What are the top 7 debt collections scams to avoid?

[00:00:00] Ralph Estep Jr.: Have you ever received one of those calls from someone claiming to be a debt collector? You know, they're calling to demand immediate payment, to make you feel uneasy, wondering if it was legitimate or not. Well, stick around because today we're diving into a topic that could save you thousands of dollars and, more importantly, a whole lot of headache. I'm also going to share a story of one of my clients who lost thousands of dollars to one of these debt collection scams, so make sure you stay tuned today.

[00:00:26] Ralph Estep Jr.: We're going to be exploring the top seven debt collection scams that you need to watch out for.

[00:00:37] Ralph Estep Jr.: Let's start by taking a look at yesterday’s show. Yesterday, we talked about the 10 things that you should never do with your credit card. It was packed full of great ideas.

[00:00:45] Ralph Estep Jr.: And if you missed it, I’m going to highly recommend you go back and listen to it. We covered some crucial tips to help you avoid some serious financial pitfalls and make the most of your credit. You can find that and all of our episodes right on our website.

[00:01:02] Ralph Estep Jr.: Now, let's get to today’s topic. I received a message from Charlie. Now, Charlie’s one of our loyal listeners, and he writes this:

[00:01:09] Ralph Estep Jr.: “Dear Ralph, I've been struggling with debt for a while now, and recently, I've been getting calls from people claiming to be debt collectors. They’re pretty aggressive, and I’m not sure how to handle it. How can I tell if these calls are legitimate? I’m worried about falling for a scam. Any advice would be greatly appreciated.” Well, Charlie, I am so glad you reached out.

[00:01:30] Ralph Estep Jr.: And trust me, this is a common concern, especially for people who have found themselves in this debt trap. So, it’s something crucial that we address. And listen, Charlie, your question is exactly why we do this show. So, I’m going to remind everybody that my goal here is to help you navigate these complex financial situations, but I want to do it from a Christian perspective. Before we dive into the details today, I want to remind all of you listening that your questions are the heart of this show.

[00:01:57] Ralph Estep Jr.: If you’ve got a financial question you’d like me to answer, just go to JustAskRalph.com, and guess what? Your question could be featured on a future episode, just like Charlie’s was today.

[00:02:12] Ralph Estep Jr.: Now, Charlie’s question brings to mind a powerful verse from the Bible, and it comes from the book of Ephesians. It’s chapter 5, verses 15 and 16, and it says this: “Be very careful, then, how you live—not as unwise but as wise, making the most of every opportunity, because the days are evil.” Well, I’ll tell you one thing: these scammers definitely are evil, but this verse emphasizes the importance of living wisely. It talks about being cautious, and it aligns well with what we’re going to talk about today.

[00:02:42] Ralph Estep Jr.: Next, being vigilant against financial scams. The verse also reinforces that Christians should approach their finances with wisdom and, more importantly, with discernment.

[00:02:56] Ralph Estep Jr.: Now, I want to address Charlie’s question and explore what I call the top seven debt collection scams you need to be aware of. Imagine this: losing $10,000 in the blink of an eye. Well, that’s exactly what happened to my client Sally. Now, Sally was this hardworking single mother. Her husband had passed away at a young age.

[00:03:17] Ralph Estep Jr.: And Sally was just trying to make ends meet. She was struggling; it was a tough day-to-day thing. She had gotten some debt, but she had managed to put aside some money. And one day, she received a call from someone claiming to be a debt collector. Now, she was trying to balance the kids, and she’s half-listening to this person. And this caller, she told me afterward, was aggressive.

[00:03:38] Ralph Estep Jr.: She said, “Ralph, this person was threatening me, insisting that I owed a significant amount of money for some old credit card debt.” She told me she didn’t even remember having that credit card. She was confused; she couldn’t remember that particular debt at all. But what was interesting, she told me, was this caller had some personal information, so it really made it seem legitimate. The next thing they said blew my mind.

[00:04:01] Ralph Estep Jr.: They told her if she didn’t pay immediately, they were going to freeze her bank accounts. He went on to say he was going to garnish her wages and even threatened to have her arrested. Now, let me just tell you, Sally was panicked. She was scared. She’d listened to what the caller asked her to do.

[00:04:17] Ralph Estep Jr.: And the caller said to her, “Look, here’s what I want you to do. I want you to go buy $10,000 worth of gift cards. And when you get those gift cards, I want you to call me and provide me those card numbers over the phone.” Now, Sally really didn’t know what to do. She was scared to death. She had two young kids; she was trying to manage all of that.

[00:04:35] Ralph Estep Jr.: She had this sense of fear. She was confused. But you know what Sally did? She did what she was told. And this was a terrible situation. She went out, bought $10,000 worth of—I think it was American Express gift cards—drained her savings, something she had worked so hard to get, and then called and gave the information to the caller. It wasn’t until later, when she spoke to her sister about what happened, that her sister said, “Sally, what are you doing?” Sally realized that she had fallen victim to a scam. But unfortunately, by then, it was too late.

[00:05:09] Ralph Estep Jr.: The money was gone. And listen, I talked to Sally soon after this happened. She was devastated—not just financially, but emotionally. This was a terrible situation, and this story breaks my heart. And it’s why I’m so passionate about educating you and others on these scams. Just think about this: Sally’s experience is a powerful reminder of why we need to be vigilant. But even more importantly than being vigilant, we need to be informed. So, let’s break down the top seven debt collection scams.

[00:05:40] Ralph Estep Jr.: You need to watch out for this list. I did some research, and I think if you study this list and we talk about it today, these will help you avoid those scams. In my past life, when I used to run a credit union, one of the things I did was serve as the president of the Delaware Association for Bank Security.

[00:05:57] Ralph Estep Jr.: We had a monthly meeting where I, along with other bank officers, mostly security officers from banks all over the state—big banks like Chase, MBNA at the time, and Bank of America—would sit and compare war stories. We’d talk about the different scams that were going on and how to help each other out.

[00:06:16] Ralph Estep Jr.: So, I’ve got some real experience with this, and I’m hoping these things will help you. The first of the seven is what I call the Phantom Debt Scam. This is exactly what happened to Sally. A scammer called, claiming that she owed a debt that didn’t actually exist, or maybe it was some debt she had already paid.

[00:06:33] Ralph Estep Jr.: And here’s the trick: they had some of her personal information. For Sally, that made it seem legitimate. I don’t know what that personal information was—maybe they had a piece of her Social Security number, or maybe they had her date of birth or her address—all of which, my friends, are not hard to find. So, stay on the lookout for those Phantom Debt Scams.

[00:06:53] Ralph Estep Jr.: Let’s look at number two, and that’s the Immediate Payment Demand. Now, Sally’s situation was in the first category. Legitimate debt collectors, by law, must send you a written validation notice about the debt. So, if someone is demanding immediate payment without providing that written documentation, guess what? It’s likely a scam.

[00:07:14] Ralph Estep Jr.: And you can say that to them right over the phone: “Listen, if you think this is a legitimate debt, that’s fine. You’ve got my name, you’ve got my address of record—send me proof that I owe that money.” So that’s number two, the Immediate Payment Demand.

[00:07:30] Ralph Estep Jr.: Number three, and this one hits Sally as well, is the Threat of Arrest. Let me just tell you something: debt collectors cannot have you arrested for owing money. That’s just the blunt truth. If someone threatens you with arrest, it is clearly a sign of a scam. If someone says to you, “Hey Ralph, if you don’t pay this debt, I am going to call the local sheriff and have you put in jail,”—I’m laughing, but it’s not funny—if you think about it, they don’t have that authority. Debt collectors aren’t sworn officers; they don’t have badges and guns. They can’t come and arrest you. So that’s number three, the Threat of Arrest.

[00:08:05] Ralph Estep Jr.: Number four—and Sally got this one as well. She had a trifecta, if you will. Number four is the Odd Payment Method Request. And here’s the thing: I used to run a collection situation at the credit union where I worked. Legitimate debt collectors will never ask you for payments by gift card, wire transfer, or cryptocurrency. These are common red flags used by scammers because they’re difficult to trace. Listen, I had a client in the other day, and he was telling me he’d gotten this email. It started off something like, “I’ve been watching your online activity, and I see what you do online…”

[00:08:41] Ralph Estep Jr.: I’m not going to get into the details of that because it’s a little shady—not something that my client was doing—but the email said, “I’ve been watching; I’ve been filming you, I’ve been keeping track of your online activity, and you need to right now send me Bitcoin.” I don’t remember what the amount was, maybe $20,000 in Bitcoin, or else they were going to email everyone on his contact list. Trust me, that is not legitimate. That Bitcoin request is garbage.

[00:09:04] Ralph Estep Jr.: So let’s move on to number five, and that’s the Identity Theft Setup. Sally had this one as well. It’s kind of what I call the Fortune Teller Approach. See, I don’t believe in fortune tellers, to be very candid with you. I think I could make money doing that because most people spill the beans. When you go in and sit down with a fortune teller—now, I’ve never actually done this, but I’ve seen it online and on TV—they ask the right questions because they can frame a story based on what you tell them. Well, that’s the same thing these debt collection scammers do. They’ll ask you for some sensitive personal information. Maybe they’ll ask for your full Social Security number.

[00:09:42] Ralph Estep Jr.: Maybe they’re going to ask for your bank account details. Listen, legitimate debt collectors already have this information. If they’re trying to collect a debt, that means you filled out an application with them; it means you filled out paperwork to get the loan in the first place. Guess what? They’ve got your name. They’ve got your address. They’ve got your date of birth. They’ve got your Social Security number. They’re not going to ask for it again. Now, they may ask you to confirm, but you could say, “Well, look, you tell me what you’ve got,” or “Here’s the last four,” something like that. But I wouldn’t even go there. I would return a call to the number they have on record.

[00:10:14] Ralph Estep Jr.: Because this is what happened to Sally. Sally said to me, “Ralph, they had some information, so I thought it was legitimate.” So, be careful of those Identity Theft Setups.

[00:10:32] Ralph Estep Jr.: Number six—now this one didn’t happen to Sally; she didn’t share it with me—and that’s the Robo Call Debt Collection. This is when automated calls about debt collections are made. Listen, I didn’t even know this, and I’ve been in this industry for a while, but automated debt collection calls are illegal. Now, that said, from what I understand, debt collectors can initiate a call through one of those auto-attendant services or robocalls that say, “Hey, please hold the line for a very important message about a debt collection,” or something like that.

[00:10:57] Ralph Estep Jr.: But if you receive just a blank robocall about a debt, here’s the deal: it’s likely a scam. So hang up the phone.

[00:11:23] Ralph Estep Jr.: Number seven—this one cracks me up, and I’ll tell you a story about one of my clients—is the Fake Government Agency. In fact, some scammers actually pretend to be from government agencies like the IRS. Remember, government agencies typically communicate by mail, not by phone. Now, that’s not always true. If you’ve been working with an IRS agent, for example, and they’ve already sent you a letter, they might call you by phone. But let me tell you about this story.

[00:11:45] Ralph Estep Jr.: One day, I was out delivering payrolls—that’s before we had a lot of electronic services—and at the time, my wife was actually the person working in the office. She called me and said, “Ralph, you’ve got to call such-and-such”—I don’t want to use their name—“you’ve got to call this client. She’s scared to death. She just got a call from the IRS, and they’re coming to put her in jail.” I said to my wife, “Jennifer, what are you talking about?” She explained it to me, so I called the client.

[00:12:01] Ralph Estep Jr.: The client says, “Ralph, you’re never going to believe this. I was sitting here…” Now, this particular client had a home daycare, so fortunately, she had one other employee, but she said, “Ralph, I was so scared. The IRS person called and said they were coming to lock me up right now.” What was funny about that was maybe the client had some back taxes, but it wasn’t anything extreme. It wasn’t a big number. And she said, “Ralph, I was so scared, I went to the grocery store, and now I’m at the grocery store hiding because I’m afraid they’re going to come get me.”

[00:12:23] Ralph Estep Jr.: See, that’s never going to happen. The IRS isn’t going to call you and tell you that they’re from the IRS and that they’re coming to arrest you. But it was one of those interesting stories.

[00:12:40] Ralph Estep Jr.: So now you might be wondering, “Ralph, how can I protect myself from these scams?” You’ve told me about these scams, and they’re scary, but how can I protect myself? And that’s really the question we need to answer today. So here are some actionable steps you can take. Number one: always, always, always ask for written validation of the debt. The truth is, legitimate debt collectors are required by law to provide this.

[00:12:58] Ralph Estep Jr.: So the first thing I would say if someone calls you and says, “You know, Ralph, you owe X dollars on a credit card you probably didn’t realize you had,” is, “Okay, fantastic, send me proof of this debt. Send me the loan where I signed for that or the credit card application.” Nine times out of ten, if they’re a scammer, you’re going to hear a click on the other side of the telephone. That’s just the truth.

[00:13:26] Ralph Estep Jr.: Number two: don’t ever give out personal information over the phone. Unfortunately, I have seen this happen way too many times with these phishing scams. That’s what it’s called—P-H-I-S-H-I-N-G. It’s early when I’m recording this, folks, I apologize. But those phishing scams are like I said, the fortune teller approach. They’ll ask you for a few pieces of information, and they can build a story all around it. So don’t ever give out your personal information over the phone.

[00:13:45] Ralph Estep Jr.: Number three: if you’re unsure about a debt, contact the original creditor directly to verify. Don’t use a link that you got in an email, and don’t use a telephone number that they may have left a message with. Go and find a statement or go online, find the actual site for that place, and call them directly. What you’re going to find is most of the time, they’re going to say, “Oh yeah, we’re aware of that scam, just ignore that.”

[00:14:05] Ralph Estep Jr.: Number four—and Sally learned this the hard way—never pay a debt using gift cards, wire transfers, or cryptocurrency. Now, that said, there could be times when you make an arrangement—let’s say you do a debt settlement or something like that—and they want you to send a wire transfer. That’s legitimate. But if they’re calling up front with this immediate payment request, using these weird methods like gift cards or cryptocurrency, it’s a scam, and run the other direction.

[00:14:44] Ralph Estep Jr.: Number five: if someone threatens to arrest you or uses aggressive tactics, hang up the phone. I’m telling you, it’s likely a scam. There is no debt collector that works for a legitimate banking institution or some sort of loan company that’s going to threaten you. They’re not going to be aggressive. Now, that said, they might be what you might consider aggressive. Like I’ve said to people on the phone sometimes—I'll tell you an interesting story. When I was working at the credit union, I had a member who didn’t want to pay. My collectors kept calling and calling, so one day we decided that Ralph was going to get on the phone and make some calls.

[00:15:23] Ralph Estep Jr.: So I got on the phone with this one person—I don’t remember who they were, but they owed like five or six hundred dollars on a personal loan. They said, “Look, I can’t afford to pay.” I said, “Okay, well what are you doing right now?” They said, “I’m sitting here talking to you.” I asked, “Where are you sitting?” They said, “I’m sitting on a couch, watching TV.” I said, “Here’s what I want you to do. I want you to unplug that TV, take it to the local pawn shop, sell it, and then send me my money.” Now, that may sound aggressive, but you understand there’s a difference between threatening arrest and telling people, “Hey, you need to honor your commitments.”

[00:15:58] Ralph Estep Jr.: So, you might hate me after I said that, but I have said things like that. I’ve told people to have a yard sale and sell their stuff so they can pay their debts. I’ve told people to go borrow from their grandmother, that kind of thing. Those are what most people say are aggressive, but they’re not threats of arrest.

[00:16:20] Ralph Estep Jr.: Number six: register your phone number with the National Do Not Call Registry to reduce those telemarketing calls. Now, I don’t know whether that honestly works or not. I see a lot of traffic online that talks about registering. I don’t even know if I’m registered for that. Maybe I should look that up, but it’s something to consider.

[00:16:53] Ralph Estep Jr.: Number seven: if you suspect you’ve been scammed, report it to the Federal Trade Commission and your state’s Attorney General’s office. You want to do this because the state Attorney General’s office, at least in Delaware, has a fraud unit. The more people that report this stuff, the more likely it is that an investigator will be assigned to it. You might also find that you have a way to get some of that money back. Like, Delaware has this thing called the Victims Compensation Fund. Now, it didn’t work for Sally, but you may be able to find something to get some money back, maybe even a percentage of it. The Federal Trade Commission site is great because it talks about all the scams.

[00:17:10] Ralph Estep Jr.: So, remember this: as Christians, we’re called to be good stewards of our resources. This includes being wise and, as I said before, discerning in our financial dealings. Remember what Proverbs 14:15 says: “The simple believe anything.” Like Sally did—and I’m not picking on Sally, it was a terrible situation, it broke my heart—but as the Bible says, “The simple believe anything, but the prudent give thought to their steps.” So, we’ve got to let this be a guide for our financial lives.

[00:17:34] Ralph Estep Jr.: Now, I know we covered a lot of ground today, and a lot of it was difficult. But just remember this: debt collection scams are, unfortunately, common. They are. But being informed can help you avoid them. Like I said before, always verify those debts before making any payments. Be wary of those aggressive tactics, threats of arrest, or unusual payment methods. Protect your personal information. And here’s the deal, folks: if something feels off—Sally shared this with me—she said, “Ralph, this just didn’t feel right.” Here’s what I’m going to tell you: trust your instincts and seek help.

[00:18:03] Ralph Estep Jr.: I sure hope this information has helped you feel more confident in dealing with these potential debt collection scams. You’ve seen the things that people do—people can be evil about this. But remember this: knowledge is power. And by being informed, you’re taking an important step in protecting your financial well-being. And I want to remind you, I’m here to help you on this journey. If you’re struggling with debt, like Sally was, dealing with this situation, having a hard time making ends meet, maybe you’re feeling overwhelmed by your finances.

[00:18:42] Ralph Estep Jr.: You know, you’ve got the debt like our listener Charlie today, saying, “You know, Ralph, I’m getting in debt, so it’s not surprising that these people are calling me.” Maybe you’re feeling overwhelmed. I want to help you. I can help you. I can give you guidance. I can help you better manage your money, and I’m going to do it from that Christian perspective.

[00:19:00] Ralph Estep Jr.: So, I want to encourage you right now: schedule an appointment with me. I’ve been helping people in this very circumstance since 1994. Wow, think about it—that’s been 30 years! And I am certain I can help you find financial peace. You can meet with me by going to SRalph.com and clicking on the banner at the top.

[00:19:18] Ralph Estep Jr.: It’s going to say, “Book a call with Ralph.” Now, during that consultation, I do charge a $150 fee because I can’t work for free. But more importantly, here’s what I’m going to guarantee you: I will guarantee that if you have a meeting with me, you’re going to get at least $150 worth of value on the call, or I’m going to refund your money. So, let’s work together.

[00:19:37] Ralph Estep Jr.: Let me help you improve your personal finances. Maybe you need help with your business finances. Maybe you’re looking for ways to help your business grow. My goal is to help you achieve all of your financial goals. I’m going to work with you to create a personalized plan. It’s going to be just for you. We’re going to take into account your unique situation because everybody’s situation is different.

[00:19:56] Ralph Estep Jr.: But the thing that I bring to the table—my passion—is aligning your finances with Christian principles because that’s the key. You can’t let stress hold you back from living the life that God has planned for you. So, schedule that appointment today, and let’s start working towards your financial freedom. And let’s do it together.

[00:20:14] Ralph Estep Jr.: And hey, don’t forget to tune in to tomorrow’s show. Tomorrow, we’re going to be discussing an interesting topic, and this one is going to send people for a loop. It’s “How can I discuss pension income during the dating process?” Yes, you heard me right! How do you broach the subject of that pension income when you’re, you know, maybe widowed, going through a divorce, or maybe your husband or wife passed away?

[00:20:37] Ralph Estep Jr.: It’s a unique situation that blends finances and relationships, and that’s what we’re going to be talking about tomorrow. Remember this: my passion is to help you achieve financial success. I want you to live out your dreams, and I want you to grow in your faith at the very same time. And I know together, we can manage your finances from a Christian perspective.

[00:20:55] Ralph Estep Jr.: So, as I always end the show, I want to say this: stay financially savvy, and God bless you.