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How to spot a debt collector scam

Debt collectors are usually hired by creditors to recover debts owed to them. A lot of debt collectors are legitimate; however, bogus or scam debt collectors exist and are becoming quite common in the UK.

A scammer might contact you and inform you of a fictional debt. That scammer might then issue threats of court action, asset seizure or you acquiring a poor credit rating. You might start to fear that you actually owe the debt, and since you do not want to suffer the mentioned consequences end up paying.

You might not have run into a debt collector scam yet, and hopefully you won’t soon. Knowing some of the warning signs, however, can save you from being the next victim and paying dearly.

Debts targeted by collector scams

The majority of scammers attempt to collect ‘phantom debts’, that is debts that do not exist because they were paid off or discharged or are entirely fictional. Another type of debt that scammers might try to collect are those that are statute barred – that is, debts that are no longer enforceable because the period during which the creditor can legally demand payment has passed.

Signs of a debt collector scam

The warning signs that you may be the target of a scam include if a supposed ‘debt collector’:

  • refuses to provide you with full details of the collection agency – its name, contact information, physical address and operating licence number – or provides you with fake or inaccurate information (such as an unreachable phone number)
  • demands that you to make a payment immediately through an untraceable method such as a re-loadable prepaid card
  • demands that you provide sensitive personal information such as your banking information or your credit card number (these can be used to commit more fraud against you, such as identity theft)
  • threatens to send the police or other law enforcement to you immediately or threatens to take some other form of immediate legal action
  • mentions a debt or creditor that you do not recognise 
  • calls you repeatedly on the phone but won’t provide or accept anything in writing.

Note that just because you do not recognise the name of a debt collection agency or a creditor does not always mean that you are the target of a scam. Companies sometimes change names (for instance, after an acquisition or a merger).

What to do if contacted by a debt collector

If you have been contacted by a debt collector or have received a debt collection letter, here are a couple of actions you can take to protect yourself until you confirm that the debt collector is legitimate.

First:

  • Do not give any sensitive financial and personal information.
  • Do not discuss anything related to the debt.

Instead, do:

  • Ask for a formal written notice or letter regarding the debt.
  • If the debt appears to be legitimate at first glance, contact the original creditor to confirm that the debt collector has permission to collect it or that it has been sold to the collector.
  • Look up the debt collector or agency online and try to ascertain the authenticity of any information provided such as physical location.

What to expect from a legitimate debt collector

You can expect full disclosure from a genuine debt collector. Such debt collectors will have no reservations about revealing information including the full name of their agency, contacts, details about the original creditor and so on. They will be willing to provide you with all relevant information in writing.

Additionally, legitimate debt collectors will not usually pressurise you to pay back debts using untraceable methods such as wire transfers and prepaid cards; they will most likely give you a couple of safer options. Valid debt collectors will also not ask you for personal and sensitive information. Their primary concern will be to strike a repayment agreement with you.

Key takeaway

Debt collector scams centre on people being tricked and pressurised into paying debts that they do not owe. If you ever find yourself interacting with a suspicious debt collector, look out for the highlighted warning signs to protect yourself from being their next victim. Do some research before making a transaction or even discussing the debt. You can also protect yourself by being aware of any specific debts that you really do owe.

Educating yourself on personal finance and understanding the financial products that you use everyday can make the difference between comfortable finances and constant stress. At MyWalletHero, we aim to make learning about personal finance rewarding and fun.

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