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Debt collection industry leaders protect consumers from scams

Feb 20, 2013 Philip Burgess

Debt collection industry leaders protect consumers from scams

Individuals falsely claiming to work for energy, cable and other regularly-billed service companies are victimizing consumers across the United States. Consumer credit data professionals should know the strategies used by these underground operations to avoid confusion among borrowers.

Collection scams are widespread and rising

Representatives at Amarillo, Texas-based energy provider Xcel Energy told consumers this month that fraudulent debt collection companies claiming to be associated with the business are targeting unsuspecting Xcel customers through phone and direct correspondence.

The fake businesses reaching out to Xcel Energy customers all over the U.S. are reportedly using several different angles to attempt false payments. In some cases a person claiming to be a representative of the energy provider will tell the consumer they must buy a prepaid card from a local vendor before giving the alternative credit card number to them for processing.

The energy service is having a difficult time conducting sales and customer service requests because of these ongoing problems. The company provides contact information on their website for consumers to call if they would like to verify the identity of Xcel employees who have contacted them by phone or door-to-door marketing.

In an effort to educate consumers in areas affected by illegal operations like this, Mid-Michigan Collection Bureau president Tom Terres told a Lansing, Michigan, NBC affiliate that consumers and debt collection agencies should be aware of the basic rules legitimate consumer credit data businesses adhere to.

"The first thing we will always tell anybody is... the debt collector when they call the person on the other end of the phone they have to identify ? themselves. That's number one," he said. "We have to tell them who we are and where what are from and what we are calling about."

Terres went on to note that if someone claiming to be a part of a debt collection firm does not let the consumer know they are allowed to challenge the money owed or that they may request concrete details of the late payment on paper, something is not right. His transparency with the news source is promising for the future of consumer trust of businesses focused in consumer credit report work and other debt-related organizations, especially in the Michigan area.

Certain scenarios may put collections firms at risk
Stemming from reports like Xcel's imitation agents, Americans are increasingly putting up walls between themselves and collections businesses regardless of knowledge that the calls they receive are warranted or not. Investopedia suggests five warning signs borrowers should watch for when taking calls or visits from debt collection agents, and they are all crucial for businesses to avoid when dealing with consumers.

Although all accredited debt collection agencies should be familiar with Fair Trade Commission (FTC) guidelines for the industry, the source says it is crucial organizations make it absolutely clear that telling consumers they could face legal prosecution for not paying their debts is not approved by the federal government and could result in negative backlash for the business. Disobeying the local, state and federal laws regarding debt collections is sure to have long term effects and can nullify any payments made on accounts, damaging the company and entire industry's reputation.

Another important aspect of collection employees should keep in mind is that once debts are declared past the statute of limitations in a specific state, the debt is no longer collectible. Related to this is the practice of purchasing debts just before the statute of limitations kicks in, which resets the consumer's bill and allows the agency to keep attempting the collection. While the second scenario may be legal, debt collection agents who are instructed to go after debts that have passed the statute of limitations should seek legal council.