Co-authored by Chad Mizelle.
There is a disturbing trend we have noticed happening in metro Detroit and probably nationwide in the past few years. We get a call from an upset person who says that a collection agency representing a payday loan company just called them and are threatening them with imminent arrest unless settlement monies are paid to them right away. The caller is very convincing and even has their social security number, address, date of birth, employment history and other pertinent personal information. Sometimes, these calls come to our existing bankruptcy clients and the caller typically tells them that a court officer will be “on the way to your house” unless an immediate settlement can be reached. They demand to be wired payment or be provided debit or credit card payment to stop the arrest. Understandably, our clients are disturbed by such callers and call our office wondering why they received such a call after they have filed a bankruptcy, which operates as a stay preventing creditor and collection agency calls. The reason is that these calls are not from real collection agencies, but rather are criminal enterprises attempting to trick vulnerable people into sending them money.
Dealing with legitimate debt collectors is stressful in its own right. Dealing with scammers attempting to disguise themselves as debt collectors can be even more stressful. There are ways to tell them apart, however.
Debt collectors and the Fair Debt Collection Practices Act (FDCPA)
Debt collectors are bound by the Fair Debt Collection Practices Act (FDCPA). The FDCPA provides important protections to debtors, but debt collection companies can still make life stressful. Debt collectors can contact individuals at their home and their office. They can also contact relatives, neighbors, and colleagues to ask if they know the location of the debtor that they are trying to reach.
Scammers disguised as debt collectors can create even more stress. This is because they are not bound by the FDCPA and will oftentimes use tactics that an actual debt collector could be fined for using. For instance – and as any bankruptcy attorney can tell you – scammers often contact debtors pretending to be court officials, attorneys, law enforcement agents, and other similar individuals in an attempt to intimidate debtors. Particularly aggressive scammers will threaten jail time or even physical violence. Of course, such threats are strictly prohibited under the FDCPA but, as mentioned above, scammers aren’t suspect to the FDCPA. And, even if scammers were subject to the rules and penalties of the FDCPA, it’s usually difficult to figure out their identity and location, so relief is hard to come by. Additionally, it’s always important to remember that failure to pay a consumer debt is not a crime and will not result in an arrest or jail time.
Submitting a request for a debt collector to stop contacting
Under the FDCPA, debtors can request that a legitimate debt collector stop contacting them altogether. To make such a request, the debtor needs to send the debt collector a letter via certified mail, return-receipt requested, stating that they do not wish to be contacted by the debt collector again. After the debt collector receives the letter, they can only contact again to confirm that they are ceasing communication, or to inform the individual that they intend to take legal action in an effort to collect the debt. On the other hand, since scammers aren’t actually debt collectors, they will continue to contact an individual if it seems like they believe the debt to be legitimate.
The amount of personal information that scammers often have can work to convince an individual that the “debt” the scammer is referencing must be legitimate. Even when individuals aren’t convinced by a scammer, they are still troubled by the fact that the person on the other end of the line has their personal information.
How a scammer collects personal information
The ways in which scammers obtain personal information isn’t always as mysterious as it seems. For instance, many scammers will create a website that appears to offer payday loans or other similar services along with a ‘simple’ online application. Then, if the scammer has done a good enough job, these websites appear convincing and entice individuals to actually apply for a loan. And, just like you would for a legitimate loan, a scammer’s application will ask you to provide a lot of personal information. Typically, once a scammer has received an individual’s personal information, they will either deny the application or simply not respond at all. Then, after some time has passed – and often armed with a wealth of personal information – the scammers will contact the applicants claiming that they owe a debt and must make a payment immediately.
Spotting a debt collection scam
In short, the easiest way to spot a scammer is to know what conduct is allowed of actual debt collectors under the FDCPA. A lot of the permissible conduct is listed above, but the following is a non-exhaustive list of impermissible and punishable conduct:
- Threaten jail time or arrest for failure to pay a debt;
- Threaten physical violence for failure to pay a debt;
- Threaten to garnish wages or bank accounts with having already obtained a judgment;
- State that they are from the government or work for a credit reporting company;
- Disclose any or all of your social security number in an effort to convince you that they are a legitimate debt collector;
- Call before 8:00 AM or after 9:00 PM;
- Refuse to give the name of the company they work for or an address where they receive written communication; and
- Failure to send a written communication within five days of their first call (but remember that unless informed otherwise, the address that a debt collector has will be the last known address that the creditor had).
Of course, legitimate debt collectors can and do engage in impermissible conduct from time to time, but the FDCPA provides a strong incentive against such conduct. Nevertheless, in the event that it is impossible to tell if it is a scammer or a legitimate debt collector, ask them to send you written communication stating who they are and who they are collecting for. If you fail to receive such written communication, you can safely assume that it was a scammer.