Beware of Debt Collection Scams!

The Phantom Debt

In late June, the Federal Trade Commission (FTC) filed a complaint in federal court in North Carolina against a debt collection company in that state. Allegedly, the debt collection company took money from consumers for fake (so called “phantom”) debts. In other words, for debts that the consumers did not actually owe.

How the Scam Worked

According to the FTC,  the debt collection company bought counterfeit payday loans through a debt broker from a third-party lending company. The debt collection company then began collecting on the fake debts from consumers. Complaints started coming in from consumers who complained that they did not owe the debts or that there was no outstanding balance on the debt. The debt collection company complained to the broker from whom they bought the debt. The broker refunded their money. But, according to the FTC, the debt collection company continued collecting on the debts knowing all the while that the debts were phony.

FTC Sues the Company on the Grounds of FTC Act Violations

The debt collection company now faces a lawsuit against them by the FTC. The FTC charges that the debt collection company violated the FTC Act by engaging in false and deceptive acts or practices. The FTC also charges that the debt collection company violated the Fair Debt Collection Practices Act by using false or deceptive means to collect a consumer debt. The FTC is asking the federal court to order the debt collection company to stop its allegedly unlawful practices. The FTC also seeks restitution and enforcement costs.

Debt Collection Scams Are More Common Than You Think

Unfortunately, these types of scams are not uncommon. There exists an entire industry out there devoted to “buying” and then collecting on defaulted, high risk, or even non-existent consumer debt. Many of those who engage in this activity lack the proof needed to prove the debts they seek to collect are, in fact, owed. These collectors depend on creating fear in those against whom they collect. Lawsuits are filed and the consumers targeted in these lawsuits can sometimes be easily intimidated into paying money that they have no legal obligation to pay. Often, this tactic results in huge profits for the debt collectors while the innocent consumers are deprived of hard earned or scarce income.

Consumers do have a way to fight back. Just like the FTC, consumers can sue debt collectors who engage in unlawful debt collection activities. Consumers in such circumstances can be entitled to receive up to $1,000.00 in statutory damages for each violation of the Fair Debt Collection Practices Act. An added benefit for consumers is that the abusive debt collector must pay the consumers’ legal fees and expenses. This can be a powerful way to curb unlawful debt collection methods.

How to Fight Against These Scams

If you or someone you know is being contacted by debt collection agencies or law firms, here are some tips on what to do about it:

1. First, if the debt collector is calling on the phone, answer the call!
2. Ask the caller for his or her name. Ask what company they are calling from and get the telephone number of the company. Ask them why they are calling.
3. Make note of this information for future reference and be sure to note the date and exact time of the call.
4. If you are getting letters, keep the letters! Also, keep the envelopes in which the letters came and don’t write on the letters or the envelopes.
5. Then, promptly contact a lawyer who is familiar with this type of legal problem. Don’t put this off. The statutes of limitations that usually apply are short; so, if you wait too long, you can’t bring a claim even if it was otherwise a great claim.

Following the above tips will get you on your way to fighting back against unlawful debt collection methods. Don’t be the victim of debt collection scams. Your hard-earned money should go towards your needs, not into the pocket of somebody looking for a quick buck.

If you believe you might be a victim of a debt collection scam, please call our office nearest to you to set up a free consultation with one of our experienced attorneys.