Fake Debt Collectors
Borrowing and lending used to be so straightforward. A consumer borrowed money from a bank and paid that bank back on agreed-upon terms. If the consumer did not pay it back on time, the bank might hire a debt collector to assure payment of the amount owed to the bank.
Times have changed. In today's financial marketplace, banks often sell bundles of consumer debt to other financial institutions, for a portion of the amount owed, and the collectors get to keep what they are able to collect for themselves. These "downstream" debt collectors call and cajole consumers, or send endless streams of mail threatening damage to credit and other negative consequences.
The source of the debt may be as simple as a credit card account with a single bank, or as complicated as a jigsaw of hospitals and medical service providers. Unscrupulous entities may sell the same debt twice. Or criminals may get hold of a contact list of account holders and try to collect debt that they don't even own.
Suddenly, the bills and phone calls can come from multiple strangers. It is easy for borrowers to get confused as to whom they should pay. That is when fake debt collectors see an opportunity to profit and steal.
In the economic recession of the last decade, these deceptive practices have skyrocketed. The Federal Trade Commission received many complaints about debt collection abuse. The Consumer Financial Protection Bureau heard about the problem as well. Both agencies are studying debt collection abuse within their regulatory authority.
The FTC advises that consumer take a number of steps if you are being dunned by a company you don't recognize or have never done business with.
- Ask the caller for his name, company, street address, and telephone number.
- Tell the caller that you refuse to discuss any debt until you get a written "validation notice." The notice must include the amount of the debt, the name of the creditor you owe, and your rights under the federal Fair Debt Collection Practices Act.
- If a caller refuses to give you all of this information, do not pay! Paying a fake debt collector will not always make them go away. They may make up another debt to try to get more money from you.
- Stop speaking with the caller.
- If you have the caller's address, send a letter demanding that the caller stop contacting you, and keep a copy for your files. By law, real debt collectors must stop calling you if you ask them to in writing.
- Do not give the caller personal financial or other sensitive information.
- Never give out or confirm personal financial or other sensitive information like your bank account or credit card to a stranger over the phone.
- Never give out your Social Security number unless you know whom you're dealing with.
- Contact your creditor. If the debt is legitimate – but you think the collector may not be – contact your creditor about the calls. Share the information you have about the suspicious calls and find out who, if anyone, the creditor has authorized to collect the debt.
We would add two things to the FTC's good comments. First, pull your own personal credit report. You are entitled to get one per year for free, by going to the official website for one of the Big Three agencies - Experian, Transunion, or Equifax. Secondly, if you still don't know why this entity continues to contact you about a debt you don't think you owe, or if you are sued by a company you have never heard of, you may need to seek legal advice.