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Debt Collection Scams

Scammers pose as debt collectors to steal your money or personal information. Discover the warning signs and how to recover.

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The Basics of Debt Collection Scams

Debt collection scams typically involve someone posing as a debt collector who contacts you — by phone, text message, mail or email — trying to collect on a debt that doesn’t exist, or for an amount that is much higher than what is actually owed. In some cases, the scammer will threaten legal action or wage garnishment if the debt is not paid. In other cases, the scammer may promise to help you repay what you owe. These types of scams can be very difficult to spot, as the scammers often use fake names and contact information. They may also use intimidation tactics to try and get you to pay.

3 Common Tactics Used by Debt Collection Scammers

There are several common tactics that debt collection scammers use to trick people into giving them money or personal information, such as:

  • Contacting you out of the blue, claiming to be from a debt collection agency. They may say that you owe money to a creditor and threaten legal action if you don’t pay up.
  • Pressuring you into paying immediately — often by gift cards or wire transfer — by threatening to damage your credit rating or report you to a credit agency.
  • Asking you to provide personal information, such as your Social Security number or bank account information in order to process your payment.
Common Types of Debt Collection Scams
  • The fake debt collector: This is when a scammer pretends to be a legitimate debt collector in an attempt to collect on a debt that you may not even owe. They may use high-pressure tactics or even threaten legal action if you don’t pay.
  • The phantom debt: This is when a scammer tries to collect on a debt that you don’t actually owe. They may claim that you owe money for a past-due credit card bill, medical bill or other type of debt.
  • The debt consolidation scam: This is when a scammer offers to consolidate your debts into one monthly payment. They may claim that they can get you a lower interest rate or waive fees.
  • The credit repair scam: This is when a scammer offers to “fix” your credit report. They may claim that they can remove negative items, such as late payments or collections.
  • The student loan debt relief scam: This is when a scammer offers to help you get rid of your student loan debt. They may claim that they can get your loans forgiven or consolidate your loans into one monthly payment.

Step 1:Recognize

Red Flags of a Debt Collection Scam

If you are contacted by someone about debt that you owe, there are some red flags to look for that may indicate that you are being scammed, such as:

  • You are contacted by a collector about a debt you don’t recognize.
  • The collector refuses to give you their contact information.
  • They try to intimidate you by threatening you with jail time, fines or garnished wages.
  • The collector demands payment using an unusual method, such as wire transfer, gift cards or prepaid debit cards.
  • They insist that you pay the full amount of your debt immediately.
  • The collector refuses to provide proof that you owe the debt.

Step 2:Immediate Actions

If you think you are the victim of a debt collection scam, it is important to take action right away to protect yourself and your finances. Here are some steps to take if you think you have been scammed:

  • Keep all documentation related to the scam, including any emails, letters, or receipts. This will be helpful if you need to file a police report or take legal action against the scammer.
  • Contact the Better Business Bureau (BBB). The BBB is a nonprofit organization that tracks complaints against businesses.
  • If you provided financial information, like your credit card number or bank account information, contact your bank or credit card company right away. They may be able to help you cancel the transaction or get your money back.
  • If you sent funds via gift card or money transfer, report the scam to the issuer. They might be able to help you stop the transaction. Find their contact information by visiting their legitimate website.
  • If you provided personal information, like your Social Security number, you may be at risk for identity theft. Contact the three major credit reporting agencies — Experian, TransUnion and Equifax — and place a fraud alert on your credit reports. This will make it harder for the scammer to open new accounts in your name.

Step 3:Report

Reporting any type of cybercrime, including debt collection scams, is imperative to help others avoid being scammed. As a society, the more people that report online scams and fraud, the more national reporting data that is collected, and the better chance law enforcement has to catch the criminals and decrease cybercrime.

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Step 4:Recover

Learn the Three Golden Rules to Spot a Scam

Scammers often utilize tactics to encourage you to act quickly and will use false information to persuade you to send money or personally identifiable information (PII). When faced with a questionable situation online, always follow the three golden rules to spot a scam:

Slow it down — Debt collection scammers often create a sense of urgency. They may be pushy, aggressive or use threatening language to force you to act quickly. Take your time to avoid being rushed into a bad situation.

Spot check — Do your research to double check that the debt collector is who they say they are. Ask them to provide their full name and the company’s name, address, phone number, website address and email. Then, search for the collection agency on the internet, and send them a letter by mail asking them to confirm your debts.

Stop! Don’t send — Scammers will try to steal your money by rushing you into paying with unconventional payment methods like gift cards or wire transfers. If they insist you pay your debt in the form of gift cards or by wire transfer, it’s a scam.

Take 5 Steps for Better Online Security

Along with making sure you follow the three golden rules to spot a scam, it’s important to strengthen your online security to help avoid all types of online scams. Take action to improve your digital posture by following these steps:

  1. Implement Multi Factor Authentication (MFA): Passwords are generally easy for scammers to crack, and even if you use strong passphrases, there’s still the possibility that a cybercriminal can obtain your passphrase in a data breach. Implementing MFA is a great way to maximize your security and ensure that you are the only one who can gain access to your accounts. MFA should be implemented on all accounts where it is available. Check your account’s security settings to see if it is something you can set up.
  2. Update Your Privacy Settings: Privacy settings allow you to control your personal information (name, address, phone number, date of birth, financial details, photos or videos, etc) and how that information is used. Review your privacy settings on all of your accounts including your social media accounts. Consider restricting who can see your friends list, contacts, photos and posts.
  3. Activate Automatic Updates: Automatic updates are a set of changes to an app, software or operating system that are automatically pushed by the developer to fix or improve it. Oftentimes, cybercriminals take advantage of security flaws to plant malicious software on your devices. By activating automatic updates, you will automatically patch security vulnerabilities to protect your data.
  4. Use a Password Manager or Create Strong Passphrases: A password manager is a software tool that securely stores all of your login credentials in one place, allowing you to create and manage strong, unique passwords for all of your accounts. If you are unable to afford a password manager, use strong passphrases. A passphrase is a combination of random words or a sentence that is much longer and more complex than a typical password. Using a passphrase instead of a password makes it much harder for hackers to guess or brute-force their way into your accounts.
  5. Learn the Elements of a Phishing Attempt: Familiarize yourself with the elements of a phishing email. Phishing emails tend to include a sense of urgency and multiple grammar and spelling errors. If they are asking you to reveal personal information, be suspicious. If you get a strange email, try contacting the company another way to confirm they sent that email. If the email is suspicious, mark it as spam.

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