How "overbiffing" tricks borrowers into repaying too much money: Internet Scambusters #847
Overbiffing -- it's a weird word for a nasty scam, tricking people who are behind on loan payments into paying more that their outstanding balance.
In this week's issue, we'll explain how the scam works and what you should do if you suspect you're a victim.
We'll also tell you how to find out more about the top scams targeting older folk.
Let's check out today's...
Overbiffing: A Wicked Scam That Overcharges People Already in Debt
There's one thing worse than being in debt: Being in debt and not knowing how much you owe -- because then you could become a victim of overbiffing.
The term comes from the initials for how much you owe -- your Balance In Full, or BIF. And, as you might suspect, "overbiffing" refers to being asked to repay more than you should.
It's a simple trick that rogue debt collectors use. They simply tell you that you owe more than you actually do and demand full payment of this amount.
And they've got lots of potential targets to aim for. Americans are past due on more than $600 billion of payments by an estimated one in 10 people.
That's in addition to people who actually don't owe money at all but are cajoled and threatened into repaying non-existent debt, or phantom debt as it's called.
The roots of overbiffing lie in the process that lenders use to recoup outstanding debt.
They do what they can to collect the money, often using legitimate debt collection agencies.
The debt that can't be recovered is often sold on to other collectors who may not have the same scruples that legit firms have.
As the debt ages, it tends to get passed further and further down the line, into the murky world of criminals.
Cents on the Dollar
They buy the debt for cents on the dollar. So, they may pay five cents on the dollar, which means they pay the lender or higher-up collector a nickel for every dollar of debt. For example, they would pay 50 cents for a $100 debt.
If they can collect it, that $100 is all theirs. And they use all manner of threats and intimidation to get their hands on it.
These lower-end collection agencies employ freelancers to recoup the cash, usually on commission. Often, if they don't collect, they don't get paid. But if they do get paid, they'll get a proportion of the money recovered.
Here's where it gets interesting.
It's obviously in the interests of the collector to recover as much as possible. So, unscrupulous agencies provide them with forms showing how much the debtor owes (referred to as "Client Balance in Full") but leaving a blank space titled "Balance Given."
This latter amount is what the debt collector chooses to tell his victim he or she owes. And the scammer can be tempted to enter sums that are vastly higher than the actual debt. This is overbiffing in action.
According to the US Federal Trade Commission (FTC), the difference between the two numbers can run to thousands of dollars.
In one recent case, according to the FTC and New York's Attorney General, the collectors tried to add weight to their demands by pretending to be affiliated to the local County Sheriff's office.
"They threaten that consumers are about to be arrested, sued, or served with legal papers unless they cough up money immediately," the agency explains.
"To keep the pressure on, the callers suggest that people can avoid arrest by speaking with someone they're told is an attorney. Who is it really? Another one of the defendants' debt collectors."
Late last year, the FTC and the AG's office launched a lawsuit against a number of firms for allegedly overbiffing, as well as allowing employees to claim to be working for law enforcement.
It's very easy to fall for these types of tactics. And many victims just pay up, regardless of whether or how much they owe.
So, here are some important things you should know, in case this happens to you:
- Under the Fair Debt Collection Practices Act (FDCPA), overbiffing, making threats and pretending to be a government or law enforcement official for the purposes of collecting debts are all illegal.
- Government and law enforcement officials are not in the business of collecting debt, nor of making threats to people who owe money.
- If the caller is abusive, you have the right to tell them they should not call anymore and communicate instead in writing.
- If you're contacted by a supposed debt collector, you have the right to ask them to validate, in writing, details of the debt, including the balance in full.
This can then be verified against your own records, the original lender or via your credit record, which you can access for free.
It's a fact that debt collectors prompt more complaints to consumer organizations than any other industry. The FTC says it has sued more than 30 debt collection companies in recent years.
Learn more about your rights under the FDCPA. When you know your rights, you can stop overbiffing attempts in their tracks.
Alert of the Week
Impersonating the IRS is the top scam aimed at seniors, says a new report from the US Senate Aging Committee.
The Committee's 2019 Fraud Book lists the other most common scams for older folk to be on the lookout for as fake lotteries, phony computer support and grandparent scams.
That's all for today -- we'll see you next week.