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?
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:
Here are three ways a collector can take advantage of your debt:
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.
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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:
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.
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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:
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.
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#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.
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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.
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.
How scammers use confidence tricks to win your trust.
#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).
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#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.