Hold the Line: That Debt Collector May Be a Crook

Consumers are getting calls from criminals who pretend to be debt collectors, attorneys or law enforcement agents and demand repayment for payday loans they've never taken out or already repaid. Find out how CyberScout helped one man restore his credit and peace of mind. Plus, tips to protect yourself.

Friday, May 04, 2012

The thieves sounded like real debt collectors. They hectored Rick Varton* with phone calls and nearly convinced him he owed money on overdue payday loans.

Varton, who had never taken out a payday loan, changed his phone number but couldn’t escape the harassing calls from multiple companies.

All across the country, consumers like Varton are getting calls from scam artists posing as debt collectors. They often target people who are financially vulnerable, already burdened with debt and who have taken out payday loans to make ends meet.

Payday loans are high interest, short-term loans. They are designed to cover unexpected expenses until repayment is made with the next paycheck. Online sites promise “emergency cash” with instant approval. But interest rates can be outrageously high, and federal agencies have cracked down on predatory lending. In a few states, including Arizona, payday loans are now illegal. 

Payday loan crooks often introduce themselves as law enforcement agents or attorneys and demand money for fake payday loans or for debts that have already been repaid. Victims often wire thousands of dollars before they realize they’ve been scammed.

“I’ve talked to victims who have spent their life savings before realizing this is a scam,” said Raul Vargas, a team manager in the CyberScout Fraud Resolution Center. “Unfortunately, there’s no recourse to get their money back.”

Fortunately for Varton, his insurance provider, Grinnell Mutual Reinsurance Company, offered LifeStages® identity management services with CyberScout.

Over a six-month period, fraud investigator Mark Fullbright worked with Varton to protect his credit and restore his good name until the calls stopped. He:

• Interviewed Varton for a complete account of his experience to date
• Informed Varton of his consumer rights under the Fair Credit Reporting Act
• Placed a fraud alert on Varton’s file with a credit reporting agency
• Enrolled him in credit and fraud monitoring services
• Helped him file complaints with law enforcement and regulatory agencies
• Spoke directly with callers pretending to be debt collectors

If you think you’re on the phone with a phony debt collector, follow these four steps to protect yourself:

1. Ask for notice in writing. A legitimate creditor will send you a detailed report about your loan in the mail.
2. Stop speaking with the caller. If you have the caller’s address, send a letter demanding that the caller stop contacting you and keep a copy for your files. By law, real debt collectors must stop calling you if you ask them to do so in writing.
3. Contact your creditor. If the debt is legitimate—but you think the collector may not be—contact your creditor about the calls. Share the information you have about the suspicious calls and find out who, if anyone, the creditor has authorized to collect the debt.
4. Report the call. Contact the Federal Trade Commission and your state attorney general’s office with information about suspicious callers.

Consider contacting one of your existing providers—a bank, credit union, insurer, financial planner or attorney—for support. They may already offer excellent identity theft coverage.

* Name has been changed to protect customer’s privacy.


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