Watch Out for This Payday Loan Telephone Collection Scam

by Lynnette Khalfani-Cox, The Money Coach on March 20, 2012

in Scams


If you’ve ever received a random phone call from someone claiming that you are delinquent on a payday loan or other type of debt, and must make a payment immediately to avoid legal action, you could be a target of a telephone collection scam.

The Internet Complaint Center (IC3) continues to receive complaints from victims of payday loan telephone collection scams and is finding that many pose as representatives of the FBI. Here’s what you need to know: 

What is a Telephone Collection Scam? 

Scam artists typically target people who they believe will be fearful enough about legal consequences when they find out they are delinquent on a loan.

Payday scams usually involve someone claiming that the victim is delinquent on a payday loan and must make payment immediately to avoid legal action. Some callers claim that they are representatives of the “Federal Legislative Department”, law firms, the FBI, and other legitimate (or even legitimate-sounding) agencies.

They often claim that they are collecting debts for companies such as U.S. Cash Advance, United Cash Advance, and other Web-based check cashing services. Oftentimes, the callers will not only call the victim’s home, but also their work place and their cell phone.

How the Telephone Collection Scam Works 

Scam artists will use high-pressure tactics to convince the victim that they owe a significant amount of money and must pay that debt as soon as possible. They might demand payment via debit card or credit card, or will ask the victim to get a prepaid card to cover the amount they supposedly owe. Some scam artists will even go as far as claiming that there are warrants out for the victim’s arrest because of nonpayment of the loan.

Obviously, these are all illegal tactics designed to scare you into paying a debt you don’t even owe.

How to Avoid the Telephone Collection Scam 

Be very careful when talking to someone who claims that they are calling from a federal agency or other legitimate-sounding business about a delinquent loan.

If you have never received anything in the mail about the delinquency and the caller is using high-pressure tactics to encourage you to send over payment immediately, you could be their next victim. Ask them to verify your debt in writing, to provide you with proof of the debt, and to show you proof that they have the authority to collect on that debt.

What to Do If You Fall for the Telephone Collection Scam 

To avoid these scammers, you can simply hang up on the caller and then take steps to report the incident. You can contact local law enforcement agencies if you think that the caller will actually approach you in person.

You can also contact your banks and credit card companies to make sure nobody has hacked into your accounts. You might want to contact the three major credit bureaus to check your credit reports or to request an alert on your file as well.

If you do owe money on a payday loan or other debt, but don’t want to be harassed by a third-party collector, remember you have the right to contact the loan company directly.

If you’re uncertain about your next steps, or realize that you’ve been scammed out of money, report the crime to the police and also file a complaint with the Internet Crime Complaint Center (IC3) at www.IC3.gov.

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Lynnette Khalfani-Cox, The Money Coach

Personal Finance Expert and Co-Founder at Ask The Money Coach.com
Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.

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Janet Lower

I have received several calls for someone claiming to be from a law office and they want my lawyers name so that they can contact him regarding a case in which I am a suspect. They say that I defaulted on a payday loan and that they are going to have me arrested for check fraud. They have the last 4 digits of my social and part of my mailing address. They continued to try and read a legal document to me and state that for $425.00 I can make this go away. They called my cell and work numbers repeatedly and stated that at 11am the sherriff would be at my place of business to arrest me. Ofcourse they didn’t. I did contact my lawyer and he stated that this is a very common scam.

Pierce Stanley

I got a call like that from 209-920-4601. The scammer threatened to harm me physically when I refused to give him money. I knew I didn’t get any loan and I wasn’t paying for something I did not owe. I hung up and reported the phone number at Callercenter.com. I also alerted the authorities.

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