Fake Debt Collectors

Apr 18, 2012 by

FTC Building

FTC Building in D.C.

Am I alone in thinking the gap between “real” and “fake” is narrowing, becoming almost imperceptible in some instances? Excellent counterfeits of virtually any product with higher than average value—including pharmaceuticals—have become commonplace. Very good phishing emails and fraudulent websites with corporate logos and colors can fool more than the especially vulnerable these days. Bernie Madoff faked being an investment manager, duping for decades the SEC, his clients, and—if you take them at their word—his immediately family. So a recent Federal Trade Commission Consumer Alert titled “That Debt Collector Could Be a Fake” caused alarm, but not surprise.

How a Fake Debt Collection Scam Works

According to the FTC, consumers across the U.S. have reported phone calls from people trying to collect on loans the consumer never took out, or on loans the consumer did take out but doesn’t owe. Sometimes the scammer is calling about a real loan, but the lender has never authorized the caller to pursue collection.

Recognizing a Scam

Here’s a scary part, and another symptom of the shrinkage between real and fake. The FTC Alert says: “It may be hard to tell the difference between a legitimate debt collector and a fake one. Sometimes a fake collector may even have some of your personal information, like a bank account number.” Wow—if the scammer had my bank account number, I think the least of my concerns would be whether I’d become past due on some long forgotten cell phone bill or credit card account.

The FTC suggests being alert for these warning signs of a fake debt collector:

  • The caller is seeking payment on a debt you do not recognize.
  • The caller asks you for personal information.
  • The caller uses high pressure tactics to scare you into paying, such as threatening arrest or to report you to law enforcement.

What If You Suspect the Caller Is a Fake Debt Collector?

I tell even people who have debts in collection to ignore calls from debt collectors if they find the calls irksome. There’s no law that says consumers must accept calls from a debt collector. A debt collector is not going to contribute constructively to any plan for you to repay your debt. If a lawsuit or something serious has been initiated, notification by postal mail is required. So, for sure, open all of your snail mail if you have debts in collection, but don’t feel obliged to take any calls!

But if you suspect a caller is a fake and you want to gather information to report to the FTC or think you might be past due on a debt but aren’t sure, the FTC says:

  • Ask for the caller’s name, company, street address, and telephone number.
  • Tell the caller he or she is wasting their time until you receive a “validation notice.” Consumer’s have the legal right to demand such a notice under the Fair Debt Collection Practices Act (FDCPA). The notice must include: 1) the amount of the debt, 2) the name of the creditor, and 3) your rights under the FDCPA.

Then hang up!

What If the Validation Notice Shows a Legitimate Debt?

If you have a legitimate debt in collections, don’t put your head in the sand! If you can pay off the debt, immediately or over time, that’s by far the best course of action. But calling back the formerly suspect debt collector is probably not the best idea because this individual will not consider your best interests. Think through your options, and come up with a plan, on your own or with the help of a certified credit counselor from a non-profit agency.

Have you had close encounters with any fakes lately?

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