Debt is a stressful financial situation to be in – especially when you have started defaulting on your payments. The main reason that it is so stressful is dealing with creditor harassment. But while it is bad enough that you are being harassed for debts that you owe, nothing is more frustrating than being hounded by phantom debt collections.
What exactly are these type of debts? Well these are the debts that collectors call you to pay off but in truth, you do not have any obligation to pay them at all. It is quite tricky how they do this actually. Some of them will buy an old debt that is already past its statute of limitations. When your debt is past this period, you cannot be sued in court for that debt. That means you do not have to pay it back. Other malicious collectors will buy old debts and failing to get the original owner of the debt to pay up, they will look for unsuspecting individuals who can be fooled. They will trick that person into paying a debt that they do not owe through threats, lies and harassment.
More consumers are being harassed for debts they do not owe
According to the report from ConsumerFinance.gov, the Consumer Finance Protection Bureau or CFPB received over 30,000 consumer complaints about debt collectors. The main complaint submitted was about phantom debt collections. The CFPB Director said that consumers should never be harassed for a debt that they do not owe. This is also true for those who are victims of identity theft. Although the debt was made in their name, if the consumer can prove that it is not their debt, then they should not be held liable to pay for it.
The report from CFPB mentioned that the debt collection industry is actually worth billions of dollars. That is why these debt collectors are aggressive and will stop at nothing to collect debts from consumers. This industry involves the buying of old debts from original creditors and lenders for fraction of the debt owed. Then they will pursue the consumer themselves to push them into paying back what they owe.
In 2013, it is reported that 30 million American consumers have an average of $1,400 debts that is due for collection. These refer to debts that have been delinquent and that is why debt collectors have entered the picture. The new debts are reasonably ripe for collection but old ones – this is where the industry gets a bit shady.
5 tips to protect yourself from phantom debt collectors
While some consumers may be scared of these phantom debt collections, you need to know that there are ways for you to protect yourself. You do not have to subject yourself to the stressful handling of a debt collection agency. You can simply avoid being targeted by these collectors in the first place.
Here are 5 ways that you can protect yourself.
- Be careful of your personal information. These include your financial information, credit card accounts, social security number, and other card details. These can be taken from you by debt collectors while pretending to conduct a survey or something similar. You may give out your name but nothing else. If the one you are talking to on the phone will request for your financial data, it will more likely lead to a scam.
- Avoid applying for payday loans online. People who apply for payday loans are usually desperate for money. According to Fraud.org, some phantom debt collections begin with online payday loan applicants. There are online payday loan sites that are actually bogus sites and will just get your information. Then once the debt collection agency has the information, they have the details that will allow them to harass you with a phantom debt.
- Always ask for a proof that you owe the debt. This is the first thing that you should ask the phantom debt collections agent. Get them to show you proof that you did borrow the money. Never confirm that it is your debt unless you have indeed borrowed it. Refuse to cooperate with the collector until they show you proof that you are liable for the debt. And even so, make sure that the debt is not past the statute of limitation. If it is, then even if it is your debt, do not confirm it. They cannot do anything to about it anyway so just ignore the calls.
- Confirm the identity of the debt collector. If you think that you do own the debt but you are not sure if you are talking to a legitimate representative of your original creditor or lender, then hang up the phone. Go through your own records and call your lender to check if the one calling you is indeed authorized to collect on their behalf. Otherwise, you may be paying your debt with a bogus debt collections company.
- Check if you had been a victim of identity theft. One of the reasons why you may be going through these phantom debt collections is because you have been a victim of identity theft. If your personal information is in the hands of malicious individuals, then you know that you need more help than you though. You need to report the incident to protect yourself further.
What to do when your phantom debt is caused by identity theft
Before you dispute debts that you do not owe, make sure that you are clearly not a victim of identity theft. If you are, then you need to act on it quickly to keep the damage from being too great. Those who fail to report it on time might face numerous debts they did not borrow and a severely damaged credit report.
According to the FTC.gov, these are the things that you should do.
- Right after learning of the identity theft, put your credit accounts on fraud alert. This will cause merchants to be more wary of those using your credit information – even you. They will ask for additional identification and that means only you can use your account.
- Get a copy of your credit report. This is to check if the culprit already borrowed money under your name. If they did, then you need to get in touch with the creditor or lenders involved. That way, you can tell them about the crime and they can investigate to help prove that you are not to be held liable to pay for the debt.
- File a report. It is also important that you file a report with your local law enforcement. This is to help make things official and give you additional documents to prove your case against possible phantom debt collections.
- Extend the fraud alert or ask for a credit freeze. This will protect you from unauthorized application of new credit. Of course, that means you will not be able to open new accounts but as long as you are protected, it should be a sacrifice well worth it. A credit freeze also means your credit report cannot be accessed.
- Build up your credit score. If your discovery of the crime was too late, the chances that your credit report is already damaged will be high. You may want to ensure that this incident will not compromise your future financial transactions so it might be best to improve your current credit score.