Zombie debt scammer tactics and protection steps : Internet Scambusters #1,081
Zombie debt collection sounds like a sinister extortion scam. And it is.
Unscrupulous "debt scavengers" try to terrify their victims into paying money that they legally don't have to.
In this week's issue, we uncover their brutal tactics and explain how you can protect yourself when someone illegally starts chasing you for money.
Let's get started…
Zombie Debt Agents - How They Scam and How To Protect Yourself
Nobody likes owing money. But sometimes even when you don't, you can get caught up in what's known as "zombie debt" - a horrifying experience that's every bit as bad as it sounds.
Money reference site Investopedia defines the term as "debt that is more than three years old, which has either been forgotten about, already paid off, or belonged to someone else. It can also be the result of identity theft, a computer error, or a fraudulent attempt to collect on a debt that does not exist."
It's the fraudulent side of things that can cause nightmares, with scammers posing as debt collectors issuing all sorts of vicious threats if you don't pay up. Victims are often so scared or intimidated that they pay up whether they owe the money or not.
In simple terms, the age of these debts is beyond the statute of limitations, which sets the term to between three to ten years, less in some states. In other words, there's no legal obligation to pay after this time lapse, though the debt is not actually cancelled. But that doesn't stop unscrupulous collection agencies and other debt scavengers from trying to resurrect it.
These characters buy lists of written-off unpaid debts for a few cents on the dollar from whomever they started with, a credit card or payday loans company for instance, and begin their terror tactics. And, even worse, if the victim makes only the smallest of payments, the statute of limitations is effectively reversed, and the debt goes back on the individual's credit report.
Zombie Debt Collector Tactics
Sometimes the debt scavengers don't even know the history of the money they're trying to collect; they likely don't bother to check. Worse, the intended victim probably knows even less about the complex laws and rules that govern outstanding debt.
The scammers tactics include:
- Threats of legal action or jail time - or saying they'll report you to your employer or neighbors - if you don't pay. Scammers may even send out fake arrest warrants.
- Harassment - repeatedly calling and writing to their victims in an attempt to wear them down. They often use terms like "theft by deception" to add to the pressure.
- Claims that the debt is dangerously lowering their credit record. It's not if it's outside the statute of limitations.
- Re-aging of debts - pretending they're more recent than they really are and are still within the statute of limitations. This is illegal.
- Refusal to provide documentation that would supposedly prove the debt is repayable.
- Impersonation - pretending to be from law enforcement or government agencies or to be acting on their behalf.
- Using fictitious company names that make them sound legitimate.
- Asking for personal, confidential information like Social Security numbers, which can be used for identity theft.
- Offering a "settlement amount" that's significantly below the alleged outstanding debt.
The result - a haunted group of individuals frightened by the non-stop threats and the risk of seeing their credit standing seriously harmed.
How to Protect Yourself from Zombie Debt Collectors
The rules on the statute of limitations we outlined above are your first line of defense, so get to know them. Here's a good site showing the limitations by state.
Second, these rules are supported by tough restrictions on how debt collectors can operate, as covered by the Fair Debt Collection Practices Act. The US Federal Trade Commission (FTC) has a guide here: Fair Debt Collection Practices Act.
The government's Consumer Finance Protection Board (CFPB) also offers guidance.
If you let the extortionists know that you're aware of your rights, it's possible they'll back off straightaway.
Third, always ask a collector for written verification of the debt and its statute of limitations expiration. Also request their mailing address. Under the act mentioned above, they're legally required to do so within five days. Refuse to discuss the issue until they have done this and keep a record of all communications.
Fourth, check with your state consumer protection agency to establish if the supposed collector is licensed with them. If not, seek advice from them on your next actions.
Fifth, check your credit report and review it frequently. If you spot an inaccuracy, for example on an expired debt, contact the agency. You can get a free copy from each of the three major agencies - Equifax, Experian and TransUnion - once a year.
Sometimes, you can spot the likelihood of fraud by poor grammar and spelling in the letters and messages you receive. Another red flag is a request for payment via untraceable methods like cybercurrency, gifts cards, and money wire transfers.
And finally, never provide confidential personal information to a collection agency. Legitimate collectors will not ask for this.
Note: This report is for information purposes only and does not constitute legal advice. For that, you should consult an attorney.
This Week's Alert
Cyber Stripe: If you get a receipt from financial services company Stripe for a supposed purchase of cybercurrency, trash it. This is a fairly new scam that's currently surging and it's not clear what the crooks are up to.
The message, received by one of the Scambusters team, includes invoice and receipt attachments for a supposed purchase of Ethereum cybercurrency (which he happens to own). Don't click on them!
The message looks convincing but the only contact information it gives is to visit PayPal, actually a rival of Stripe. We did and confirmed there'd been no such transaction.
That's all for today -- we'll see you next week.