By Lorie Konish —
CNBC
Nearly 2,000 consumers were scammed into paying debts they didn't really owe and are still in the process of recovering their money, an average of $516 (over a million total), via PayPal or a mailed check , as announced by the Federal Trade Commission (FTC, in English).
″They will get back all the money they lost to the scammers,″ he
said.
The phantom debt collection scheme—using names like GAFS Group, Global Mediation Group, and Mediation Services—pressured consumers into
paying bogus debts
by threatening legal action against them.
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If you know your rights and your financial situation, you're less likely to be duped by a similar scheme, said Bruce McClary, vice president of the National Foundation for Credit Counseling.
But if you don't, you may be liable to hand over your money to scammers like those in this criminal scheme.
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“If you don't know about the Fair Debt Collection Practices Act, and you're not aware of your rights as a consumer, it's easier for a scammer to conjure up all sorts of scenarios that will scare you,” he said.
These five steps can help avoid that scenario.
1. Request a debt validation letter
If you are contacted by a credit collection agency, regardless of whether it appears legitimate or not, you should request a debt validation letter, McClary cautioned.
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The letter will require the debt collector to prove that they are legally collecting the balances owed, McClary said, adding, "If they don't respond with that kind of proof, then you are not legally required to send them a dime."
2. Keep a good record of previous debts
It's especially important to be diligent about saving your financial records in case circumstances like this arise, McClary said.
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This applies to all accounts you owed and how they were handled, regardless of whether you paid in full or settled for less than you owed.
“In either case, you need to have verification that shows you met your commitment and shows the record of those debts,” McClary said.
3. Check your credit report
By regularly checking your credit report, you will be able to see the status of your current and past accounts.
That can give you more clarity than trying to remember those details on your own, he said.
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To be sure, a credit report may not show it all.
You may have outstanding debts from past years that are within the statute of limitations on debt collection and can still be legally collected, McClary said.
You can check your credit report weekly for free through the end of 2022. Those free reports are typically available once a year.
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4. Know your rights
Consumers should become familiar with their rights to better protect themselves from creditors, McClary said.
Knowing about the Fair Debt Collection Practices Act is a good starting point, he said.
The Consumer Financial Protection Bureau also provides information detailing how fair debt collection practices should work in easy-to-understand terms.
"The first tool a scammer uses is a psychological tool
," McClary said, "they create a sense of urgency where there really isn't any sense of urgency."
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5. Negotiate existing debts
If you determine the debt is legitimate, it's possible to negotiate with the debt collection agency to come up with a payment plan you can afford, McClary said.
To do this, you can talk to a nonprofit credit counselor or agency, which you can find on the National Foundation for Credit Counseling website.
