What are debt collection scams?

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Helene Mueller
eCollect support team

Debt collection scams are unfair and illegal techniques for recovery of past-due payments from debtors, carried out by different debt recovery agents, such as third-party DCAs (Debt Collection Agencies), debt solicitors, debt buyers, even the original creditors can use such methods of collection. Although these procedures are not tolerated by law and are considered as criminal actions and violation of debtors’ rights, there are still some cases of debt collection scams usage. The aim of such strategies is to frighten a debtor in order the full debt amount to be recovered faster and easier. A subject of debt has to be aware of such illegal practices and should consider the fact that an authorised and registered debt collection agency will never use insulting or aggressive tone. These agencies always comply with country and international debt collection laws and acts and will never harass the debtor or violate his rights as a consumer.


Types of debt collection scams

Suspicious telephone calls

The first step of a debt recovery fraud is suspicious phone calls. The subject on the other side will claim he is a licensed debt collector, and he might or might not be a real representative of a legally authorised debt collection agency. The “debt recovery agent” can assert he is a representative of a DCA, a private debt solicitors’ company or even a government organisation when he is none of these. Such “agencies” are known as phantom debt collectors.

The person contacted the debtor might be a DCA’s representative for real. Even if the recovery agency is registered and legal, it can still try to use fraud scams in order to collect the amount faster. They might threaten the consumer with seizure of property, wage garnishment, even arrest, if he refuses to pay or does not pay as soon as possible. Debtors should remember that these practices are illegal and furthermore jail is not a legal option for not paying debts anymore.

Harassing letters and emails

Debt collection scams can also consist of various intimidating written reminders, consisting of harsh tone, rude language and threats with non-existing legal actions. If the agency is not real, it might use a different trading name in order to conceal information or present a false one. If the debtor receives such email/letter he has to request a debt validation letter. This document shows proof that such delinquent payment exists, also points the exact amount of debt, the original creditor and his official company’s trading name. It also includes the full name of the DCA, operating on the part of the lender. Not furnishing the consumer with detailed information about their matter is considered as illegal and suable.

When a debtor is visited by a debt recovery agent, he has to request his identification documents. Such agent can be legitimate, but can still use fraud and threats to recover an amount due. A debt collector has no right to forcefully enter debtor’s property or seize his personal belongings. Even if the agent is authorised to perform force actions (e.g. bailiffs and debt solicitors), he must have an official Warrant of Execution provided by a High Court. If the collector is authorised to confiscate material items, he has no right whatsoever to seize needful possessions.

Additional charges

A default collector might also charge the consumer an unreasonable amount of interest. Generally, a recovery agency has the right to request payment from the debtor once the creditor has transferred the default case to a third-party DCA. However, if such agency charges the consumer a higher amount than the sum indicated by law, the debtor should immediately contact legal authorities and report the agency, as such actions are considered as debt collection scams. In the United States, for example, harassed debtors can turn to the governmental Consumer Financial Protection Bureau (ext. link 6).

Victims of debt collection scams

If a consumer suspects or is sure that he is a victim of a debt collection fraud or harassing behaviour on behalf of a debt recovery agent, he should report this individual/company immediately to the structure in charge of DCA scams. The debtor can also check debt agency’s registration number. Every country has its own system and governmental structures for DCA’s licences and verification check-ups. There are different acts and organisations, protecting consumers from such scams, like EU’s Unfair Commercial Practices, the Department of Consumer Affairs and the Fair Debt Collection Practices Act for the U.S., the Federation of EU National Collection Association, the Financial Conduct Authority for UK & Wales and many others.

If a debtor is certain that an individual performs debt collection scam, he must not provide this subject with any finance or private information whatsoever. A licensed debt recovery agency will never oppress the debtor or insistently request personal information to be given to him.

An indebted subject harassed by a DCA or a victim of debt collection scams, can file a complaint and report the recovery agency to different institutions, like the CFPB, known as the Consumer Financial Protection Bureau and the National Association of Attorneys General both for United States; the Australian Securities and Investment Commission; the Financial Conduct Authority or the Office of Fair Trading for United Kingdom and Wales, etc.


Used literature & external links

http://www.cnbc.com/id/101574218#
 

http://www.scambusters.org/debt.html
 

http://www.consumerfinance.gov/askcfpb/1699/how-can-i-verify-whether-or-not-debt-collector-legitimate.html
 

http://www.nolo.com/legal-encyclopedia/debt-collector-scammer-how-tell-the-difference.html
 

http://www.fraud.org/news/61-phantom-debt-collectors
 

http://www.consumerfinance.gov/askcfpb/1699/how-can-i-verify-whether-or-not-debt-collector-legitimate.html