"Phantom debts” are phony bills that crooks insist you need to pay, pronto. What's truly ghoulish are the criminals trying to scare you into thinking you will be sued, arrested or thrown in jail for a bill that was never yours in the first place.
State and federal laws govern debt collection, so if you fall behind on an obligation — say, a loan payment or a bill from a doctor, department store or utility — it's critical to know your rights. As important is knowing the red flags that signal that a fraudster is trying to make a quick buck or steal your Social Security number or other personally identifiable information to commit identity theft.
In October, an Atlanta-based debt collector was shut down after the Federal Trade Commission (FTC) said it had tried to collect debts that consumers did not owe and had threatened people with arrest and imprisonment. Critical Resolution Mediation LLC's collectors regularly posed as law enforcement, attorneys or process servers to lend credence to threats about supposed unpaid debts, the FTC said, and in many cases, they were “phantom debts” that were never — or no longer — owed.
The case was part of Operation Corrupt Collector, a sweeping enforcement operation conducted by the federal government and 16 states: Arizona, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Massachusetts, New Mexico, North Carolina, North Dakota, New York, Ohio, South Carolina and Washington.
Altogether, the FTC heard 53,004 complaints in 2020 — an average of 145 complaints a day — about debts that people did not owe and about abusive or threatening debt-collection practices, an 8 percent rise in complaints from 2019.
Likewise, AARP's toll-free Fraud Watch Network Helpline, 877-908-3360, regularly hears from people besieged by debt collectors for obligations that were never theirs. Some callers were accused of owing $1,000 or more for magazine subscriptions they never purchased.