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What You Need to Know about Debt Collection Scams

Reading time: 5 Minutes

October 24th, 2020

worried woman speaking on phone worried woman speaking on phone

Your credit card bill is overdue and you receive a phone call from someone who claims to be a debt collector. You recognize the bill, but the caller's tone is aggressive and threatening. How do you know if this is a legitimate call? While many businesses do hire third-party agencies to collect payment for an overdue balance, there are clear differences between a real debt collector and a scammer. Look for these red flags and learn what steps you need to take to protect yourself.

1. Bullying Tactics

Beware if the person on the other line pressures you to act immediately or uses harsh, abusive language. A scammer wants to create a feeling of urgency and panic so you'll make a payment on the spot, typically through a wire transfer or another form of payment that can't be traced, such as a prepaid credit card or gift card.

A legitimate debt collector will generally allow you to negotiate a schedule for repayment, and will accept more conventional payment methods like checks, debit cards and credit cards.

2. Aggressive Threats

Another telltale clue is when the caller threatens to tell your friends, employer or family about your debt. They may even threaten you with jail time.

These kinds of threats are illegal, and a legitimate debt collector will never resort to them.

3. Withholding Information

A real debt collector should be able to provide information about the collections agency they are calling from, including the name of the firm, the address and the phone number. As a consumer, you have the right to independently research a collection agency reaching out to you, and a refusal to share detailed contact information is a red flag.

4. Requesting Too Much Information

If your caller asks you for information they should already have, they might be phishing–gathering personal information they can use to commit identity theft. Never give out your social security number, address, name or date of birth. A legitimate debt collector should already have these details on hand, and won't need to ask for them.

5. Unfamiliar Debt

If you don't recognize the company or the amount of the debt, don't pay. You have the right to request proof of debt in the form of a validation letter, even if the collections agency wants you to pay right away. And if you do recognize the account but still have suspicions, it's always a good idea to request proof.

6. Impersonation

Many scammers will claim they are calling from the IRS, Medicare or the Social Security Administration. The IRS, however, will never reach out to you out of the blue via phone call, text or social media—it normally communicates by regular USPS mail. If someone claims to be an IRS official and asks you to make immediate payment to a source other than the U.S. Treasury and makes threats of law enforcement, the odds are high it's a scam.

A similar tactic is a vishing scam, a contraction of "voice phishing," where the caller claims something is wrong with your tax return or bank account. They will ask for your login credentials to fix the problem or to make a new payment. If it's an automated call, don't respond to prompts or press buttons—scammers use these ploys to identify potential future targets or record your voice for other automated phone menus.

What to Do If You Suspect a Scam

If you think you're being scammed, the key is to remain calm. This can be difficult, especially if the call is aggressive, but remember you never need to make any immediate payments. Collect your thoughts and follow these simple steps:

  1. Ask for a Validation Letter

    A validation letter is a document that outlines the amount you owe, the creditor and a description of rights under the Fair Debt Collection Practices Act. Request this letter and wait until you receive more information before sending any payments.
  2. Gather Information

    Ask for the caller's name, company, address and a callback number. If they share this information, look up the company online. Additionally, call the number that you find online, not the one they give you. If the business does not answer the call with the same company name they gave, it's a scam.
  3. Reach Out To The Original Creditor

    Another way to research the validity of a debt collection attempt is to contact the business the collector claims to be working for and find out what collection agency your debt has been assigned to.
  4. Ignore The Calls

    Don't answer any more calls if you suspect it's a scam. Hang up when your caller makes threats. Scammers are unlikely to keep pursuing you if they don't think you are an easy target.
  5. File A Formal Complaint

    Don't hesitate to file a complaint with the Consumer Financial Protection Bureau or your state attorney general's office if you think a scam debt collector has contacted you. Gather all information you can and include it in your formal complaint.

    And remember, after you've done all due diligence and it turns out the call is legitimate, handle the situation as swiftly as you're able—it's never a good idea to ignore debt, even if you're having financial difficulties right now. If you are having trouble paying your bills, you can start to get ahead of the situation by reaching out to your creditors. Once you're back on track, you can take these steps to start repairing your credit score.

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