Outsourcing phantom debt collectors | Causes, Not Just Cases®

Intimidation has long been a hallmark of organized crime. We all know the stereotype—big, burly, trench coat-wearing, baton-wielding men showing up at the doorstep demanding money—or else. Inducing fear, these henchmen force their victims to pay up.

While this type of conduct still occurs, thankfully it appears more relegated to mobster films and TV dramas than a national problem like in the gangster era of the roaring twenties. As criminals tend to do, however, they adapt. In a strange parallel to American manufacturing, criminal organizations have begun outsourcing their enforcement divisions. Recent charges brought by the Federal Trade Commission show that technology has allowed these bruisers to hide behind phones and computer screens in places such as Pakistan and India, badgering Americans to pay up on an overdue debt. But there is a catch.

Many of the debt agencies looking to collect do not exist. And neither do the debts. Criminals scour the internet looking for personal information, or looking to steal it, and then attempt to trick victims into paying money they do not owe. The fraudsters use things like stolen social security numbers and prior debt histories to fabricate an outstanding debt that may appear very legitimate. "It's a very pernicious and innovative new fraud," said FTC Chairman Jon Leibowitz. What exists are U.S. shell corporations, complete with American-based front men, and money trails leading to Indian or Pakistani towns. Once collected, the stolen funds might be transferred out of the U.S. and never seen again.

The most unsettling trend surrounding this fraud involves the intended targets. The victims tend to be experiencing severe financial hardships, perhaps surviving on short-term, high-interest loans to pay off mounting debt. A stressed individual juggling many bills, not knowing when the next collection call will come, and surrounded by a perpetual cloud of anxiety, may be more susceptible to false threats of additional fees or legal actions.

So, borrowers beware. Short-term or payday loans alone involve serious financial risks but are also a favorite target for phantom debt collectors. Here are a few recommendations to help protect you:

  • Create a budget that includes a sound repayment plan for debts. Dave Ramsey is an excellent source on personal finance, and he offers free budgeting forms on his website.
  • Keep records with copies of all related documents to avoid any discrepancies. Know who you owe money to and whether your lender has sold your loan to a third party.
  • Don’t invest in what you don’t understand. It is a simple rule that applies to investments but can be carried over to any borrowing agreement.
  • Make yourself aware by becoming familiar with the Fair Debt Collection Act. It outlines the federal laws debt collectors must follow.
  • Visit StopFraud.gov for more information about how to protect yourself against fraud.

Practicing these steps could go a long way towards avoiding becoming a fraud victim.  If you know your finances well, you can more easily spot fraudsters.

Authored by David Abel, a Motley Rice attorney from 2010 to 2016.