and directly, according to Melinda Opperman, vice president of

“Rather than try sophisticated identity theft or computer hacking schemes, [debt collection scammers] resort to old-fashioned fraud in an attempt to trick you into just handing them your funds,” said Opperman.

She said those with debt balances and less-than-perfect credit are the ideal victims for a debt collection scam. “Because people struggling with debt are vulnerable, the scammers reason that they will be more likely to pay,” said Opperman.

The scammer may threaten a debtor with consequences such as arrest or a lawsuit unless they pay up immediately. The debt collection cover helps scammers get away with it because a debtor might not find out whether the debt was resolved until much later, when it’d be impossible to track down the perpetrator.

But not every scammer is only looking to hit your wallet. “Some scammers don’t want your money, or at least not immediately. They want your personal information,” said Martin Lynch, education director at Agawam, Mass.-based Cambridge Credit Counseling. Acting as a debt collector gives a scam artist the leverage they need to intimidate stressed debtors into paying up or confirming their sensitive information without the debtor asking too many questions.

Lynch said a fraudster might ask the debtor to verify the type of information that a legitimate collector would already know, such as a Social Security number or driver’s license number. Once they’ve verified the information, they can sell the data or use it to open new accounts in your name.

7 ways to recognize a debt collection scam

A scammer’s tricks can be well thought out. The scammer may already know to whom you owe money and may use that to their advantage.

“Some scammers might purchase your personal financial info on the black market, and since the Equifax data breach exposed 143 million consumers, it’s nearly certain your information is available somewhere,” said Opperman. With that information, they can pose as one of your actual creditors, or a collector representing them.

“People are much more likely to fall for the scam if the fake collector knows the victim’s financial info,” said Opperman.

A scammer may also mimic common abuses real debt collection agencies have gotten in trouble for, such as threatening a lawsuit or collecting on expired debts. For those reasons, it may be tough at times to decipher whether or not you’re dealing with a scammer or a real debt collector.

1. You do not recognize the debt

If you don’t recognize the debt the caller is referring to, that could mean you’re on the phone with a scam artist. Don’t pay up simply because someone is telling you that you owe them money.

Under the FDCPA, you have the right to validate the debt. The law requires the collector follow up with you in writing with a validation notice within five days of first calling you.

Ask the caller for a copy of the validation letter they have to send you. The notice should include the amount owed, the creditor to whom the debt is owed and a description of your rights under the FDCPA. Verify the debt is legitimate, the amount is correct and that you are the person who owes the debt. You have up to 30 days from when the collector first contacts you to demand validation and dispute the debt in writing, or the debt will be assumed to be valid.

“This paperwork will weed out scammers because you’ll have their physical address and information about [the] legitimacy of the debt itself,” said Opperman. “Demand this in every case, whether you think the collector is a scammer or not. Legit collectors should have no trouble supplying you with proper debt validation, and scammers won’t even try.”

2. The caller refuses to reveal identifying information

If the caller is hesitant or refuses to give you information about themselves and their employer, they are likely a scammer.

Lynch recommended that you ask the caller for the name of the collector’s company, the caller’s name and their business telephone number. You can confirm that information online, or by checking with your state attorney general or secretary of state. You may ask for the company’s professional license number and check the company’s licensing status with your state regulator as well since many states require debt collectors be licensed.

If the caller isn’t willing to tell you the company’s contact information or you cannot verify the information, you may be speaking with a scammer. Cease communication with the caller and do not give them any money or information.

3. The caller demands payment right away

“Scammers will also demand payment right away,” said Opperman. That’s where threats play into the scam.

For example, a scammer may threaten harsh consequences if they don’t get a payment by the end of the day or within 24 hours.

“Real collectors know the debt isn’t going anywhere and will give you time to send them proper payment,” said Opperman.

4. The caller demands payment all at once

Lynch said that a scammer might try to get you to make all of the payments at once, instead of breaking it up into a payment arrangement, like some collectors may be willing to do. The scammer may request you pay them right at that moment over the phone or send the money using a wire transfer, so it gets to them quickly.

“They want as much of your money as they can get before you realize you’ve been had,” said Lynch.

5. The caller uses abusive language

If the caller starts to use abusive language to harass you into paying them right away or all at once, as mentioned above, they may be a scammer.

Under the FDCPA, it’s illegal for a collector to harass or abuse a debtor. For example, a debt collector cannot threaten violence or use profane language on a call with a debtor. They also cannot call your phone repeatedly with the intent to annoy, abuse or harass you.

Opperman said real debt collectors have knowledge of the FDCPA and know they will get in trouble if they are caught in violation of the law. But scammers often flagrantly violate the FDCPA and generally won’t be impressed if you mention your rights.

6. The caller threatens you with arrest or lawsuits

Under the FDCPA, a debt collector cannot use “false, deceptive, or misleading representation or means in connection with the collection of any debt.” That means they can’t use empty threats like that of a lawsuit, wage garnishment or an arrest to coerce you into paying up. Opperman told MagnifyMoney that most threats made over the phone are hollow.

“Any negative action a collector will take against you is something they will just do if they can. You won’t get a phone call warning you, you’ll be served with a lawsuit,” said Opperman.

If a collector threatens to have you arrested if you don’t pay immediately, Opperman said to remember: “The only debts that can land you in jail are unpaid child support or tax evasion — and those situations will involve a complicated legal process, not threats over the phone.”

7. The caller insists on being paid with gift cards or another unusual method

Another sign of a scam is if the caller insists on being paid in a particular, unusual method, like with Amazon gift cards or prepaid credit cards.

“Real collectors will take just about any form of payment they can get, but scammers want something that can’t be canceled or traced,” said Opperman.

Another payment-related red flag is if the caller requests you tell them the gift card or prepaid credit card information over the phone, as opposed to mailing the cards to a physical address. If they are unwilling to give you a physical address to mail in your payment, they are likely scammers.

What to do if you suspect a scammer is on the line

If you think the debt collection calls you’ve been receiving are fraudulent, you can follow the following steps to protect yourself from financial fraud and take action against the fraudster.

  1. Gather information: Get all of the information you can about the debt and the debt collector. Ask for a copy of the validation notice they are required to send you under the FDCPA. Again, they have up to five days to send you a validation letter. Ask the caller for their name, and the name, phone number and address of their employer. Record everything so that you can confirm the details later. If they won’t give you this information, that’s a red flag.
  2. Protect your sensitive information: If you think you’re dealing with a scammer, you should do your due diligence to protect yourself from financial fraud. Take care not to give the scammer any sensitive information such as your Social Security number, address or bank account, credit or debit card information. You can further protect yourself by placing a free credit freeze on your credit report with all three reporting bureaus so that a fraudster won’t be successful if they try to open a new account using your information.
  3. Contact the original creditor: If the call is about a debt that you do recognize, call the original creditor to confirm the details of the account in question. If the debt was actually sold to a collections agency, ask for the agency’s contact information and compare it with the information you have about the agency that’s been allegedly attempting to collect on the debt.
  4. Ignore the calls: If you are confident the caller is a fraudster, stop answering their calls as there is no need for you to continue communication with them once you’re aware of the scam. If you answer and choose to engage in conversation, there is a chance the scammer may use other tricks to get you to spill sensitive information.
  5. File a complaint: If you think you’re the victim of a debt collection scam, you should submit a complaint with the Consumer Financial Protection Bureau and the FTC. You may also report the scam to your state’s attorney general’s office with information about the suspicious caller.