Beware of the Payday Loan Collection Scam

A recent report posted at CreditBloggers.com warns of a scam that’s been popping up in various parts of the country that involves intimidation, false threats and attempts to collect money by people who have no legal right to it. In other words, a serious scam.

Here’s what you should watch out for and how to make sure your money is safe.

How the Scam Works

According to a report released by the Illinois attorney general, the scam works like this:

Scammers call consumers and pretend to be collectors interested in collecting on debt related to a payday loan.
Scammers threaten legal action (including arrest and jail time) to victims who refuse to authorize a transfer of funds from their bank account.
Scammers refuse to provide specific details about their employer or the company for which they’re trying to collect a debt.
In some cases, scammers have detailed information about the person they choose to victimize (including name, address and even Social Security Number). This can make the scam all the more frightening, because their threats can seem very real.

Naturally, this can be a terrifying experience, especially to a consumer who actually does owe money on a payday loan. But, just to clarify, these scammers have no actual affiliation with real payday lenders. They are simply trying to scare unsuspecting consumers and bilk them out of their money.

Protect Yourself and Keep Your Money

Payday loans can be expensive enough without paying extra money to scammers who have no right to collect from you. Here’s what insiders recommend doing if you’re accosted by this or a similar scam:

Play by the rules: The Fair Debt Collection Practices Act requires debt collectors to provide you in writing with certain information, including the name of their company, the initial amount of your debt and how much you currently owe. If an alleged debt collector refuses to do any of these, you can assume that it’s either a scam or the caller is breaking federal law (in which case you may want to consult with a lawyer).
Hang up the phone: If a so-called debt collector won’t give you his or her company name, hang up your phone. If possible, report the phone call (and the number that called you, if available) to the Federal Trade Commission and/or your state’s attorney general’s office.
Don’t make payments if you aren’t sure: In most states, even legitimate creditors can’t garnish your wages or repossess your property without first getting a court order to do so. If you’re in doubt about a debt collector’s legitimacy, you may want to speak with a lawyer so you can better understand your rights.

Remember: even if you do owe money, you still have rights. Don’t be afraid to stand up for yourself and question any collector who sounds too pushy.

Get Free Credit Report!