Debt

How to tell the difference between a legitimate debt collector and scammers

By: CFPB

Dealing with debt collection issues can be challenging—especially when you’re not sure if the person you’re being contacted by is legitimate or trying to scam you.

When an account like a credit card, auto loan, or cell phone bill becomes past due, the original creditor may attempt to collect the amount owed. The creditor may also hire a debt collector or sell the debt to someone who may try to collect the debt. While there are many legitimate debt collectors in the financial marketplace, there are also scammers who may try to get you to pay on debts that you don’t owe or on debts that don’t even exist.

Warning signs of debt collection scams

1. Withholds information from you

A debt collector must tell you information such as the name of the creditor, the amount owed, and that if you dispute the debt, the debt collector will have to obtain verification of the debt. If the debt collector does not provide this information during the initial contact with you, they are required to send you a written notice within five days of that initial contact.

2. Pressures you to pay by money transfer or prepaid card

Scammers like these payment methods because they may be untraceable, and it can be hard for you to get your money back.

3. Falsely threatens you with jail time or poses as a government official

But beware, if the debt comes from the criminal justice system, it is possible that failure to pay may result in your arrest.

4. Says they will tell your family, friends, and employer 

Some scammers may try to get you to pay by threatening to reveal your debts to family, friends, coworkers, or employers. A debt collector is generally not allowed to tell other people about your debt without your permission. They can only ask others about your whereabouts to try and contact you.

5. You don’t recognize the debt that the person claims you owe money for

Ask questions to make sure the debt is one that you owe.

6. Asks you for sensitive personal financial information

Such as your bank account, routing numbers, or Social Security numbers. You should never provide anyone with your personal financial information unless you are sure they’re legitimate. Scammers can use your information to commit identity theft.

7. Calls you at inconvenient times

Debt collectors cannot call you at an unusual time or place or at a time or place they know is inconvenient to you. You might be dealing with a scammer if you are called before 8 a.m. or after 9 p.m.

Learn how to protect yourself

1. Ask for a callback number

If you’re uncomfortable providing any information, you can request the caller’s name, company name, street address, and a callback number. You can use this information to verify that they are not a scammer before providing any personal information. Also, if you call back and the business doesn’t answer as the name they provided to you or it’s a nonfunctioning number, it could be a scam.

2. Make sure you have been given information about the debt before you pay

Make sure you have been given information or have received the written notice with information about the debt before you pay anything.

3. Contact your original creditor

If you suspect you are dealing with a scammer, contact the creditor the debt collector claims to be working for and find out who has been assigned to collect the debt.

4. Check your credit report for the account in question

You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies. To get your free credit report authorized by law, go to AnnualCreditReport.com or call (877) 322-8228. Keep in mind that not all debt collectors and creditors provide information to the credit reporting companies. If the debt is not on your credit report, that does not necessarily mean the debt is not valid.

5. Understand your rights

The Fair Debt Collection Practices Act prohibits debt collectors from engaging in a variety of practices, such as misrepresenting the debt, falsely claiming to be a lawyer, or using obscene or profane language when trying to collect a debt.

6. Submit a complaint

If you have received a suspicious call or think you’ve been the victim of a debt collection scam, you can submit a complaint with the Federal Trade Commission or you can contact your state Attorney General’s office.

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Credit Cards

The Credit Card Act – Facts You need to Know

The Credit Card Act

The Credit Card Act was signed into law in 2009 under President Barack Obama. The act set up several provisions aimed at limiting how credit card companies can charge consumers. In July 2011, the Consumer Financial Protection Bureau (CFPB) opened as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Card Act helped curb the practices that made banks wealthy and consumers were going to be satisfied. But when it was put into practice, there were still complaints. Especially from stay-at-home moms and dads; under the current provisions, they cannot obtain a credit card because creditors only take individual income into consideration, not household income. Complaints such as these needed a venue to be expressed and Tuesday, the CFPB unveiled its online credit card complaint database for all consumers.

“By making our data publicly available, initially in the area of credit cards, we hope to improve the transparency and efficiency of this essential consumer market,” Richard Cordray, director of the CFPB, said in a statement.

How the Consumer Financial Protection Bureau Works

The function of the bureau is to acquire all consumer complaints and create new regulations from the information gathered. Complaints received are put in categories and from there, companies can respond to a consumer in one of four ways. Consumers can expect to receive a refund, an explanation, a correction or change in account terms, or have the case closed. Companies have up to 15 days to respond and a total of 60 days to close a complaint.

With this new database, complaints made are now viewable by everyone. According to the Government Executive website, the bureau received 45,630 complaints between July 21, 2011, and June 1, 2012. With this new information readily available, consumers can view which companies to steer clear of.

Shame on Capital One

Currently, the bank topping the list with the most complaints is Capital One. This move by the CFPB could lead credit card companies to change their policies, benefitting consumers. The next step will be to see the new regulations added to the Credit Card Act in response to complaints received.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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