Debt Collector Scams Targeting Payday Loan Borrowers
There’s a new reason to be stressed about phone calls from debt collectors: a growing number of debtors are being scammed into paying off debts they don’t owe by phantom debt collection agencies.
Thousands of Americans have reported receiving calls from fake debt collectors, according to the Federal Trade Commission. In response, the FTC has recently filed four cases involving fraudulent debt collections that have cost victims an estimated total loss of $20 million.
Scammers appear to be targeting people who have recently taken out or applied for online payday loans. In some cases, however, the victims hadn’t even applied for a loan, but had simply provided their name as a reference for another borrower.
Typically, the scam artist impersonates a law firm, government agency or police officer and threatens to garnish wages, seize assets or even arrest the debtor if they don’t pay off a debt or agree to a debt settlement. What makes these debt collection scams particularly convincing is that scammers have so much personal information on debtors – which, of course, they’ve discovered through payday loan sites.
They’re also targeting individuals likely to be stressed, and who therefore may not be as careful as they should be.
Because payday loans come with some of the highest interest rates and predatory terms around, people usually don’t borrow from payday loan centers until they’re so overwhelmed with debt that they believe they are out of options. But when you’re that deep in debt, it can be hard to stay organized about whom you owe and how much you owe to them – making it all too easy to fall for lies from phony creditors or bill collectors.
If scammers agree to settle a debt worth thousands of dollars for a few hundred bucks, it can sound like a bargain. Little do debtors know that none of this money will actually go to pay down their debts – and all of it will go into the hands of scammers.
Next time you get a call from a debt collector, take heed. Just because they have your personal information doesn’t mean they’re legitimate. Here are some tips for avoiding fraud when dealing with debt collectors:
When it comes to your money, you shouldn’t trust anyone until they’ve proven they can be trusted. When debt collectors call, ask for the required written validation notice that provides information on your debt and the debt collector. If they won’t agree to send it to you, consider it a red flag.
Don’t Fall for Scare Tactics
Scam artists use intimidation to bully debtors into paying debts – whether they owe them or not. You don’t have to fall for it. No matter what the caller says, you cannot be arrested for failing to pay a debt. It’s true that you can be sued or your assets can be repossessed for being delinquent, but there are ways to protect yourself – such as filing for bankruptcy. If you feel yourself start to give in to the harassment, hang up the phone so you can collect your thoughts.
Do Your Research
Never send money to an unknown caller. Get the name and information of the debt collector and request information on the debt. If there’s any question about whether you owe money, contact the original lender. Then, take the time to find out if the people calling you are really associated with the company they claim to represent. Even if it turns out that you owe money, you may not owe it to the person who is contacting you.
If you’re struggling to stay on top of debt, the last thing you need to be worried about is bill collectors – real or fake. When debt is taking over your life, bankruptcy may be able to offer a realistic solution. Contact DebtStoppers today to schedule a one-on-one debt analysis with one of our experienced attorneys – and find out if bankruptcy could be your ticket to financial freedom.
Phantom Debt Collector Scam Hits Payday Loan Borrowers, by Herb Weisbaum, CNBC