Money Scams: How to Spot a Fake Debt Collector

debt collector calling phone
debt collector calling phone

Getting a call from a debt collector is bad enough. Getting a call from a phony debt collector trying to scam you out of money you don't owe can be even worse.

The Federal Trade Commission announced Tuesday that it had settled with a California man who was working with phony debt collectors in India to scam American consumers. The FTC says the operation, which called itself American Credit Crunchers, took in more than $5 million in two years.

While the operation has been shut down and criminal charges are pending, it appears that similar scams are ongoing.

"At the time we filed the complaint in February, we had seen over 4,000 consumer complaints," says Elizabeth Scott, a staff attorney at the FTC who was involved with the case. "Unfortunately, we have not seen a slowdown since then."

So the bad news is that such scammers are still operating. The good news is that there are a number of clear warning signs that the person on the other end of the line might not be a real debt collector.

For instance, that both the American Credit Crunchers operation and another recent case both involved callers from India, and Scott says that most of the complaints received by the FTC did describe a caller with an Indian accent. Still, Scott says, consumers should pay less attention to the caller's accent and more to what they're saying.

"The red flags are less about accents, but the kinds of statements they make," she says. For example, if they're threatening to have you arrested. "You can't be arrested for private debt," Scott notes. But many consumers don't know that: The FTC describes one frightened consumer who paid more than $500 that he didn't owe to a scammer after he was threatened with immediate imprisonment.

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Another big warning sign: If the story starts to unravel when you start to ask questions. Fake debt collectors will refuse to provide you with a written "validation notice" of the debt, which is required under the Fair Debt Collection Practices Act. And most suspiciously, they'll likely demand payment using a money transfer service like Moneygram or Western Union.

Of course, the biggest tip-off that the person on the phone isn't a real debt collector is that you don't actually have any outstanding debts. But often, the people who are targeted by these scammers are indeed dire financial straits, and have taken out payday loans (or at least applied for them). Scott says that it's likely these scammers are somehow obtaining information from websites that allow you to apply for payday loans from multiple lenders at once.

"Be careful about how much information you're willing to input into these apps," she warns. "[The scam] sounds somewhat legitimate because they have a whole host of information about you."

So even if you do have unpaid loans, if you get a call, do your due diligence. Ask to get a written notice of the debt, and don't hesitate to call your original creditor to ask if your debt has been turned over to a collection agency. And if anyone threatens to toss you in jail for an unpaid debt, don't worry -- with a few exceptions, debtors' prisons largely went out of style in the 19th century.

But not completely out of style, which leads to this final word of advice: If you get a court summons about a debt, don't ignore it, even if you can't afford to pay. Real debt collectors in many states are manipulating courts to turn them into payment enforcers. More than a third of U.S. states allow borrowers who can't or won't pay their debts to be jailed for failing to appear in court when summoned, or for not making court mandated payments. So, broke or not, you're much better off if you're in the courtroom when the bailiff calls your name.

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Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at, and follow him on Twitter at @Brownellorama.