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Debt Collection Scams

Debt collection regularly ranks among the top consumer complaints to the Federal Trade Commission (FTC). The agency notes a range of deceptive and abusive tactics used to get debtors to pay up, including repeated phone calls, verbal harangues, and threats to disclose debts to employers and family members.

But many Americans are confronted by a problem even scarier than aggressive debt collectors: aggressive fake debt collectors, who try to bully their targets into paying money they don’t owe.

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The FTC calls it “phantom debt collection.” You get a call, text, email or social media message from someone claiming to be a debt collector, law enforcement officer, attorney or process server. They insist you have a delinquent payday loan, credit card balance or some other sort of consumer debt and demand immediate payment of hundreds or thousands of dollars, threatening lawsuits or imminent arrest if you don't comply. 

Occasionally such situations arise from mistaken identity: A legitimate debt collection agency slips up, confusing a consumer with a debtor who has a similar name (an error known as “debt tagging”). Often, though, it’s a scammer, combining bits of personal information harvested from sources such as old loan applications and hacked accounts to fabricate bogus debts that consumers might be deceived into thinking are real. Some large-scale operators package these phony liabilities into portfolios and sell them to debt brokers for collection.

In recent years, federal and state authorities have upped the pressure on abusive collectors and phantom-debt predators. A joint crackdown by the FTC, other federal agencies and authorities in 16 states produced more than 50 cases in 2019 and 2020, putting many collectors out of business and securing multimillion-dollar judgments.

But the problem remains widespread. In 2021, the FTC received more than 77,000 consumer reports of collectors using abusive or threatening tactics or trying to collect money that wasn't owed, a 45 percent increase from the previous year. And a federal rule change that took effect in November 2021 allows collectors to contact debtors by email, text or social media direct message as well as by phone (previously the only sanctioned method), opening new routes for fake-debt scammers to reach their targets.

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Have you seen this scam?

  • Call the AARP Fraud Watch Network Helpline at 877-908-3360 or report it with the AARP Scam Tracking Map.  
  • Get Watchdog Alerts for tips on avoiding such scams.

Warning Signs

  • You receive a call, email, text or direct message claiming you owe a debt you don't recognize.
  • The supposed collector threatens to have you arrested, something the federal Consumer Financial Protection Bureau (CFPB) says legitimate collectors should not do.
  • They demand immediate payment.
  • They want you to pay via gift card, wire transfer or prepaid debit card. These are methods favored by scammers because they’re difficult to trace.

How to protect yourself from this scam

  • Do insist on identification. Ask for the debt collector’s name, company, address, phone number and professional license number, which your state may require. 
  • Do demand information about the debt. Debt collectors are required by federal law to provide you with a written validation notice specifying how much you owe, the name of the original creditor and how to challenge the claim.
  • Do check your credit report after you hear from a suspicious collector — if a debt isn’t listed, that may be a sign of a scam. Through the end of 2022, you can get one free credit report per week from each of the three major reporting agencies, Equifax, Experian and TransUnion.
  • Do a web search on a suspicious caller’s phone number. You might find reports from other consumers that it belongs to a scam collection agency.
  • Don’t give any personal data to someone who claims to be a debt collector. A legitimate collection agency would have received that information from the creditor.
  • Don’t discuss the debt with someone who contacts you out of the blue. Demand that they provide the legally required written notice first.
  • Don't respond to threats. By law, collectors are not allowed to harass you, threaten arrest or physical harm, or publicly reveal any debts you owe.
  • Don’t make a payment you’re not sure you owe to get a collector off your back. Insist on verifying the debt claim.
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spinner image cartoon of a woman holding a megaphone

Have you seen this scam?

  • Call the AARP Fraud Watch Network Helpline at 877-908-3360 or report it with the AARP Scam Tracking Map.  
  • Get Watchdog Alerts for tips on avoiding such scams.