If you’ve been struggling to keep up with your loan payments, your lender may sell your debt to a collection agency. While some calls may be from a real debt collector, others may be from a scammer posing as a debt collector.
So if you ever receive calls from a debt collector, whether you know you have debt or not, do yourself a favour and investigate before you pay.
If you’re overdue on your debt, your creditor may reach out to you and try to collect your missed payments. However, if they’re unsuccessful, they may enlist the services of a debt collector to collect the money you owe.
Unfortunately, many Canadians have been victimized by scammers who convince consumers that they are legitimate collection agencies collecting overdue funds on behalf of creditors.
To protect yourself against these fraudsters, consider the following red flags:
Always ask for a debt collector to provide you with written proof that they are in fact legitimate as they are required to if you ask. If your debt collector refuses or tries to avoid this topic then you would be correct to assume that they are trying to scam you. Do not believe them if they tell you that they have already sent you a letter of proof in the mail and that you should be receiving it soon or that they will email you proof.
Makes sure that you have a confirmation letter in your hands before you even think about paying the debt collector and if for some reason it hasn’t arrived then there is no reason you shouldn’t ask for a second one to be sent to you.
Legitimate collection agencies can be easily verified by checking with the Better Business Bureau (BBB) or the consumer affairs office in your province or territory. They should be transparent about their company name, contact information, location, and website address.
Once you find this information, call the agency and make sure they did indeed try to reach you to collect on unpaid debt.
If you can’t find the company with your local government office or the BBB, chances are you’re dealing with a fraudster.
While collection agencies are allowed to make every effort to call you, they cannot go so far as to harass you in the process. More specifically, these agencies cannot use language that is considered to be threatening, intimidating, or abusive in any way. They’re also not allowed to put undue pressure on you or make any threats to get you to pay.
Yes, a collection agency can take you to court to collect a debt you still owe. However, this typically happens with debt that is at least 6 months past due. If they decide to sue you, you’ll be served with papers.
Creditors can also sue you if they wish, though this seldom happens because it’s an expensive process. They may be more likely to take you to court if the debt is high enough to justify this step.
Collection agencies and creditors must adhere to the statutes of limitation applicable in the respective province or territory. In other words, they cannot take you to court if your debt is too old.
A legitimate collection agency will have all the details about your overdue debt, including the type of debt, who the creditor is, how much the debt is, when you started falling behind on your payments, and what the interest rate is, among others. If the debt collector is not able to provide you with any of these details, it’s most likely a scam.
Legitimate debt collectors will never ask to be paid with a prepaid card or through a wire transfer. If you’re asked to do this, it’s a sign that you’re being scammed.
Similarly, fake debt collectors will demand money right away because they don’t want to give you a chance to figure out that you are being scammed. Never pay a debt collector the same day they call you, a real debt collector will at least give you a few days to get your affairs in order.
There are specific rules that debt collectors must comply with when collecting an overdue debt, such as the following:
So, if a collection agency tries to scare you with imprisonment, threatens to call your friends and family, or calls you at all hours of the night, they’re breaking the rules.
Fraudulent collection agencies are savvy and use several tactics to scam unsuspecting Canadians out of their money. They sound legitimate, which is why many Canadians fall victim to these scams.
Here are a few debt collector scams to keep an eye out for:
In this scam, the person pretends to work with Equifax or TransUnion and informs you that they’ve been sent by one of your creditors to collect an overdue debt.
The credit bureaus in Canada do not directly collect debt payments. So, if anyone claims to be from one of these bureaus and demands that you repay what you owe, do not provide them with any information and hang up.
In this scam, the person pretends to work for the Canada Revenue Agency (CRA) and says that you owe taxes and that you must repay them immediately. In many cases, these scammers may use threatening language and claim that you could be arrested and thrown in jail for failure to pay.
The real CRA won’t ask for any credit or debit card information over the phone, nor will they use intimidating language or threaten to call the police. Do not give any personal information over the phone, and hang up. If you think you may have overdue tax debt, call the CRA directly to check your tax account and verify that the CRA actually did call you.
If you receive a call from a debt collector and decide that you are being scammed, it’s important to stay calm and follow these steps.
Calmly ask who they are and what company they are working for and then make an excuse and hang up right away. Your scammer will probably give you a legitimate name but now you need to figure out if they are actually the person they said they were.
Do some research online and try to find more information about who the debt collector is pretending to be. If they are impersonating a legitimate company or debt collector, you should be able to verify the real identity of the name they gave.
Call the agency they said they worked for and ask questions, it’s your money so do what you need to do.
Once you verify that the debtor who contacted you is in fact a scammer, it’s important to report them to the Canadian Anti-Fraud Centre. You can do this online or over the phone. By reporting fraud you may help prevent other consumers from being scammed in the future.
If you believe you’ve been targeted by a fraudulent debt collector, you should consider reporting the incident, both to protect yourself and other consumers. Here are a few ways to report a fake debt collector:
Just remember the two most important things you can do are stay calm and do not under any circumstances hand over any money. Do some research and verify all the information you have. Making sure if it’s a scam or a legitimate debt collector before you make any payments is extremely important.
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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