Best Practices for Avoiding Debt Litigation Scams

Edited by Hannah Locklear

Summary: Five ways to avoid debt lawsuit scams are: keep records of existing debts, research the collector, speak through your attorney, demand written correspondence, and question the collector’s credentials.

US household debt continues to rise with the lingering effects of the recent global pandemic to local economic instability. The average American consumer carries a debt balance of over $95,000, with only about 25% of households thought to be entirely debt-free.

While many debtors may be engaged in payment plans and structured agreements designed to help alleviate existing debts safely and reasonably, this isn’t always viewed as a viable option for every household. In fact, reports suggest debt collection lawsuits have become far more common in recent years, with 1 / 20 US debtors being sued in 2021 alone.

Unfortunately, those feeling the burden of unwanted debts are often viewed as prime targets for criminals, con men, and scammers, with malicious actors masquerading as debt litigation companies determined to make a bad situation even worse. To protect you from suffering the adverse effects of such actions, below are 5 best practices for avoiding debt litigation scams.

Watch for these 5 warning signs of a debt litigation scam

Before detailing how debtors can assess the validity of supposed debt litigation demands, it’s important to cover the warning signs associated with illegitimate operations.

Authorized debt litigators in the US must follow a set of strict procedures outlined in the Fair Debt Collection Practices Act (FDCPA), a federal law that prohibits debt collection agencies from engaging in abusive, unfair or deceptive practices when attempting to collect debts from American citizens. These regulations can be used to identify potential litigation scams.

Taking the FDCPA into account, below are 5 warning signs of litigation scams to look out for:

Refusal to share information - Valid debt collection agencies are required by law to share all of their company’s information on request, this includes the name of the collector and the name of the company, as well as the company’s physical address, website address, phone number and email address, refusal usually indicates a scam.
Requests for basic information - Authorized debt litigation teams should already have access to a debtor’s personal information prior to making contact, this includes the amount owed as well as the debtor’s current address, birthday and social security number, direct requests for this information can be a warning sign of a litigation scam
Threats and deceitful practices -As mentioned previously, the FDCPA prohibits legitimate collection agencies from using threatening, abusive, or deceitful language when communicating with debtors, if a supposed litigator tries to intimidate a debtor with suggestions of jail time or further lawsuits, the operation is likely to be a scam.
Requests for immediate payment - In accordance with the US Code of Federal Regulations (Title 17 / Chapter II / Part 204), debt collectors must set a date for the collection of owed funds and provide a debtor with written notice prior to collection, requests for immediate payment should be viewed as a hallmark of a litigation scam.
Requests for payment via untraceable methods - Scammers prefer to receive payment via untraceable methods like gift cards, wire transfers or cryptocurrencies, a legitimate debt litigation company will never accept payment via untraceable methods.

Avoid debt litigation scams with these 5 tips

While the above warning signs can help debtors to identify potentially fraudulent practices, some additional best practices must be followed if citizens are to avoid debt litigation scams.

1. Keep records of existing debts

Debtors can improve their chances of identifying fraudulent litigation practices by keeping detailed records of all existing debts. Legitimate debt collectors will have access to records outlining the exact funds owed by debtors, including information regarding original creditors.

Authorized debt collectors are required by law to reveal this information on request, allowing debtors to cross reference details in order to deduce the validity of debt litigation demands. Additionally, the Truth in Lending Act requires debt collectors to fully disclose all transaction details prior to entering into credit agreements, failure to do so suggests fraudulent behavior.

2. Research the supposed collector

Legitimate debt litigation companies must disclose all organizational information on request. Debtors can use this to their advantage by researching the company to deduce whether the operation is suspicious. Check their reputation with the Better Business Bureau, look for online reviews and see if any complaints have been filed with your state’s attorney general.

3. Only speak through your attorney

The FDCPA outlines how official debt litigation agencies are legally allowed to communicate with debtors. Ligitgators may not contact debtors at unusual times (before 8am / after 9pm) and may not contact debtors publicly on social media. Most importantly, if a collector knows a debtor is being represented by an attorney they must pivot communications to that official.

Revealing this information to a supposed debt litigator should help to highlight the validity of their demands. If they are legitimate, they will be happy to speak directly with your attorney.

4. Demand written correspondence

As with any legal agreement, debtors are advised to secure written confirmation of any and all communications with supposed litigators. Documents must be secured in line with smart physical security planning procedures, with physical and digital copies protected in multiple secure locations. Having everything in writing will help officials investigate suspected scams.

5. Question their credentials

Finally, debtors should make sure to question the credentials and affiliations of supposed debt litigation companies before engaging in any meaningful correspondence. Trustworthy organizations will be happy to confirm compliance with local and federal regulatory bodies, though debtors must check which licensing requirements apply to companies in their state.

If a supposed debt litigator is unable or unwilling to comply with this request, the operation is likely to be fraudulent in nature. If additional research into the company supports this claim, debtors may wish to consider filing an official complaint with their state’s attorney general.

Summary

Debt continues to be a significant issue impacting the lives of many American citizens, but when handled by authorized officials, a safe and reasonable route to debt settlement can more than often be agreed upon. However, debtors must be wary of fraudulent actors and debt litigation scams, following the tips above to protect themselves from malicious entities.

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