Sep 29, 2013 Dave King
Debt collection continues to be one of the most spoken about industries among economists, regulators and businesses today, especially as the sector has expanded rapidly following the Great Recession. Now, identity theft and debt collection appear to be the two most complained-about issues by consumers and businesses, according to data from the Federal Trade Commission (FTC).
Though the two might not seem that intertwined, recent events have illustrated how close the ties truly are, especially because both are closely tied to the management of financial data. Debt collectors need to be especially careful when formulating and executing records management strategies to avoid losing sensitive information and incurring financial shortfalls.
WMC-TV recently reported that one consumer's eBay account was hacked several months ago, which led to a serious instance of identity theft. The victim did not know that her identity was stolen until well after the fact, when debt collectors started to call regarding balances that had been fraudulently created through her online selling and buying account.
According to the news provider, Karen Davis has now had to communicate with a variety of collection agencies, all of whom believe that she owes significant amounts of money for previous purchases. Davis has experienced serious issues when trying to deal with this problem, noting that the collectors do not believe her identity had been stolen and that was what led to the creation of the debts.
The source noted that the combination of agencies pursuing Davis is very indicative of the problem, since one is one of the most highly rated in the nation and the other is among the worst. This illustrates how even the most seasoned and proven collectors can be fooled when identity theft rears its ugly head.
From the agency's perspective, this is a major threat to financial wellness, as the firm will be stuck with the fraudulently created debt after purchasing it from the original creditor. Now, WMC-TV explained, Davis is faced with a serious uphill battle in getting the identity theft-based debts under control and repairing her credit score.
Collectors should go above and beyond the call of duty when verifying debts before purchasing any to avoid issues such as this one. Even the more respected agency has now been complained about for allowing the crime to slip under the radar. On the flip side, creditors also need to improve ID verification standards to avoid lending funds to scammers.
Maintain credit checks
Consumers and businesses alike can avoid issues such as this one by keeping a closer eye on their credit scores. Regularly checking these reports will often decrease the chance of long-term identity theft crimes, especially as most victims only realize their identities have been compromised after being denied a loan.
Businesses, debt collection agencies and lenders all need to be more mindful of ID verification standards and records management policies. Together, these organizations can improve the efficiency and integrity of the debt collection process, all the while reducing identity-related crimes.