Scam Alert: Unethical Debt Collectors Going After Discharged Debts

Our office was recently contacted by the United States Trustee advising that there have been many complaints that debtors are receiving calls from prior creditors demanding payment for bills or services listed in their bankruptcy. Most of the callers are refusing to send a bill or statement, and claim that the debt was either not included in the bankruptcy or not dischargeable in the bankruptcy.

scam imageUnder the Fair Debt Collection Practices Act creditors are required to send you a bill or statement. If they are not able to do so, it is most likely a scam. These scammers are preying on people who filed bankruptcy in particular. They are trying to scare debtors into making a payment over the phone. As a rule, any creditor calling you and demanding payment right then, should not be paid over the phone.

If you are unsure whether a debt was included or discharged in your bankruptcy, contact your attorney’s office and explain the phone call you received. Your attorney’s office should be able to check your case for the correct information.

If the debt was in fact listed and/or discharged in your bankruptcy case and you continue to receive calls, you should tell them to first send you a bill. If the creditor refuses, take down their information and then contact the US Attorney’s Office to file a complaint.

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Abusive Collection Agency Shut Down; Employees Arrested

Federal agents halted operations and arrested the owner and six employees of an abusive collection agency in Georgia on November 18, 2014.  The arrests were the result of a joint investigation by the FBI, Consumer Financial Protection Bureau, and the Federal Trade Commission.  The agency and its employees are accused of using abusive, deceptive tactics and making false threats to consumers to coerce them to pay.

More information about the investigation: CNN Money


Creditors can utilize many legal tactics to collect debts from consumers, but they cannot make threats of arrest or criminal prosecution, or identify themselves as part of a public agency associated with the police or US Government.  If you get a call or contact from a debt collector, make sure you understand what debt they are collecting.  Watch out for anyone who uses “red flag” statements like:

  • “If you don’t pay this debt, we will send the police to your home/office with a warrant for your arrest.”
  • “You are guilty of check fraud/theft by deception/fraud.  If you don’t pay, you’ll go to jail.”
  • “We won’t send you a notice.  You have to pay now by phone or we’ll sue you.”
  • “You’ll be arrested for tax fraud if you don’t pay immediately.”

A reputable agency would never use threats like these to collect a valid debt.  While creditors can file a lawsuit to collect a valid debt from you, that doesn’t turn the debt into a criminal matter.  If you are uncertain about the debt or collection agency, always ask the creditor to provide you with written verification of the debt.

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FTC Study Says 1 in 4 Consumers Have Errors in Credit Reports

In a recent study, the Federal Trade Commission discovered that as many as 1 in 4 consumers have potentially negative errors on their credit reports!  That’s a lot of errors that could be corrected by careful monitoring and disputes with problem creditors.  Errors aren’t just a problem for consumers who have filed bankruptcy, either.  They can also make it harder to get credit, or can result in higher rates and fees on loans and credit.  The FTC has just released the results of the study, which is the first major study to look at consumers, lenders and reporters, the Fair Isaac Corporation (which develops FICO credit scores), and credit reporting agencies.

FTC Study Results




Worst of the Worst: Debt Collection Horror Stories

A recent CNN article highlights some of the craziest, most outrageous debt collection scams out there, including threats to harm pets and even exhume deceased relatives’ bodies!

 CNN: Debt Collection Horror Stories

Of course, most debt collectors are not scammers.  Here are some quick tips to make sure you’re dealing with a legitimate collection agency:

  • If you’re not sure whether the debt is valid, ask for a written verification.  Debt collectors are required to provide proof that the debt is valid and is owed by you.  
  • NEVER make a payment by phone to a debt collector who calls you.  Once you’ve received written verification of the debt, and you believe the debt is valid, make a payment to the address provided.  If you can, try to pay the creditor using your bank’s online bill pay service.  Bill pay services guard your personal checking account information while still providing the convenience and tracking of a personal check.
  • Keep good records.  Make sure the payment is credited to the proper accounts.  You’ll want to make sure that you keep the contact information for the debt collector in case you need to contact them later to correct an error or misapplied payment.
  • Check your credit report.  You can get a free copy of your credit report from each of the three major credit reporting bureaus once per year at, by calling 1-877-322-8228, or by sending a written request by mail.  If the debt still appears on your credit report after you’ve paid it and allowed reasonable time for the debt to be reported, you may need to open a dispute with the credit reporting bureau.

If you have more debt than you can handle, or you’d like to talk to an attorney about negotiating debt settlements, contact our office for a free, confidential consultation with an attorney to discuss your options.  We’re glad to talk about your situation and help you come up with a plan that fits your needs.


Is that a Facebook Friend or a Debt Collector?

Debt collectors are known to use any means available to contact a debtor.  We talk to clients who have had debt collectors call employers, parents, children, ex-spouses and even neighbors to try to embarrass and pressure debtors to pay.  But in a new trend, debt collectors are “friending” debtors on Facebook in order to send them personal messages or post on their walls:

Debt Collectors Posing as Facebook Friends Spur Watchdogs

When creditors are owed money, it’s understandable that they must take action to collect the debt if possible.  And the truth is, our clients want to pay their bills.  Most often, they are unable to pay their debts due to illness, job loss, or other major life events that leave them unable to pay and vulnerable to wage garnishments, repossessions, foreclosures and further financial hardship.  We have serious concerns about debt collectors who try to collect using fraud or misrepresentations, and hope that new federal oversight will keep collection agencies honest.


So what is the Fair Debt Collection Practices Act, anyway?

We believe it’s important for all consumers to become familiar with their rights and responsibilities in debt collection.  The Fair Debt Collection Practices Act (FDCPA) is a set of consumer protection laws that set out the rules for creditors trying to collect on a debt.  Law professor Amy J. Schmitz has provided a great explanation of the FDCPA on her blog

Even if you’re not having collection problems now, it would be a great page to bookmark for your reference.  The site is non-profit and offers tips and resources for consumers.

We’re always looking for good information sources for our clients that don’t take advertising dollars and give straightforward, helpful information.  If you have suggestions, feel free to post them below!