With almost 30 million of us with an account in collection, it shouldn’t be any surprise that scammers have started impersonating debt collection agencies. A recent news report showed a story about a couple ordered to pay over $6 million for a cash advance collection scheme. The couple had tricked people into paying off debts they didn’t even owe. Operations like this are nothing new. They all work the same. You target a consumer and tell him he has a delinquent loan, and then threaten and harass him until he pays you. It doesn't matter if he's innocent. We can’t help you avoid them completely. There’s no surefire way to stay off these guys’ radar, but we do have a few tips on how to recognize cash advance scams.
When you know what collectors aren’t allowed to do, it’s easier to spot a cash advance collection scam. The Fair Debt Collection Practices Act (FDCPA) protects you from many of the “abusive and deceptive” tactics used by cash advance collection scammers. Here are just some of the practices prohibited by the act:
The act requires the lender to identify themselves, state the name of the original creditor, verify the debt, and more. If a collection agency isn't playing by the rules, they might be trying to scam you.
The collector is required to send you a written notice about your debt. This notice should have all of the information you need to determine if the outfit is legit or not. So don’t do anything until you receive that written notice. Remember, the less you say over the phone the better.
Your original loan agreement should show how much the debt collector is allowed to charge you. Make sure the collector isn’t asking for more money than they are allowed to ask for. You may also want to consult your state's rules regarding how much interest a debt collector can impose.
According to a Time.com article, one way to outsmart debt collectors (whether they be of the scam variety or not) is to “know the time limits” associated with court action. That big, scary court case the collector threatens you with could be off limits. Depending on your state’s rules and regulations, if your debt has passed the statute of limitations, you can’t be brought to court over it. Be careful, though. Depending on your state, you might accidentally extend that statute of limitations if you do something like agree to a new repayment plan, make a payment, or admit that the debt is yours.
The FDCPA is primarily enforced by the Consumer Financial Protection Bureau (CFPB). If you’ve been targeted by a cash advance scam email, phone call, letter, or any other form of communication – or if you feel like a debt collector has violated the FDCPA in any other way – you should contact the CFPB. You can submit a complaint at the CFPB website and they will forward it to the collector and help you get a response. You should also report it to the FTC at ftc.gov/complaint, as well as to your state Attorney General’s office. If the phantom debt has made it onto your credit report, then you should also contact the three major credit bureaus and explain the situation. You may also want to get an attorney and consider taking private action against the debt collector. They could be on the hook for damages. Just be careful -- you could be forced to pay attorney fees if it's decided that you're trying cheat the collector.
The FTC recently announced a coordinated federal-state initiative that aims to target abusive debt collection practices. It’s called Operation Collection Protection. Illinois Attorney General Lisa Madigan said that the initiative will help put scam operations out of business and also “protect consumers from abusive practices by legitimate creditors.” That means it’s not just the scammers you need to be wary of. Even the real collectors might employ unlawful tactics to try to get you to repay your loans. Know your rights and don’t let them take advantage of you.
Some of the people who give in to cash advance debt collection scams do so because they were expecting a collector to call. If they hadn’t been in debt, they might have been more defensive and maybe not fallen for the scam. This is just one of the many reasons financial planning is so important. If you don’t currently have a budget, we recommend setting one up. The more you know about your finances, the better off you’ll be against scammers, schemers, and collection agencies.