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Don’t Fall For These Debt Collection Scams!

Don’t Fall For These Debt Collection Scams!

Debt collection scams are very real – and very dangerous. Despite the fact that the law protects consumers from abusive and unfair debt collection practices, many debt collections agencies disregard the law and engage in manipulative tactics designed to scare you into repaying more than you owe! We’ve summed up many of these awful industry tactics in the following list of debt collection scams.

Debt collection scams are very common.

Debt collection law is very specific but most debt collectors don’t care. They generate millions, even billions, with their fraudulent, illegal debt collection practices, so they can easily handle the few customers who understand the law and sue them for their misdeeds.

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.

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.

debt collection scams

Debt Collection Scam #1: You’re contacted by someone who says they need to serve legal papers on you.

This morning, I 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 (wrong) 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.

This is a huge red flag for several reasons:

Real process servers usually don’t call in advance. I’ve had the misfortune of being served lawsuit paperwork in the past and the real process servers have never called in advance. If someone calls you claiming they have legal paperwork to deliver, 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 should be able to tell you the county and state where the case is being filed, the case number and the named parties.

When I called that number, 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 isn’t the first time I’ve encountered this particular scam. I demanded his name and company information. I asked a lot of questions that made Robert act very suspicious and uncomfortable. While I was placed on a brief hold, I did a series of quick Google searches and discovered that the company he claimed to represent didn’t even exist.

This scam seems to be the newest tactic that debt collectors are employing. I’ve personally encountered it twice in the last year and I’ve heard reports of it happening to others. Basically, one debt collector poses as a legal process server and contacts the person who owes the debt. By scaring the debtor into believing they’re about to be sued, they ensure the debtor calls the company. The company then hypes up the lawsuit and insists that there’s very little time remaining to cooperate on the debt.

I’ve ignored this debt collector scam both times I’ve encountered it. And you know what? I wasn’t sued. I wasn’t even served either time! 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! 

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Debt Collection Scams #2: The debt collector claims you’ll be arrested and/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 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.

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.”

Of course, irritating your boss is designed to pressure you into paying the debt. The logic is that if your employer is irritated, your job is endangered. 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.

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.

In most states, the statute of limitations expires sometime between four and six years after the date of your last payment on the debt. If enough time has passed, the company cannot sue you or otherwise harm you to try to obtain the debt. They are still legally allowed to try to collect but you can put an end to it with a written request to stop collections activity. Since they can’t sue, that will basically put the debt to rest.

However, if you make a voluntary payment on that debt, it revives the debt and makes it legally collectible. If you receive a collections notice or call for an old debt that may be close to or past the statute of limitations, do not pay it. Check the dates first to see if you’re being tricked into renewing the statute of limitations on that debt.

The best way to fight zombie debt is to submit a written demand for the company to verify the debt. If they can’t, the debt is invalid and you shouldn’t pay it. You can also request to have it removed from your credit report.

Debt Collection Scams #5: 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.

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What should you do if you’re the victim of one of these debt collector 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 person’s name and company information. You need to obtain the caller’s name, company name, street address, telephone number and a professional license number. This may help you when you later look up to see if that company even exists. Remember my experiences in Scam #1, above? I was given the names of three companies and only one of them really exists.

Get the details on the debt. 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.

Do not confirm or give any personal financial or sensitive information. Do not confirm or provide your bank account, credit card or Social Security number.

Do not acknowledge that the debt is yours, even if you suspect that it may be legitimate. If the debt is yours, contact the original creditor and ask for a History of Title so you can see which company legitimately owns the debt at this time. Remember that debt buyers purchase the debt for pennies on the dollar so you can most likely settle for far less than the original amount you owed.

Refuse to discuss the debt until you receive written verification of the debt. Remind the debt collector that you are entitled to a written validation notice in accordance with the FDCPA. This written notice must include the amount of the debt, the name of the creditor you owe and a description of your rights under the FDCPA.

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.

Never pay without something in writing, especially if the company is offering you a settlement of some kind. You always need to have a written settlement offer in your possession before you give the company any money.

Keep detailed records of each contact you have with the debt collector. Document the time, date and duration of each call. If the debt collector has committed FDCPA violations, be sure to document those also. If the violation occurred in a voicemail, save that voicemail and don’t delete it!

*Please remember our Terms of Service. I’m not a lawyer – I’m a researcher. 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.

Nicole leads the Low Income Relief team with over 20 years of professional research and writing experience. Nicole started Low Income Relief after a personal experience with poverty. When her husband was medically discharged from the US Army, their family experienced tremendous financial hardship. Nicole was able to gather help from multiple community agencies and move into a nearby low income housing unit in just two weeks! Since then, Nicole has been dedicated to helping low income families in crisis. She regularly spends hundreds of hours combing through countless resources to make sure that Low Income Relief has the most comprehensive and complete resource directories on the internet today. Prior to starting Low Income Relief, Nicole worked as a novelist, journalist, ghostwriter and content creator. Her work has been featured in various print and online publications, including USA Today, eHow, Livestrong, Legal Beagle, The Daily Herald, The Chronicle and more.