Debt Collection Scams & Scare Tactics (2024)

The debt collection industry generates $11 billion a year from the 70 million Americans who haven’t or can’t pay their bills.

Debt collectors get most of their revenue from people who fall hopelessly behind on student loans, medical bills, auto loans,credit cardsand home mortgages. Some forms of debt – student loans and medical debt especially – are shooting up so fast that many consumers aren’t even aware they are behind until they receive a call from a collection agency.

Collection agenciesoften are intimidating, demanding and most of all persistent, in trying to extract whatever money you have available to satisfy your debt. They can be just as aggressive in trying to collect debts you don’t owe, yet some people still pay, just to avoid any more contact with the debt collection agency.

And that is where the trouble begins.

Rule 1: Get Everything in Writing

Before you discuss anything with a debt collector over the phone request the information about the debt in writing. Debt collectors are notorious for giving out misleading information over the phone. This will guarantee a paper trail that documents the terms.

The Fair Debt Collection Practices Act requires debt collectors to send you a written notice within five days of when you were first contacted. The notice should detail the name of the creditor, the amount owed and inform you of your right to dispute the debt.

Once you receive the written notice, you have a 30-day window to dispute the debt in writing. A dispute letter does a couple things. Most importantly it stops the calls and second it buys some time for you to figure things out. Debt collectors cannot call or contact you until the debt is verified in writing.

Rule 2: Don’t Be Afraid to File a Complaint

In March of 2018, the Federal Trade Commission released a report on consumer complaints and consumers complained more about debt collectors than any other business.

For the third year in a row.

Debt collectors were responsible for 23% of the 2.68 million consumer complaints. That means the FTC received more than 600,000 complaints from people tired of the way they were treated by debt collection agencies.

If you have a complaint, go to this FTC website, click on Credit and Debt category, then click on Debt Collection Practices. A form will appear that requires you to fill in the necessary information.

It is best to be prepared with specific information on time, place, person’s name and company you were speaking with. If possible, have a witness with you during the phone conversation to testify to the validity of your complaint.

The FTC has another page on its website listing more than 100 companies and individuals it has banned because of illegal practices.

You also can file a complaint with the Consumer Financial Protection Bureau, the state attorney general in your area or the Better Business Bureau.

Rule 3: Debt Consolidation Plan

One avenue to explore before defaulting on payments – and inviting debt collection agencies to chase you down – is to consider using one of the methods available in a debt consolidation plan.

There are three types of debt consolidation plans: debt management programs; a debt consolidation loans; and a debt settlement plan. Each is designed to help consumers cope with overwhelming debt from credit cards, home, auto and student loans.

The first step toward consolidating your collection accounts is to contact a credit counseling agency, preferably a nonprofit company, which will go over your income and expenses and advise you whether any of the plans will work to eliminate your debt. Enrolling in one of these plans, especially a debt management program, could be a better solution that trying to deal with debt collectors.

Nowhere is the notion of “Knowledge is Power” more important than in the realm of debt collection. The less knowledgeable someone is about their consumer rights, the more likely debt collectors will take advantage of a delinquent borrower to repay an overdue obligation.

The situation grew so ugly that the federal government had to step in and pass laws to protect consumers. The Fair Debt Collection Practices Act (FDCPA) and Fair Credit Billing Act (FCBA) are part of theConsumer Credit Protection Act, which outlines what is accepted and prohibited behavior from debt collectors. This legislation also stipulates the rights and remedies afforded to consumers who are subject to debt collection efforts. In short, the laws protect consumers – and these are rights that collection agents prefer you not know.

The Consumer Financial Protection Bureau (CFPB) said it handled 84,500 debt collection complaints in 2017. Of those, 39% involved attempts to collect a debt that consumers say they don’t owe. Another 13% had to do with communication tactics and recurring phone calls at inconvenient times of the day. It’s unlikely collection agencies will share any of that during their phone calls to you, so here is a summary of 10 rules they would rather you didn’t know.

Rule 4: You Don’t Have to Talk

If you do not want to deal with debt collectors on the phone, there is an easy exit door available: Send them a cease-and-desist letter by certified mail that says you no longer want to be contacted by them.

If they continue calling you after that, they are in violation of the FDCPA, which puts them in trouble with the federal government. Keep a log of all calls and letters from them. Write down the time and date they called and the agency’s name. Keep any voicemails and letters of correspondence, including ones you sent to them.

If you do file a cease-and-desist letter, it doesn’t mean they won’t still try to collect the debt. It just means they can’t call you to discuss it. They could attempt to settle it through the courts so check the mail for a summons or court notice. If you have an attorney, refer all calls and mail to your lawyer.

Collection agencies can make a negative report to a consumer reporting agency, which would have a negative effect on your credit score.

The point is you are not required to work with them at all, including not talking to them.

Rule 5: It’s OK to Negotiate

If you want to settle matters with the debt collection agency, you or your attorney can negotiate a deal. First, figure out how much you can afford to pay and see if the collection agency will agree to that amount. The money could be a lump sum or monthly payments.

If possible, conduct negotiations at the end of the month. Collection agents often have deadlines and monthly goals they must meet. If they are desperate to reach one of those goals at the end of a month, they might be more willing to negotiate your debt.

If the collection agency accepts your terms, get it in writing before making payments. There should be written proof on how much will be paid and by what date that amount must be paid.

Rule 6: There Is a Statute of Limitations

Creditors have a certain amount of time – 4-6 years in most states – to collect a debt before the statute of limitations runs out and they can no longer get a court judgment against you. You still owe the money and debt collectors may still attempt to get it from you, but they will have lost the help of a court judgment in attempting to collect.

If you make a payment or agree to a repayment plan, you could restart the clock on the statute of limitations.

If you are not sure whether the statute of limitations applies in your case – the rules vary from state-to-state – simply ask the collection agency if your debt is “time-barred” meaning the statute of limitations has run out.

Never admit the debt is yours whether that is over the phone, via email or in court. Doing so could reset the statute of limitations.

The FDCPA rules say the collection agency must answer consumer questions truthfully.

Rule 7: Check for Fake Debt Collectors

The only phone call worse than the one from the debt collection agency, is one from a fake collection agency.

Fake collection agencies use the same intimidation tactics, the same threats of arrest and the same claims that they will tell family members about the debt if you don’t pay them. Often, the fake collection agencies are trying to collect on “phantom debts” that are too old to collect or were never proven to be valid.

The Federal Trade Commission (FTC) shut down two fake collection agencies in Miami that had bilked Latinos out of $2 million in 2014. The FTC warned consumers this type of fraud was spreading to communities across the country.

The fake collection agencies use the same avenues to find debtors that real agencies use: databases that sell personal information; mailing lists; information from credit applications; calls to relatives, friends or employers; and forwarding addresses from the post office.

Know that you can’t inherit debt unless you were a cosigner. Collection agencies have been known to try to scam relatives into paying the deceased loved one’s debts. In these situations, the estate is responsible for the debts. Assets are used to pay creditors first, which could affect potential inheritance, but they cannot come after you to pay debts a relative is responsible for.

To stop the scam before it costs you, the FTC suggests that you ask the caller from collection agency to provide their name, the company’s name, their street address and business phone number. Verify each of the answers before talking to the caller again.

Rule 8: No Big Early Payments Required, No Deadline to Act

Most collection agencies work on a commission basis, so it is not unusual for collectors to tell a debtor that he or she has to make a large down payment on the amount owed. They may say that a hefty initial sum is required in order to prevent collection fees from growing, or that it is necessary to begin the process of eliminating the debt from their records.

What they don’t want you to know is that there is no such requirement. They merely want to get as much money upfront as possible to inflate their commission.

Debt collectors also may tell you that there is a deadline for payment and threaten you with dire repercussions if the debt is not paid within the prescribed timeframe.

There is no such thing as a deadline. It is a complete fabrication, one designed to get you to repay your debt as quickly as possible, because they know that the longer they wait to get paid, the less likely it is to ever happen.

Rule 9: Your Credit Is Damaged Already

Collectors often exaggerate the consequences of delinquency and non-payment. Threats are illegal under the FDCPA, but suggestions that your credit score will suffer or that your possessions may be seized are simply scare tactics with nothing to back them up.

In fact, if your debt already is in collection, your credit score already has been damaged and the potential loss of your possessions is pure fiction. What they don’t want you to know is that all they can really do is ask, cajole, and demand that you pay. The rest is bluster.

Rule 10: Don’t Give Up Personal Information

Sometimes, debt collectors will ask you for personal information – your bank account number, Social Security number, where you work, references from friends and colleagues. Why? To put together a “financial statement” they need to work out any repayment plan.

They don’t want you to know that they are merely fishing for information that will help them find you if you move, sue you if you don’t repay, or get into your bank records. There is no financial statement, and you should never give out proprietary information to anyone – ever.

Rule 11: Collectors Can’t Cross State Lines

Debt collectors also don’t want you to know that they cannot pursue you across state borders to enforce a judgment levied against you by a creditor who sued you for non-payment and won. Transferring the judgment to another state is time-consuming and expensive and not likely to occur very often.

Rule 12: There Are Limits to Garnishment

Debt collectors don’t want you to know that there are limits on the amounts they can legally garnish from portions of your income. For example, the maximum amount that can be taken from a paycheck is the lesser of 25% of your disposable earnings or the amount by which your wages exceed 30 times the federal minimum wage.

You can also file for complete exemption from wage garnishment, if you can verify that it will cause you or your family financial hardship to have any monies withheld.

Rule 13: There Are Options for Student Loan Debt

Debt collectors don’t want you to know that if you have student loan debt, while it still must be paid, you have the right, under the 1992 Higher Education Act, to set up a short-term payment schedule with the collection agency, requiring only “reasonable and affordable payments” – sometimes as little as $10 per month.

Successful completion of the student loan rehabilitation program (making nine out of 10 payments on time) takes the debt out of the collector’s portfolio and sends it back to the Department of Education. The collection agency loses its various commissions and bounties, and your loan is now being held under more favorable conditions.

Remember, high-pressure tactics by bill collectors are used solely to scare or bully you into paying them. While it is still your responsibility to square all your valid and legitimate debts, you don’t have to endure illegal, harassing or irritating activities.

Arming yourself with the right knowledge can help free you from the frustration – and empower you.

Debt Collection Scams & Scare Tactics (2024)


Debt Collection Scams & Scare Tactics? ›

If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

What scare tactics do debt collectors use? ›

Top 7 Debt Collector Scare Tactics
  • Excessive Amount of Calls. ...
  • Threatening Wage Garnishment. ...
  • Stating You Have a Deadline. ...
  • Collecting Old Debts. ...
  • Pushing You to Pay Your Debt to “Improve Your Credit Score” ...
  • Stating They “Do Not Need to Prove Your Debt Exists” ...
  • Sharing Your Debt With Family and Friends.
Dec 13, 2023

What are the illegal tactics of debt collectors? ›

What is an unfair, deceptive or abusive practice by a debt...
  • Misrepresenting the nature of the debt, including the amount owed.
  • Falsely claiming that the person contacting you is an attorney.
  • Threatening to have you arrested.
Aug 2, 2023

How do you outsmart a debt collector? ›

You can outsmart debt collectors by following these tips:
  1. Keep a record of all communication with debt collectors.
  2. Send a Debt Validation Letter and force them to verify your debt.
  3. Write a cease and desist letter.
  4. Explain the debt is not legitimate.
  5. Review your credit reports.
  6. Explain that you cannot afford to pay.
Mar 11, 2024

What is the 11 word phrase to stop debt collectors? ›

If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.

What's the worst a debt collector can do? ›

Debt collectors are not permitted to try to publicly shame you into paying money that you may or may not owe. In fact, they're not even allowed to contact you by postcard. They cannot publish the names of people who owe money. They can't even discuss the matter with anyone other than you, your spouse, or your attorney.

What are 3 things that a debt collection agency Cannot do? ›

Debt collectors cannot harass or abuse you. They cannot swear, threaten to illegally harm you or your property, threaten you with illegal actions, or falsely threaten you with actions they do not intend to take.

Why should you never pay a collection agency? ›

By paying the collection agency directly, the notification of the debt could stay on your credit report longer than if you attempt to use another option, like filing for bankruptcy. When institutions check your credit report and see this information on it, it may harm your ability to obtain loans.

What not to say to debt collectors? ›

Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.

What debt collectors don't want you to know? ›

Debt collectors don't want you to know that you can make them stop calling, they can't do most of what they tell you, payment deadlines are phony, threats are inflated, and they can't find out how much you have in the bank. Furthermore, if you're out of state, they may have no legal recourse to collect.

What is a weakness as a debt collector? ›

Lack of current information on debtors. Difficulty identifying and contacting debtors. Difficulty in accessing the most valuable information. Takes too long to locate debtors when sorting through all the data.

What is the hidden credit loophole? ›

The 609 dispute letter is often referred to as the “legal loophole”, or the “credit repair secret' and can be useful in different situations. Apart from correcting your credit report, the 609 letter could be what you need to respond to a debt collection lawsuit.

What is the loophole of debt collection? ›

Debt collectors lose the right in many states to sue consumers after three or more years. But there's a loophole: If the consumer makes a payment, even against his or her own will, that can be used to try to revive the life of the debt.

How to get rid of debt collectors without paying? ›

You can sue the debt collector for violating the FDCPA. If you sue under the FDCPA and win, the debt collector must generally pay your attorney's fees and might also have to pay you damages. If you're having trouble with debt collection, you can submit a complaint with the CFPB.

What is called debt trap? ›

Debt traps are situations where a borrower is required to borrow more in order to pay off previous loans. Basically, a debt trap exists when the person's credit capacity is outweighed by an obligation to pay it back.

How long before debt collectors give up? ›

Most states or jurisdictions have statutes of limitations between three and six years for debts, but some may be longer. This may also vary depending, for instance, on the: Type of debt.

What methods do debt collectors use? ›

They will attempt to contact delinquent borrowers through phone calls and letters and try to persuade them to pay what they owe. They can also conduct searches for a debtor's assets, such as bank and brokerage accounts, to determine their ability to repay.

What debt collectors don t want you to know? ›

Debt collectors don't want you to know that you can make them stop calling, they can't do most of what they tell you, payment deadlines are phony, threats are inflated, and they can't find out how much you have in the bank. Furthermore, if you're out of state, they may have no legal recourse to collect.

How do you win against a debt collector? ›

Here are a few suggestions that might work in your favor:
  1. Write a letter disputing the debt. You have 30 days after receiving a collection notice to dispute a debt in writing. ...
  2. Dispute the debt on your credit report. ...
  3. Lodge a complaint. ...
  4. Respond to a lawsuit. ...
  5. Hire an attorney.


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