It's becoming increasingly difficult to tell the difference between a real business and a scam. Chances are, you've been on the receiving end of a suspicious phone call before, where someone posed as a legitimate representative in order to try to get your information.
Sometimes, scammers give themselves away upfront. For instance, if someone claims they're calling about your house that's not for sale, or saying that you owe the IRS thousands of dollars when you pay your tax bill dutifully every year by April 15 — it's easy to ignore these calls.
But when you have debt, specifically debt that's past due, it might become increasingly difficult to discern true debt collectors from the scammers. Debt collectors, even legitimate ones, are legally allowed to call consumers at their personal numbers, and as of October 2020, a new rule from the Consumer Financial Protection Bureau (CFPB) gives debt collectors permission to contact you not just by phone, but also by email, text message and social media platforms like Facebook, Instagram and Twitter.
Having debt in collections can make life feel like you're under a barrage of attacks from strangers, and it's not always clear who to trust. To help, CNBC Select spoke with NY Collectors Association president Jacob Corlyon about the red flags to look out for when you're contacted by a debt collector.
Red flag #1: They contact you when they shouldn't
If you get a call from an unknown number, check the time. Debt collectors are only allowed to contact you between the hours of 8 a.m. and 9 p.m. local time. And if you're already working with a debt collector on a payment plan, they are only allowed to contact you during the hours you specify. You can even place limits on where they contact you (for example, telling them not to call you at work).
Red flag #2: They don't verify your identity
This one is a little tricky, because sometimes scammers actually possess information about you and can trick you into giving up more. Legitimate debt collectors will also have access to your personal information, such as your social security number, date of birth, etc.
However, a legitimate debt collector isn't going to share that info until you verify who you are first. If you're speaking to someone who spills your info before you have a chance to verify your identity, end the conversation right away and check your bank accounts and/or credit monitoring service to make sure you haven't been hacked.
When in doubt, it's OK to decline verifying anything until you get confirmation that the debt collector you're speaking with is legitimate.
"The consumer always has the right, especially if something doesn't feel right, to request a validation notice," says Corlyon.
A validation notice is an official letter (on agency letterhead) that details your debt(s), including the balance(s) and info on the original creditor. Confirm the letterhead branding, logo and address all reflect what you see on the website of the debt collection agency.
Last way to double check: Call your original creditor and ask them if they work with the agency that called you. They can confirm when your delinquent debt was sent off, and to whom.
Red flag #3: They are clueless about your debt
A legitimate debt collector can tell you the entire history of your debt in collections, including who your original creditor was, what kind of debt it was (student loans, medical, etc.) how much it was for/is now, when you fell behind on payments, what the payments were/are, interest rates, etc.
"If you're asking questions that are kind of in that vein, and they're not willing to give you that answer, that's a big red flag," Corlyon says.
Red flag #4: They use aggressive tactics and/or language
When someone speaks aggressively and vaguely about your supposed debt but isn't able to pin-point any details about it, it's best to ignore their threats.
"There is no debtor's prison," says Corlyon.
Aside from refusal to pay criminal fines, as the CFPB notes, you won't face any jail time for being in debt. The police won't show up at your house or workplace to arrest you.
Another common threat is that they will embarrass or shame you, says Corlyon.
"They might say, 'I'm going to call your friends and family and your employer and tell them all about your debt and how you're a deadbeat, etc.'"
If they use language like that, hang up.
Red flag #5: They are impatient
"A common threat that a scammer might use is that they're going to have you arrested if you don't pay by today or next," Corlyon says.
While true debt collectors will try to get you to pay what you owe, they can work with you to make a plan.
Debt collectors can usually accept payment in a number of ways, possibly including debit/credit card, ACH transfers, e-checks and/or wire transfers through Western Union or Money Gram. Their goal is usually to set you up with a payment plan through an online portal and/or finding the best payment option to work with your finances. They have the ability to process payments over the phone and online, and you'll always get a receipt. The transaction should feel professional, as it would with any kind of legitimate payment.
Scammers, on the other hand, usually demand one specific kind of payment (often prepaid cards sent to a random P.O. box), and they will aggressively insist that you send it right away.
How to get started paying off debt
The first step to paying off your debt is facing the numbers. Learning the ins and outs of your situation will help you advocate for yourself if you find yourself having to deal with creditors and collectors.
Pull your credit report for free at AnnualCreditReport.com to see all the accounts you have in your name and what you owe.
Once you get a sense of where you stand, you'll want to come up with a debt repayment plan — either with or without the debt collector's help. Target high-interest debt first (this approach is known as the avalanche method) or start with the smallest balance and enjoy some small wins as you work your way toward the big debts. (That's called the snowball method, and it helped one couple pay off $45,000 of debt in under two years.)
The free budgeting app Mint can help you get a sense of your monthly earning and spending, as well as a big-picture overview of how your debt impacts your net worth. Meanwhile, the zero-based budgeting app You Need A Budget (YNAB) can help you get serious about debt payoff by mapping out a plan for every dollar.
Signing up for a credit monitoring service may also help you stay motivated: Since FICO scores are used in over 90% of lending decisions, signing up for the FICO® Basic, Advanced or Premier service will help you get a good snapshot at what lenders see. All plans offer access to 28 versions of your FICO score, including scores used for credit cards, mortgages and auto loans. Plus, you'll receive $1 million identity theft insurance and 24/7 access to U.S.-based identity theft experts who can help restore your identity if your information is compromised.
FICO® Basic, Advanced and Premier
Information about FICO® Basic, Advanced and Premier plans have been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
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Cost
$19.95 to $39.95 per month
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Credit bureaus monitored
Experian for Basic plan or Experian, Equifax and TransUnion for Advanced and Premier plans
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Credit scoring model used
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Dark web scan
Yes, for Advanced and Premier plans
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Identity insurance
Yes, up to $1 million
Terms apply.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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