Most of us have gotten the “call.”
A debt collector, lawyer, law enforcement officer, or government official is on the phone, and they’re asking you to pay your debts—today. Failure to do so will result in jail, property seizure, or wage garnishments. They’re actually doing you a favor by calling: pay them now, and you’re off the hook.
There’s just one problem. It’s all completely fake.
Yes. With advanced technology and access to your private information, debt scammers can put on a pretty believable show. But there’s some good news: though debt scams are as wide and varied as folk tales, most of them follow a specific story pattern that makes them easy to spot. Whether you’ve been burned in the past, or you want to protect your future, here are five of the most common debt scams you should know.
1. Debt you don’t owe.
This scam is perhaps the most easy to spot. A debt collector calls you and asks you to pay a debt you don’t recognize. To convince you the debt is, indeed, yours, they’ll tell you someone else took it out in your name. They may even give you the actual name of a relative or immediate family member.
Often they’ll get aggressive with you, threatening you with arrest, deportation (if applicable), wage garnishments, and credit score damage. They’ll give you an ultimatum: pay them over the phone now, or you’ll pay more later.
Don’t let them intimidate you. If they’re asking you to pay a debt you don’t recognize, it’s usually because it doesn’t exist. Your best strategy is to ask for a callback number (if they have one), hang up the phone, and check your credit report. If nothing looks suspicious—if you don’t see any debt you don’t recognize—then congrats: you just avoided a scam.
One final note: a surefire sign of a scam is aggressive language and threats. No debt collector can threaten you with arrest, as it’s against the Fair Debt Collection Practices Act. The moment someone starts spouting out threats, hang up. It’s a scam.
2. Debt you do owe.
Demanding repayment on debt you don’t owe is one thing. But demanding you pay up for a debt you do owe—now that’s a trickier situation.
The verisimilitude on these calls can be unsettling. The debt collector will usually name off specific debts, including the amount you owe, the name of your lender, the day you took the loan out, and, if applicable, the days you missed payments. They seem to know everything. How do you know if they’re real or not?
First, ask for a validation letter. If the debt collector is legitimate, they’ll send you this letter without question. A fraudster, on the other hand, will hesitate or make excuses: there is no letter, and you caught them.
Even if they say they’ve sent you a letter, don’t let your guard down. Ask for the debt collector’s name and callback number, hang up the phone, and call the lender with the debt in question. Ask the lender if they sold the debt to a debt collection agency. If so, get the agency’s name and number. At this point, you’ll have the legitimate agency. If it matches the debt collector who originally called you, great. If it doesn’t, well—another scam avoided.
3. Relief or settlement for your debts.
Debt collection scammers prey on your fear of negative consequences. But there’s another predator who preys on the opposite emotion: your hope for a way out.
Like debt collectors, debt settlement scammers often know everything about your debts (usually because they’ve obtained your credit report illegally). They promise they can negotiate with your lenders, securing you a much lower amount than what you originally owe. They may even tell you to stop paying your debt or communicating with lenders, as playing the silent game will make lenders desperate for your money.
As with debt collectors, legitimate debt settlement companies are out there. But it’s fairly easy to spot fraudsters from legitimate companies.
The most surefire sign is the upfront fee. It’s illegal for debt settlement companies to charge you fees for services they haven’t performed yet. If they’re asking you to pay them now, it’s a hoax. Secondly, it’s illegal for debt settlers to promise relief of a specific amount. When a debt settler tells you they can cut your debt in half or by a certain percentage, hang up the phone. They’re fraudsters.
Finally, debt settlement companies rarely cold call. Getting a random call from a “debt settlement,” especially at an inappropriate time, tells you it’s probably a fake.
4. IRS tax collections.
Occasionally you’ll get a call from “Internal Revenue Services,” demanding immediate payment for unpaid taxes. While the IRS does use private debt collection companies who may or may not call you directly, if the “IRS” on the line demands payment now, it’s a scam. The real IRS won’t request payment over the phone, and they certainly won’t ask for your debit or credit card number.
5. Refund and recovery scams.
Finally, you can get scammed after being scammed.
Yes. If you gave into a scam in the past, whether a debt settlement or, truthfully, any scam, you could be targeted for a refund or recovery scam.
These scammers act like your friend. They hate that you were the victim of fraud, and they want to make things right by giving you the money back. They could say they’re from the government, a law firm, charity, consumer advocacy group, or even the company who scammed you. Wherever they’re from, their motive is clear: they need your credit card, debit card, or banking information to redeposit the money.
Don’t believe them. While, yes, it would be nice if this were true, it’s not. Again, the easiest way to detect a recovery scam is if they ask you for private financial information. If they do, tell them you’re not interested and hang up. You’ll save yourself a lot of hassle.
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Debt scammers prey on ignorance, fear, and helplessness. Often, they know you’re going through a hard time, and they offer you an unbelievable way out.
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