Scammers are very good at impersonation. So when the phone rings and the person calling claims to be a debt collector, you need to be suspicious -- even if they have a lot of personal information about you. It could be a con artist running the "phantom debt collector" scam.
These telephone swindlers often pretend to be with a law firm, government agency or police department. "They might threaten garnishment of your wages or seizure of your assets, all the way up to arrest and jail time if the consumer does not pay on this debt right away," said John Breyault, who runs the National Consumers League's Fraud.org website.
These phone bandits commonly target people who've taken out -- or simply applied for -- an online payday loan. They sound credible because they have all the personal information needed to apply for the loan. "The fact that they have this incredible amount of personal information is part of the reason why people pay them," said Elizabeth Scott, an attorney with the Federal Trade Commission. "Victims are convinced that only someone who they legitimately owe money to would have this information."
Maria, a victim in one of these cases, gave a sworn statement to the FTC that she and her husband received numerous harassing calls at home and work. She said he screamed at them and made numerous threats about a payday loan debt they did not owe. "He claimed that ... the police would arrive at my house within a half hour if I did not pay the debt," she said in court papers. Maria and her husband had never taken out a payday loan. She had been used as a reference by someone who applied for an online cash-advance loan.
These phantom debt collectors often say you owe thousands, but they're willing to settle for a couple of hundred dollars, typically by wire transfer or Green Dot MoneyPak. "That's a red flag," Breyault said. "This is not how a legitimate lender accepts payment for your loan."
It's not easy to tell if a site offering payday loans is legitimate or run by crooks who want to snag the personal information you provide to use for fraudulent purposes. That's why fraud fighters urge you not to apply for a payday loan online.Here's what to do if a phantom debt collector calls:
- Tell the caller you will not do anything until you get the required written "validation notice" that spells out what you owe and to whom, and provides information about the collector. Anyone who says they can't send it is a fraudster.
- Never send money to an unknown caller who demands payment of a loan -- or provide any additional information about yourself -- even if you owe the money. If you're not sure if you have an unpaid debt, talk to your original lender. Find out if there's a balance due and/or if they sent you to collection.
- Don't let them scare you into doing something foolish. You cannot be arrested for being delinquent on paying back a loan. You can be sued, but the police are not coming to get you.
If you get a call from a phantom debt collector, file a complaint with your state attorney general's office and the Federal Trade Commission. This is how prosecutors build a case and go after these crooks. The FTC has information about phantom debts and fake collection notices on its website.