Debt Collector or Scammer: How to Tell the Difference and What Actions to Take

A debt collector is a person or a company that collects outstanding debts for others. While there are many legitimate and ethical debt collectors, fake debt collectors try to scam people into paying them money. Legitimate collectors are generally professional and can verify the company they work for, the creditor to which you owe the money and the debt amount. 

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Scammers, on the other hand, will withhold information from you while pressuring you into making a payment. In this article, we’ll look at how to go about spotting fake debt collectors and the steps to protect yourself from debt collection scams. 

What is a Debt Collection Scam?

A debt collection scam happens when a scammer contacts you claiming you owe a debt that is fake, already paid, or beyond the statute of limitations. Scam debt collector phone calls often involve deceptive and intimidating tactics, including aggressive threats and demands for either immediate payment or personal information. Debt collection scams are on the rise, and consumers need to recognize the warning signs of collections fraud.

Debt Collector vs. Scammer: Differentiating Legitimate Debt Collectors From Scammers

You can tell the difference between a scammer and a licensed debt collector by asking the right questions and requesting important information. 

How to Tell if a Debt Collector is Legitimate

You can tell if a debt collector is legitimate by first asking for their name, company name, street address and telephone number when they first contact you. If the state you reside in requires debt collectors to have a license, ask them for their professional license. You can verify the legitimacy of the information on your state’s database to ensure that the debt collector has the legal right to collect debt. Make sure to check that the company that they work for is a legitimate one, too. 

There are a few options available to you to check how legitimate the debtor is: 

• Verify their licensing by searching for them on the National Multistate Licensing System (NMLS) Consumer Access website. 
• If your state requires debt collectors to have licenses, you can check with the state’s attorney general’s office.
• Your state’s bank regulator can assist you with verifying the legitimacy of the professional license. 

Ask for their debt validation notice if they aren’t registered in your state. The Fair Debt Collection Practices Act (FDCPA) governs debt collection laws and regulations and requires that a debt collector provide you with the relevant information about your debt within five days of contacting you. With this information, you can confirm whether or not the debt is yours. You can then go about disputing it if it is not yours. The validation notice should include the following information: 

• The name of the debt collector and the credit on the account
• The account number associated with the debt
• The debt amount
• A statement detailing your debt collection rights 

If you find that the debt is inaccurate or illegitimate, you can send a debt validation letter requesting the collector to provide clear evidence of the owed amount. You must send the letter within 30 days of receiving the notice. 

Identifying Scam Debt Collectors

There are many legitimate debt collectors, but occasionally, people become the targets of scammers who try to get them to pay debts that aren’t theirs. We have a list of a few red flags for scam debt collectors to look out for:

1. Contact you outside of regular working hours: If a debt collector is calling you at odd hours, it’s definitely a red flag. Debt collectors should only contact you between 8 a.m. and 9 p.m. local time. Scammers will contact you at unusual times and places they know are inconvenient for you. Even when you are working through a payment plan with a debt collector, you can choose the hours they can contact you and limit where they can call you. 
2. Withhold information: When a debt collector contacts you, they need to know the name of the creditor and the amount you owe. If you dispute the debt, they need to provide verification of the debt. If they don’t share this information on the initial contact, they must send a verification letter within five days of the initial contact. A licensed debt collector can tell you about your debt history, including the type of debt it is, for example, student loans, what day you fell behind, what payments you made and what the interest rate is. If the debt collector is unable to answer these questions, it’s a big red flag. 
3. Fails to verify your identity: Some scammers have information about you that may lead you to believe they are legitimate. However, licensed debt collectors will also have access to sensitive information such as your social security number and date of birth. They won’t share the information with you until you verify your identity first. If someone shares sensitive information before you can verify yourself first, hang up and check if any of your accounts have been hacked. If you’re still unsure, you can decline to verify your information until you receive a validation letter confirming the collector’s details and the debt you owe. 
4. Threatens you: A common tactic of scammers is getting aggressive and threatening you with jail time. You can’t go to jail unless you owe criminal fines or restitution. It’s best to hang up and ignore the person if they threaten you. They may also threaten to embarrass you by telling your family, friends or colleagues about your debt. Debt collectors generally can’t contact people about your debt unless it’s to find out where you live or your contact number — even then, they still can’t say they’re trying to collect debt. 
5. They pressure you and are impatient: Scammers will try to get you to pay immediately or the next day. They will usually offer you one of two payment methods — prepaid card or money transfer. They like these methods because it’s difficult to get your money back. While a legitimate collector does want you to pay the debt, they are willing to work out a payment plan with you. They will offer you a variety of methods to pay and are willing to work with you to find the best payment method that works for your finances. The interaction should feel professional and not rushed. 

Taking Action: Steps to Take When Contacted by a Debt Collector or Scammer

Once a collector contacts you, you’ll need to take steps to settle the debt. You may feel overwhelmed and not sure where to start. First, let’s look at the best way to respond when a debt collector contacts you. 

If It’s a Legitimate Debt Collector

• Know your consumer rights against debt collectors: Under the FDCPA, debt collectors cannot use abusive, unfair or deceptive practices to collect your debt. Many debt collectors follow the law, but there are some who might not. It’s important to note that even if the collector breaks the law, the debt won’t go away — you do have the right to sue them. 
• Make sure the debt is yours: Before making any payment, verify that the debt is legitimate and is yours. Make sure to document everything and request additional information about the debt.
• Act quickly: Depending on how old the debt is, you have a few options to settle it. If your debt has been outstanding for several years, find out the statute of limitations in your state for a debt collector to file a lawsuit to collect the debt. Consulting a lawyer will help. You can negotiate how much of the debt you would like to settle. If you’re unsure whether the debt is yours, write to the debt collector and request more information or dispute the debt. If the debt isn’t yours, don’t leave it. Write to the collector to inform them that it isn’t yours and that you wish not to be contacted about it again.

If It’s a Scammer

When you suspect that a debt collector is illegitimate, you need to take immediate steps to protect your information and identity:

• Stop contact: Ignore the person’s attempts to contact you, and don’t share any information with them. Scammers can use your personal information to steal your identity, open up fraudulent accounts and perform other financial activities. 
• Report the debt collector: You can report the scammer by filing a complaint with the Consumer Financial Protection Bureau (CFPB), Federal Trade Commission (FTC) or your state’s attorney general’s office. 
• Send a cease and desist letter: If the debt collector is illegitimate, you can send a cease and desist letter instructing them to stop contacting you. Send the letter via certified mail and request a return receipt to prove they received it. The FDCPA states that a debt collector must obey a cease and desist letter if the statute of limitations expires or if you don’t have or expect to have any assets to make court-ordered payments. 

Protecting Yourself: Reporting Debt Collection Scams

If a debt collector is trying to scam you, it’s important that you report them immediately to protect yourself. There are a few ways you can go about reporting scammers:

Documentation and Record-Keeping for Debt Collection

When you are dealing with a debt collector, make sure to keep detailed records. Take note of the time and date of the calls and save emails, texts, letters and any other correspondence you have with the collection agency. If the law permits you to in your state, you can even record phone calls — the more information you have, the better. 

Reporting to the Federal Trade Commission

You can visit the FTC website to report the scammer. You’ll start by filing a report that includes as much detail as possible — anything you share with the FTC can be helpful. If you have already paid money, include how much you paid and when. Make sure to share details about the illegitimate debt collector, too.

Once you’ve filed your report, the FTC will give you the next steps to protect yourself and recover from the incident. If you paid money, they will send you steps on how to recover the money. If someone from the FTC or a government agency asks you to pay a fee to recover your money, that is a scam. 

Reporting to State Attorney General

Many states have debt collection laws that differ from federal laws. You can locate your state attorney general and file a complaint to understand what action you can take. When you file a complaint with the state attorney general, they use the information in the report to identify trends for enforcement actions — it does not necessarily mean they will legally represent you.

Reporting to the Consumer Financial Protection Bureau

You can submit a complaint to the CFPB, and they will work to get you a response from the company you are complaining about. You can submit your complaint either online or via the phone. Make sure to explain what happened, what you think would be a fair outcome and what you have done to resolve the issue. Provide all the necessary information, as you usually cannot file a second complaint about the same issue. Include the company name, dates and any related amounts.

Once you submit the complaint, they will work with the company to resolve it. If the CFPB feels that another government agency can better handle the complaint, they may forward it to the relative agency. You can also track the status of your complaint online. 

Avoiding Frauds: Ensuring Your Debt Collector Is Legitimate

If a debt collector contacts you, there are ways you can tell whether they are a real professional. You can ascertain whether it is a scam by requesting the right information. They should be able to give you information about themselves and their collection agency.

How to Verify a Debt Collector’s Legitimacy

A legitimate debt collector should be able to provide you with the following information:

• Their name
• Company name
• Company street address
• Telephone number
• Professional license number — if your state licenses debt collectors

If you are worried about the legitimacy of the collection agency, you can protect your personal information by doing the following: 

• Contact the creditor: Get in touch with the creditor to verify the information they have on file regarding the debt. If the details the collector gave you match what the creditor has, you’ll know it’s a legitimate agency. Always ask the collector to send you a validation letter confirming the debt. 
• Check your credit report: In most cases, the debt collector will report the debt to one of the three credit bureaus, in which case it should show up on your report. You can order your report online from one of the bureaus. If the collector has not shared the information with the bureau, you may have to do more research to verify the debt. 
• Avoid sharing personal information: If the debt collector asks for sensitive information, don’t share anything they don’t already know, especially if you still need to verify their legitimacy. Ask for their name, collection agency name and the company’s contact number. If you aren’t able to verify the company or get in touch with them, that’s a red flag.

How Do I Know if a Debt Collection Letter Is Legit?

A scammer may even send you a debt collection letter to try to get you to make payments. If you examine the letter closely, there are some signs of debt collection scams:

• The letter may be filled with spelling mistakes or it was not appropriately translated via an online translating app. 
• It may be a scam if it lacks information about the creditor you owe the money to and doesn’t provide precise information and details about the debt. 
• If the letter requests that you transfer money abroad or make payment immediately in a specific way, it’s most likely a scam. 

Staying Informed to Protect Yourself From Scam Debt Collectors

If a debt collector does contact you, stay calm and take all the necessary steps to verify that it is a legitimate company. Remember, you can’t go to jail for owing money, but it can be challenging to recover your money or rectify the damage of a scam. If the collector uses dubious methods to get you to pay, cease all contact and report them. You can also contact the creditor directly to double-check if the debt is, in fact, yours.

At Southwest Recovery Services, we provide a range of debt recovery services based on professional, legal and ethical practices. If you need help recovering your debt, contact our experts today!