Many elderly Americans scammed with Hundreds of thousands of Americans have received phone calls from people purporting to be either debt collectors or police pursuing delinquent debt. The callers contact people at work and at home. Many calls come in the middle of the night. The victims are threatened with harassment or imprisonment. The scammers have collected at least $5 million from people who did not owe them money.

These scams are persuasive because the callers usually have a great deal of personal information about the victims. They often know when a loan was made, the loan amount and other details. Because of the amount of information they have and in an effort to avoid trouble, many people pay up.

Phantom debt is debt that is old, defaulted, paid or otherwise not owed by the debtor. While phantom debt can sometimes appear on credit reports as an error, the current case involves individuals deliberately trying to collect money that is no longer owed.

The Federal Trade Commission has frozen the bank accounts of Kirit Patel, a front man who set up the California company behind the scam. The FTC and the state of Illinois are suing six companies and three people who have used a number of business names in the scam, including Stark Recovery, Stark Law and Capital Harris Miller and Associates. While the calls originate in India, the scam is supported by the participation of people in the U.S. American corporations are set up to collect the information that is used when calling the alleged debtors.

This is not the first case of widespread phantom debt fraud. In November 2015, the FTC reported on a company called Delaware Solutions or Clear Credit Solutions that allegedly purchased payday loan debts. The debts were not valid, but, the company proceeded to call and harass people to intimidate them into paying.

What should you do if you are contacted about phantom debt?

There are a number of laws that protect people from unfair pursuit of debts. Knowing your legal rights can help protect you against scammers. If someone contacts you about a debt that you do not think you owe:

  • Ask for a validation notice. This is a document that confirms, in writing, how much you owe and what the debt is for. By law, it must be sent to you within five days of contacting you.
  • Remember that it is illegal for a debt collector to threaten or harass you.
  • Know that a debt collector cannot put you in jail.
  • Know that you can tell a debt collector must, if you ask, only contact you in writing.
  • If a debt collector does not validate a debt or threatens or harasses you, report them to the FTC and your state’s Attorney General’s office.

Knowledge of your rights can help protect you and preserve your good credit. Do you need help improving your credit score and erasing phantom debt? Contact Key Credit Repair today.

If you default on a loan and fail to pay or work out some sort of arrangement with the creditor within three to six months, things have the potential to get really sticky. You may be hounded day and night by the creditor seeking information on the status of the payment you owe to the point where their tactics may be considered illegal. Your creditor may also sue you and take you to court for the money that you owe – and that’s where things have the potential to get even more tumultuous. According to a May report from Prorepublica via Boing Boing, debt collectors often prey on minority and underprivileged groups, filing lawsuits in states with low filing fees in an effort to recoup as much as possible from the people that owe. It’s further proof that the debt-collection machine is ruthless, and this post is designed to take a closer look at just how brutal it really is.

Inside America’s Debt-Collection Machine

So just how appalling is the debt collection process in America? Just take a look at these takeaways from the Prorepublica piece:

  • In 2008, the state of New Jersey heard about 140,000 debt collection cases. Almost all of these cases were filed against African Americans that were unable to afford legal representation. These 140,000 cases were up exponentially from 12 years prior, when only about 500 cases were heard.
  • Most of the debt collection cases were filed by what’s known as “vulture capitalists,” or those who purchase the debt on the cheap and quickly file a lawsuit in a predatory manner against those they know are the easiest victims.
  • Medical debts are among those that are most sought after – and some of the victims that debt collectors and their lawyers have gone after for payment include active-duty soldiers.
  • Capital One was discovered to be the leading U.S. bank when it comes to filing lawsuits against its own customers.
  • The debt collection process for many lenders is highly predatory. It not only involves purchasing debt on the cheap, but filing suit in the states were it’s most affordable to do so to keep their own costs down. It’s a low-risk, high-reward type of proposition.
  • Creditors are always represented by legal teams in court. In 2013 New Jersey, a whooping 97 percent of defendants were without legal counsel.
  • When collectors are given access to and permitted to tap into a consumer’s bank account to seek repayment, the average amount that they net is a measly $350.

Not only does Prorepublica shed light on a damaged debt collection system in need of reform, but it also serves as a good reminder on why you should do your best to avoid financial issues at all costs. Not only can such issues hurt your credit score, but you may also find yourself on the wrong side of the predatory ladder.

For one reason or another, things happen. And when circumstances affecting one’s financial situation arise, consumers may find it difficult to keep up on things like credit card bills, phone bills and more. If there’s an issue making ends meet, a consumer may stop paying a certain bill. While this is never advised, like we said, things happen. After the creditor realizes payments are not being made, they’ll contact the consumer to let them know, but eventually, after three to six months of inactivity, the debt may be turned over to a collection agency. At this point, the credit bureaus will also be notified and you’ll likely see your credit score take a hit.

But you’re not done once the debt goes to collections. No, it’s only just begun – and things can get messy and confusing. With that said, this post will cover what to expect when a debt goes to collections:

What to Expect When a Debt Goes to Collections

  • Assigned vs. sold debts: Your debt is either assigned or purchased. When it’s assigned, the debt is simply turned over to collections with a contract to collect. When it’s purchased, the creditor has sold the debt outright to a collection company. No matter the situation, the collection company has motivation to collect, as they’re paid for results. For instance, agencies with assigned debts can keep up to 60 percent of what they collect. And there’s certainly motivation for an agency to collect if they’ve purchased the debt.
  • They work fast: As soon as a debt is passed on to a collections agency, you can expect to be hearing from them. Generally speaking, the earlier contact can be made, the better the likelihood of settling or collecting.
  • Collection agents can be ruthless: There’s a lot at stake when it comes to collecting debt, so an agent may revert to extensive – and possibly illegal – tactics as a way of collecting it. Make sure you know your rights when it comes to this, as you do have rights as a consumer. If collection agencies are breaking the law, they may be punished.
  • Assigned debts can be tricky: In the case of assigned debts, the collection agency is still taking barking orders from the creditor. So as they work to recoup what is owed, agencies can’t do anything without first checking with the creditor – they’re essentially just the middle man in things. For instance, an agency can’t sue you without the creditor’s authorization. Similarly, if you settle with an agency for less than what is really owed, nothing can be set in stone until the creditor agrees to the terms.
  • Negotiating: In most cases, you may be able to settle with an agency to repay less than the amount that is actually owed.

Remove Collections – Once and for All

When you start working on repairing your credit, paying off old debts is part of the deal. But, how you deal with these old collections accounts can have a big effect on your credit score. By approaching your creditors in the right way and securing certain agreements from them, you can get old collections off your credit report sooner and keep them from dragging down your score.

 

What Stays on Your Report

When you pay an old debt, it doesn’t automatically disappear from your credit report. In fact, a debt can stay on for seven years after you have paid it off, since this was the last time that you had any interaction with this record. While the collection stays on your report, it will show up as “paid” or “settled.”

If you just pay the old debt without making any other arrangements, it will stop showing up eventually. But, in the meantime, it could mean the difference between getting a mortgage and being passed over. Or, you could wind up paying a higher interest rate, which will cost you thousands more over the life of your home loan.

 

How to remove collections Off Your Report

When you start addressing negative entries on your credit report, it makes sense to contact the creditor to negotiate instead of just writing a check. When you are making arrangements to pay, ask for what is known as “pay for delete.” In a pay for delete agreement, you pay the debt and they remove it entirely from your credit report.

Experts say that about 10% of collection agencies are willing to agree to pay for delete. In general, you will have better luck with a smaller company than with a larger one. A few of the situations where your pay for delete request is most likely to be honored:

  • It’s a medical debt. Medical debts are often now treated differently than other types of unpaid debt. In fact, in the newest FICO scoring models, unpaid medical debts are not counted at all. While the new FICO scores are not yet widely used, they make it more likely that a collection agency will agree to a pay to delete.
  • The original debt is not credit card debt. When a collection on your credit report is related to a big bank, chances are low that you will be granted a pay to delete. Your best bets are debts that are owned to smaller companies.
  • You never got notice of the original debt. If a collection letter is your first notification that you have an unpaid debt, collection agencies are more willing to work with you. Life happens, and sometimes we get surprises when errors are made in a creditor’s system or if you move right when you get a bill.

In any case, you should always ask for a pay to delete when satisfying an old debt. The quick improvement to your credit score is worth the extra effort.