Aren’t you tired of collector calls? They won’t let you breathe until you paid the last penny you owe. Whether you pay or not, they may take all kinds of legal actions against you because of your vulnerable condition.
If you don’t pay back borrowed money in a while, a 3rd party collector may become your new lender. Once the lender believes you’ll never be able to pay it back, he’ll look for help.
It doesn’t matter how they punish the irresponsible borrower. At the end of the day, the lender has lost all his money. That’s when debt buyers come in.
Collection agencies may buy your debt for a discount, then make money if the borrower pays back eventually. At least, lenders will make something instead of losing everything.
Borrowers get pushed to pay, and lenders get rid of irresponsible borrowers. But is it as good as it sounds? Whenever you give control to someone else, you should pay more attention to who that person is rather than what they say.
If the collector doesn’t care about helping you, they may show you unnecessary payments and underpriced rates. A waste of money.
- What Is Portfolio Recovery Fraud?
- How To Spot Portfolio Recovery Scammers
- How Portfolio Recovery Scammers Take Advantage
- How To Stop Portfolio Recovery Scams
- Wrapping Up: Are Collectors Trying To Scam You?
What Is Portfolio Recovery Fraud?
Debt paid tomorrow costs more than debt paid today. It may seem debt buyers help both parties in the short term, but they ended up losing money later on:
- A lender who thinks of collectors as his only choice will accept a low offer. He may find out later the borrower paid off the loan in full, but he no longer owes the lent money.
- A borrower may get a flexible plan from a debt collector. However, not paying may lead to prosecution and steep interest rates.
Here are three ways a collector can take advantage of your debt:
- Goodwill payments. They’re taking legal action against you, but they encourage you to keep paying as your good actions will help to win the lawsuit. Technically, the lawsuit focuses on the claim and the present (not what you did meanwhile), meaning the outcome won’t change. You sent money for nothing.
- Insulting rates. Debt buyers talk to lenders about the many time’s borrowers walked away without ever paying back. They build the scarcity mindset: “You may never get it back!” So they sell their debt trading dollars for cents.
- Potential scammers. First, the debt was between you and your lender. Now that a collector owns it, they don’t need to keep your debt in private. Any scammer could browse on the collector site, find about you, and approach you with a fraudulent debt rescue pitch.
Look at portfolio recovery as a last resource, never as an option (unless you can cope with the risks).
How To Spot Portfolio Recovery Scammers
1. Not identifying themselves: Who are you dealing with? A real debt buyer? Verify, or you may fall for serious imposter scams.
- A scammer talks to the borrower posing as his lender to collect money.
- A debt buyer using sneaky tactics to buy your debt, then cancel the payment and get it for free.
2. Legal threats: Collectors will call all day long to make sure you pay it back. That includes talking about penalties, jail, and prosecution which they may have no right to do.
3. Empty words: They can’t back up their words with documents. They show no references and always default to phone calls, no text.
Imagine you want to consult a legal expert about this collection company. What will you analyze if they refuse to share any documents? Ask yourself first whether the company exists.
How Portfolio Recovery Scammers Take Advantage
#1 The lender becomes the borrower
The lender can’t make the borrower pay their debt, so he starts looking for buyers:
- The scammer buys the debt.
- The new lender offers the borrower fraudulent loan forgiveness. In reality, they’ll take a second, more expensive loan to pay off the first loan.
- For the previous lender, it may seem like the borrower has paid it back. The scammer comes back with goodwill: “The borrower is about to pay off the loan in full, but we haven’t collected it yet. Would you like to retake control of your loan?”
Let’s make it visual with numbers. A borrower owes $10K, and the lender sells the debt for $1K, thinking he will never pay it back. The con man borrows another $10K at more interest, covers the first loan, forgives the borrower, and resells to the lender for more, like $2K. The borrower won’t ever worry about debt, and the lender will be happy to recover $8K versus $1K.
Is that what ends up happening? No.
The lender bought a loan, so he now becomes someone else’s borrower. He must pay back the amount he once owned!
#2 Paying your way to legal freedom
Your 3rd party collector wants to sue you for not paying on time. At the same time, he encourages you to pay it back, no matter how little you can contribute.
You may think: “If I pay now, they will consider my good intentions and win the lawsuit, or at least reduce the penalty. Perhaps, your collector forgives your debt or renegotiates!”
What happens has nothing to do with what you planned:
- What you did before the lawsuit doesn’t give you any winning preference. You’re still a delinquent borrower.
- If you lose, you’ll be paying loans plus penalties.
- If you win, you won’t need to pay for anything. If you paid your collector until then, they’ve just earned free money from you.
Even worse, every dollar you put on an unnecessary loan is a dollar that won’t help you earn your freedom. You’ll have less money to invest on attorneys, who may really get you out of the situation.
#3 False/illegal contracts
Before you do so, make sure the claim exists. Legal harassment doesn’t mean you’re involved in legal issues (if it’s not on paper, it never happened). Collectors can’t take action against you whenever they choose to: there’re conditions.
- Data accuracy. Are you paying more than what you owe? Debt collectors may combine your loan with penalties plus service fees. Inside the fee section, you may find abstract payment terms with no fundament.
- Statute of limitation. Old debt means your creditor cannot get a judgment against you, but you still owe the money. Consult with a professional: by starting a payment (as creditors encourage), you open yourself to lawsuits and reset the debt clock.
- Debt settlement. To pay it back as soon as possible, reduce your debt to the minimum.
#4 Debt relief scams
There’s only so much you can do as a lender to solve a loan problem. Whether you lend or borrow, you may find debt relief rescuers who may bold claims trying to help you.
“We will help you pay your loan back today.”
“We can negotiate the loan to reduce it by 50%.”
“We can talk to the lender and forgive your loan.”
Here, the borrower thinks he’s about to fix his finances, but he only gets deeper into debt after losing money on scams. Most agents charge an upfront fee and offer “phantom help.” They vanish forever.
How To Stop Portfolio Recovery Scams
What associates tell you may not always be what’s true. Having debt puts you in a vulnerable situation, and they may use your blindspots to profit from your losses.
- They don’t expect you to question your numbers after they sign the contract. They could misstate them.
- They know you want to get rid of it. Thus, they can ask for payments before it’s necessary.
- As a lender, you want to get a return no matter what. So you accept insultingly low rates (cents for dollars) because something is better than nothing.
Ideally, portfolio recovery will help lenders resolve outstanding debt. Whether you lent or borrowed, follow these steps before dealing with debt buyers:
#1 Well Informed
The first thing you should ask as a borrower: do their claims make sense? PRA works with several lenders every month; if you don’t revise your contract, they neither will, especially when it benefits them.
The company reaches out on the phone to present as a debt buyer/collector. However, if you never received any documents to back it up, you won’t be able to verify anything.
Make sure you’re indeed talking to the PRA, not an imposter. Next, ask for legal documents where you can revise what they’ve shared with you. A phone associate may refuse to show those papers just as you should refuse to move forward without proof.
#2 Expect Other Responses
Debt buyers may share debt information with others outside of lenders/borrowers. So anyone you don’t know who knows about your case may reach out and trick your confidence.
For example, an identity thief poses as your debt collector asking for sensitive data and money. You’ll also get messages from debt relief agents you will “rescue” you if you give them control of your accounts. If they contact by email, you’ll recognize them for their misspelled address and unappropriate tone.
If they reach out using the phone, they’ll use an urgent tone. Because you’re talking at that moment, your fear may stop you from recognizing the scammer. Don’t let them rush you and take the time to verify.
If you already talked to PRA but got unexpected emails from other matters, you’re dealing with internet scammers.
#3 Don’t Tolerate Wrong Claims
Fear comes with a cost. One may, for example, avoid looking at debt, so it “feels” like it’s not there. A person could be overly optimistic about what they owe, or not know the number at all, feeling as if the problem didn’t exist.
Most don’t want to know it because they know it’s bad. But is it really as bad as you picture? If you’re 100K in debt, misstating 110K may not seem like a difference. However, the collection company could be attributing debt you don’t owe (10K in this case).
Just because you are a debtor, that doesn’t make you bad or think wrong. If you don’t check your numbers— or trust whatever PRA shows you— you will commit to more debt than you should. Following basic accountability habits can save you thousands.
#4 Avoid Common Mistakes
Misinformation will cost you money, even if you did the right thing (at the wrong time).
- Do not trust everything from the call. Ask for documents so that you can revise carefully. Take your time.
- Now when to pay, and when not to. If the PRA takes legal action against you, what you pay may not influence the case. If you win, you may not have to pay anything at all.
- Confirm your debt. Their number will include penalties and fees. Make sure to know where each dollar goes, so you’re not paying for made-up service fees.
- If possible, get professional help. There’s only so much you can do alone. If you’ve owed money for years, chances are you’ve already done everything you could. Asking a legal specialist will save you time and stress.
- Act fast. When you first expose your debt problems, it may be too hard to accept, so you choose to ignore/hide it. Instead, take action as soon as you identify the problem. You’ll have time for revisions and remove time pressure. You’ll get through it better.
- Share data with caution. One may want to share as many documents as possible, so they don’t miss anything. But sharing sensitive data with the wrong people can lead to wrong claims and identity theft. After you verify the PRA or any other collector, send only what they ask.
#5 Consider Bankruptcy
Easier said than done: to get rid of debt collector problems, get rid of debt. Ask for debt relief/forgiveness, get a loan to buy time, or declare bankruptcy. As a last resource, bankruptcy will effectively cancel most of the amounts you owe.
Bankruptcy ruins your credit report and can hurt your other assets. However, if you can’t pay your debt in any way and don’t have much to lose, it can save you from lawsuits. At least, to make them less harmful for your finances.
Wrapping Up: Are Collectors Trying To Scam You?
Debt buying is a multi-million dollar industry, and PRA stands for one of the largest buyers in the US. How could they have reached such sizes without offering what’s best for their customers? Impossible.
Lenders have prevented losses because of them.
But what’s best for the lender may not be what’s best for the borrower. Exactly know what you owe, so you don’t end up paying more than you should.
Given the size, you may find PRA impostors as well. Nothing they tell you means anything if they refuse to verify their identity. Who comes first, not What.
Not without reason, portfolio recovery brings profit to debt buyers, whether they’re scams or legit practices.
Lenders want to get paid soon, but borrowers don’t want to hear the bad news. Communication and negotiation stand for the simplest, most effective way to manage debt.
It neither hurts to adopt the right financial habits, even temporarily.
- Minimalism: What expenses can you cut off?
- Productivity: What tasks offer the best return of your money?
- Focus: If you try ten different ways to boost your income, you’ll lose more money and time than what you’ll save. Choose a fast, safe method. Don’t deviate with opportunities, like fraudulent debt rescuers.