Not sure if a debt collector is legit? Fake debt collection companies might be more prevalent than you think and could cost you if you’re not careful. You can protect yourself by looking out for common scams and reporting suspicious companies to prevent them from targeting anyone else.
Fake debt collectors try to trick you into paying off debts you’ve never actually taken out. One of the biggest dangers is that they might sound legitimate. Many use the names of real businesses — or names that sound similar to real businesses you might even have an account with, according to the Federal Trade Commission (FTC).
Here are some common debt collector scams to look out for:
IRS tax collector scam
What it is: Someone posing as an IRS employee says you owe taxes and demands payment — usually with a credit, debit or prepaid debit card. Often, they threaten you with jail time.
How to recognize it: The IRS has clear rules on how debt collectors can approach you. Any caller that contacts you about tax debt you’re unaware of, demands immediate repayment, threatens to call law enforcement or doesn’t give you the opportunity to appeal is acting illegally. The IRS never asks for any credit or debit card numbers over the phone.
What to do: Hang up and don’t give the caller any personal information. If you think you might have tax debt, you can check your tax account information on the IRS website, where you’ll also find payment options. Or call 800-829-1040 and explain the situation.
Wire transfer scam
What it is: A debt collector calls you, says you owe money and demands repayment by wire transfer, rather than by check or online.
How to recognize it: The debt collector only allows you to make repayment through a wire transfer and doesn’t give other options.
What to do: Hang up and don’t make the transfer. If you’re not sure it’s a scam, contact your creditors to check if your account has been transferred to collections. If it has, ask for the collection agency’s contact information.
Credit bureau collection scam
What it is: Someone claims they work for one of the three major credit bureaus — Equifax, TransUnion or Experian — and tells you they’re collecting debt you owe.
How to recognize it: Anyone who says you need to pay off debt through a credit bureau is scamming you. None of them collect repayments.
What to do: Get the person’s name, title and general information about the company they claim to work for before hanging up — this makes it easier to report. Don’t give out any personal information.
Fake government official scam
What it is: Someone claims they work for a government agency and says you owe them money, often threatening you with jail time.
How to recognize it: With the exception of agencies like the IRS or the Office of Child Support Enforcement, most government agencies don’t collect money from private individuals.
What to do: Ask which agency they work for, their name and position before hanging up. Then report them to the FTC or another consumer protection agency.
Phishing scam
What it is: Someone poses as an employee of a debt collection company to get personal information like your Social Security number to steal your identity.
How to recognize it: They ask for information you normally wouldn’t give out, telling you your record is incomplete or that they want to double-check the information they have is correct.
What to do: Hang up immediately without giving out or confirming anything. Contact your creditors to make sure your debt is not in collections and that your personal information is up to date.
Before you sign up with a debt relief company
Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And not all companies are transparent about these costs or drawbacks that can negatively affect your credit score. Depending on the company you work with, you might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.
Consider alternatives before signing up with a debt relief company:
Payment extensions. Companies you owe may be willing to extend your payment due date or put you on a longer payment plan if you ask.
Nonprofit credit counseling. Look for free debt-management help from nonprofit organizations like the National Foundation for Credit Counseling.
Debt settlement. If you can manage to pay a portion of the bill, offer the collection agency a one-time payment as a settlement. Collection agencies are often willing to accept a lower payment on your debt to close the account.
How can I tell if this attempt by a debt collection agency is legit?
Sometimes it’s unclear if a debt collector is the real deal. If you’re not sure an agency is legit, take these steps to double-check.
Ask for a validation notice. By law, creditors are required to send you a written notice stating how much money you owe within five days of reaching out. You can request validation or verification of the debt to make sure it’s legitimate and that you’re the person the collection agency is actually looking for.
Get their name and contact information. You can use this information to make sure everything checks out — or to give a more detailed complaint if it doesn’t.
Contact your creditors.Sometimes debt collectors lie to get you to pay quicker. Ask if any of your accounts have gone to collections. If they have, ask for the name and contact information of the collection company and reach out yourself.
If you’re a victim of a debt collection scam, your main recourse for resolving the situation is to file reports against the company. You might be able to resolve the issue while also helping others avoid that scam.
The Consumer Financial Protection Bureau (CFPB) does two things when you file a complaint: It reaches out to the company to attempt to resolve the issue and uses complaint data to influence new laws to protect consumers.
You can file a complaint through the CFPB website. Before you get started, make sure you have all of the information about the debt collection company on hand so that your report will be as detailed as possible.
The FTC is the federal agency that’s responsible for enforcing debt collection laws. It can take action against a company if it thinks a debt collector has violated federal law — especially if it’s a scam. And like with the CFPB, your complaint can help shape future debt collection laws.
Some states have additional debt collection laws, which the attorney general’s office oversees. If you file a complaint about a debt collector scam, it can take action against the business and also use that complaint to shape future debt collection laws on a state level.
Each attorney general’s office has a different method of filing complaints, though most have an online form or phone number.
The Better Business Bureau (BBB) is a private nonprofit that works to protect consumers against unfair business practices. When you file a complaint, it reaches out to businesses to attempt to resolve the issue.
While it doesn’t have any legal authority, you can make your complaint available to the public, which can help other consumers make an informed decision. You can file a complaint by filling out a form on the BBB website. You’ll need the business’s mailing address and an email address to get started.
What is the Fair Debt Collection Practices Act?
The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates how debt collectors interact with consumers. Because of the FDCPA, debt collectors can’t:
Threaten you with jail time or garnished wages
Harass you with repeated phone calls
Call you before 8 a.m. and after 9 p.m
Impersonate a lawyer or government employee
Bottom line
While laws like the FDCPA protect consumers against debt collectors, scammers are still out there. Familiarizing yourself with common tricks and knowing the law are the best steps you can take to prevent yourself from becoming a victim.
Yes, the IRS uses private debt collectors to get in touch with consumers that owe back taxes. Currently, it has contracts with the following companies:
CBE: 800-910-5837
ConServe: 844-853-4875
Performant: 844-807-9367
Pioneer:800-448-3531
Reach out if you’ve been contacted by one of these companies but noticed some red flags — it could be a fake debt collector posing as a legitimate operation.
It depends on where you live. Each state has a statute of limitations on how long a debt collector can go after you. Typically, this is around four to six years.
It can if you don’t respond to its requests for repayment. Since lawsuits are civil cases, you won’t end up in jail — unless you’re unable to make a court-ordered repayment.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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