Don’t Fall For It: 7 Debt Collection Agency Scams & Tricks You Need to Know

Debt collection scams are very real – and very dangerous. Even though the FDCPA law is supposed to protect you from abusive and unfair collection practices, many debt collectors have proven time and time again that they just don’t care. They continue to do shady things and break the law, simply because those tactics and tricks still work.

You don’t need to be afraid or fall for these deceptive tricks. In this article, we’re going to review the most common debt collection scams that are happening to low income people in America today, and we’re going to show you what you can do to protect yourself.

While I’ve done extensive research and have personal experience with these scams, I’m not a lawyer, and this article doesn’t constitute legal advice. If you’re facing a specific debt collection issue, it’s always best to consult with a qualified attorney or debt counselor. For example, you can contact our sponsor CareConnect USA’s debt relief line at (866) 530-9949 for personalized assistance with debt settlement.

Debt Collection Scams are Common

Debt collection law is very specific about what debt collection agencies can and cannot do, but it really seems like most debt collectors don’t care. They generate millions, even billions, through fraudulent and illegal collection practices. I guess the money that flows in makes it easy for them to handle the few customers who actually understand their rights.

Over the years that we’ve been reporting on this issue, we’ve identified a handful of reasons why debt collection agency scams are so common in the United States. These include:

• Complex Debt Buying and Selling: America has a thriving debt economy, where debts are bought and sold among different collection agencies. With this constant movement, it can be hard to keep track of who you owe for what. It can also make it hard for companies to keep track of paperwork.
• Commission-Based Models: Many debt collectors who work for these agencies are paid on commission. They employ these severe and drastic tactics because it’s the only way they get paid for their work. This Dateline episode showcased some of the drastic steps that debt collectors will go to, including threatening rape or pretending to be military investigators, in order to get paid.
• Limited Consumer Awareness: Most people simply aren’t aware of their rights. Debts are often held by vulnerable populations, like the elderly, low income individuals, or those who don’t understand English well. Unfortunately, this means that people with debt are less likely to understand or advocate for their rights and they’re often more easily intimidated.

Even though we can’t change the industry overnight, we can defend ourselves. Learning about debt collection law and the most common debt collection scams can help you protect yourself against fraud and abuse. It will help you avoid costly mistakes and ensure that you’re never taken advantage of by debt collection scams.

The Most Common Debt Collection Scams

Now, let’s review the most common underhanded tricks, scams and strategies that debt collectors use when trying to intimidate people into paying. You may recognize some of these.

Debt Collection Scam #1: The debt collector is threatening to serve papers immediately if you don’t pay.

This scam seems to be the newest tactic that debt collectors are employing. I’ve personally encountered it several times in the last few years and I’ve heard reports of it happening to others.

Basically, it goes like this:

1. It starts with a debt collector pretending to be a process server when they call you. They say they can’t tell you anything about the debt, but they give you a phone number to call for more information. They count on you being scared enough to make that call right away.
2. When you call the company, you end up speaking to someone who hypes up the lawsuit and insists that there’s very little time remaining to cooperate on the debt. They tell you that if you don’t pay before the server arrives, they won’t be able to help you.
3. They count on you paying up by step three, or at least making a payment plan. I have never cooperated with this process, and in my experience the calls ended without any further action being taken.

Let’s talk about how this works in practice.

For example, I recently received a call from a man named Jim who claimed to work for a legal service company. He said that he had court paperwork that he needed to serve me with. He said that the lawsuit had been filed in the local county courthouse but couldn’t provide me with any additional documentation. He told me I needed to call a certain phone number for more information.

Now, by the time we reached this point in the conversation, I was pretty sure that this was a scam. I live near the border between two counties, and Jim had named the wrong county courthouse when he contacted me. But I decided to play it out.

When I called the number that Jim gave me, I spoke with a representative named Robert who claimed I was being sued for an old loan from many years ago. He said that I was being sued for twice the original debt amount. He insisted that he could only help me until I was served and that if I waited until the legal server came to the house, I wouldn’t be able to settle the debt.

This wasn’t the first time I’ve encountered this particular scam, so I demanded his name and company information. I asked a lot of questions that made Robert very suspicious and uncomfortable. He placed me on a brief hold, so I did some research and discovered that the company he claimed to represent didn’t even exist.

By the time Robert came back on the line, he wanted to get me off the phone as quickly as possible. It was clear I wasn’t going to give him any money.

I’ve ignored this debt collection scam every time I’ve encountered it. And you know what? I wasn’t sued. I wasn’t even served any papers! And that’s a violation of debt collection law because debt collectors are not allowed to threaten to sue when they do not have any intention of actually suing you! 

If a debt collector is threatening to serve papers, remember:

• Don’t panic. Debt collectors use scare tactics to make you act quickly, impulsively, and without thinking. Take a deep breath and stay calm. If you panic, you’re more likely to miss important details or fall victim to scams.
• Real process servers usually don’t call in advance. I’ve had the misfortune of being served lawsuit paperwork in the past and real process servers have never called in advance. If someone calls you claiming they have legal paperwork to deliver or that they need you to pay before the paperwork arrives at your house, be very skeptical!
• Real process servers know something about the documentation. Real process servers can tell you what kind of papers are being served and the case they belong to. They cannot explain the legal nuances to you, but they should at least be able to tell you the type of document they’re serving, the case number, jurisdiction, and named parties.
• Getting served isn’t the end of the world. I know it can be scary if a debt collector is threatening to serve papers, but you still have options and rights even if they serve papers on you. I have settled many debts after being sued, so it’s often still possible to settle or negotiate after the lawsuit is initiated. Don’t let them use fear of paperwork as leverage to get you to make impulsive mistakes.

Debt Collection Scams #2: The debt collector threatens to have you arrested or jailed.

You can’t be arrested simply because you can’t pay a debt. When you hear about people being arrested in conjunction with debts, it’s because they failed to appear in court or failed to pay legal fines or committed some other related crime. It is not because they simply couldn’t pay. Debts are a civil matter, not a criminal one.

Sometimes, debt collectors will impersonate police offers or even FBI agents. Law enforcement does not collect on debts. If someone contacts you and claims to work for either of these agencies, take down their name and hang up. Call the agency directly at their published number. You most likely won’t find the person who called you.

As this Dateline episode detailed, sometimes debt collectors will pose as law enforcement officials and state that felony charges have been made and that a warrant has been issued for the debtor’s arrest. It is important to remember that you cannot be arrested simply because you can’t pay a debt. If you receive a call like this, hang up. Contact your state’s Attorney General or file a complaint on the Consumer Financial Protection Bureau website.

If a debt collector threatens you with arrest:

• Hang Up Immediately: Do not engage with them or provide any personal information.
• Verify Their Identity: If they claimed to be law enforcement, call the agency directly at their official, published number to confirm. You most likely won’t find the person who called you.
• Report the Scam: Contact your state’s Attorney General or file a complaint on the Consumer Financial Protection Bureau website.

Debt Collection Scams #3: They harass your boss in an attempt to pressure you into paying.

“One of the things that I like to do, which is pretty nasty though, is that I’ll find out where somebody works and then I’ll find out who the owner of their company is, find out their number and call them at home.” Joe, a debt collector, told Dateline, “I love that. Call the boss at home. That’s my favorite thing to do.”

This is one of the most outrageous collection agency scams because irritating your boss is clearly designed to endanger your job and pressure you into paying the debt. They assume that if your job is endangered, you’ll be more cooperative with the collector.

However, the law is on your side. Legally, a debt collector may call you at work only one time. If you tell them not to call you at work, they are legally obligated to stop calling you at work. Under no circumstances are they allowed to contact your employer at home without your written permission.

If a debt collector contacts your employer:

• Inform Your Boss: Explain the situation to your boss and let them know that you are aware of your rights and are taking steps to address the issue.
• Send a Cease and Desist Letter: Send a formal letter to the debt collection agency demanding that they stop contacting your employer.
• File a Complaint: Report the violation to the FTC, your state attorney general, and the CFPB.

Debt Collection Scams #4: Zombie Debt comes back again… and again… and again…

Zombie debt earned its name because it comes back again and again, even when you think it’s been dealt with. These debts are created when companies extract as much money as they can from you before selling the remaining debt to another company. That company does its best to get the rest from you and may sell whatever remains to another company. It’s a vicious cycle and the worst example of American debt buying.

The market of debt buying and selling is largely unregulated. In many cases, debts are bundled together and sold “as-is.” The seller acknowledges there may be faults in the paperwork but buyers still buy them. Why? Because they pay just pennies on the dollar. That’s how John Oliver managed to buy $15,000,000 worth of medical debt for a mere $60,000. 

Buyers of zombie debt often have little more than a name, contact information and an amount of money owed. They often can’t verify the debt and lack essential paperwork that would be required to pursue the debt in court. Of course, they’ll never admit that when they contact you.

If you’re contacted about a “zombie debt”:

• Demand Validation: Request written proof of the debt, including the original creditor, amount owed, and any supporting documentation.
• Don’t Acknowledge the Debt: Avoid saying things like “I’ll try to pay” or “I know I owe something.” This could restart the clock on the statute of limitations (the legal deadline for them to sue you) and make it harder to fight the debt.
• Seek Legal Advice: If you’re unsure about your rights or the validity of the debt, consult with a consumer protection attorney or debt counselor.

Debt Collection Scam #4: They ask you to pay just $1.

In most states, there’s a time limit for how long you can be sued for a debt. That limit is usually somewhere between 4-6 years after your last payment. If too much time goes by, then you can’t be sued for the debt any more.

However, debt collectors are still legally allowed to try to collect older debts. Some of them will try to convince you to make a very small payment toward the debt, even as low as $1.

If you agree to pay anything toward the debt, it can restart that time limit again and give them more ability to collect on the debt. That’s why some debt collectors are so eager to get just a single dollar. It revives the debt and gives them more power.

If a debt collector asks for a small payment on an old debt:

• Don’t Pay Anything: No matter how small the amount, do not make any payment on a debt that may be past the statute of limitations.
• Don’t Acknowledge the Debt: Avoid saying things like “I’ll try to pay” or “I know I owe something.” This could restart the clock on the statute of limitations and make it harder to fight the debt.  
• Check the Statute of Limitations in Your State: Research your state’s laws to determine the time limit for collecting on old debts.
• Take Action Depending on the Statute: If the debt is still within the statute of limitations and you’re unsure about the debt’s validity, request written proof from the collector. If the debt is older than the statute of limitations allows, send a written request that the debt collector stop contacting you about it. The request needs to be in writing to create a legal record.
• Consider Consulting an Attorney: If you’re concerned about an old debt or believe you’re being targeted by this scam, seek legal advice from a consumer protection attorney.

Debt Collection Scams #6: They may try to coerce you into paying your dead relative’s debts. 

There is a growing industry around collecting the debts of the deceased. Generally, you are not responsible for the debts of dead relatives unless (1) you were a cosigner or (2) you are the spouse of the deceased AND you live in a community property state.

Unless one of those two criteria apply, the debt collector is supposed to recoup the debt from the estate. If the estate does not have sufficient funds, the debt collector is simply out of luck.

Sometimes, debt collectors are unwilling to accept that reality and may pursue debt collections from close relatives. Although they are supposed to tell you that you aren’t obligated to pay the debt, many fail to disclose this important fact.

If you’re contacted about a deceased relative’s debt:

• Know Your Responsibilities: Generally, you’re not responsible for a relative’s debts unless you were a co-signer or the spouse living in a community property state.
• Request Information in Writing: Ask the debt collector to provide written documentation of the debt and prove that you have a legal obligation you have to pay it.
• Report Suspicious Behavior: If the debt collector is using aggressive tactics or misrepresenting your obligations, report them to the FTC, your state attorney general, and the CFPB.

Debt Collection Scam #7: They demand payment through unusual payment methods.

Scammers may insist on payment through unconventional methods, such as wire transfers, prepaid debit cards, cryptocurrency or gift cards. These methods are often favored by scammers because they are difficult to trace.

If a debt collector asks you to pay in an usual way, instead:

• Insist on standard payment methods: Use checks, money orders, or credit cards, which offer more security and recourse if something goes wrong.
• Get everything in writing: Always obtain written confirmation of the debt and any payment arrangements before sending money.
• Report suspicious activity: If a debt collector pressures you to use unusual payment methods, report them to the FTC, your state attorney general, and the CFPB.

How to Protect Yourself from Collection Agency Scams

The most important thing you can do to protect yourself is always document your interactions with debt collectors. By law, debt collectors are supposed to identify themselves as such when they contact you.

When you receive a call from a debt collector, be sure to take notes. Remember to say little and stand firm! Specifically, you’re going to want to write down the following information.

• Get the facts. Ask for the for the debt collector’s name, company name, address, and phone number. Request validation of the debt in writing, including the original creditor, amount owed, and any supporting documentation.
• Check the numbers. Write down the name of the original creditor, the amount owed and the amount that the debt collector currently claims you owe. If there is a discrepancy between the original balance and the current amount owed, demand information about any fees, interest or other charges they are trying to recoup from you.
• Be careful what you say. Don’t admit you owe or promise to pay. This could restart the statute of limitations, giving collectors more power.
• Know your rights. Under the FDCPA, debt collectors cannot threaten lawsuits they don’t intend to file. If the debt collector is pretending to be a process server, that’s a pretty blatant violation of the law. They also can’t misrepresent the amount you owe or use abusive language.
• Get everything in writing. demand a chain of assignment. This is the paper trail that shows the history of the debt, including who owned it originally and how it was transferred from one company to another. Don’t ever pay unless you have a written agreement detailing the terms, including total payment, schedule, and what happens to any remaining debt. Without this, collectors could change terms or claim non-payment later.
• Document everything. Keep records of all communication, including dates, times, and names of individuals you speak with. Write down the phone number they called from, the company they claimed to represent, and the duration of the call. If they send anything in writing, keep that too.
• Track and leverage FDCPA violations: Debt collectors must follow strict rules about how they can contact you and attempt to collect a debt. Document everything. This can be used as leverage if the debt collector does sue you. In some cases, I’ve convinced collection companies to completely void the debt because of the evidence I’d gathered.

This written validation protects you in many ways. It requires the company to prove that the debt is legitimate, confirm that you have not already paid the debt and that this company is authorized to collect that money.

Relief Recap

The information in this article can help you stay safe from debt collection agency scams and even fake process server calls. Please bookmark this page so you can quickly find it in the future, if you ever need it.

Again, please remember I’m a researcher and not a lawyer. The material on this website is provided for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.