Loans and Collections: How to Spot a Scam

By | Lending Education

For most people with an outstanding debt that’s been on their balance sheet for some time, one of two things will happen. Either they will take a proactive stance on eliminating their debt via consolidation, with an affordable credit rebuilding program or possibly a GIC, or they will eventually feel the pressure of debt collectors come to call for their money.

The latter solution is particularly stressful and undesirable for most, and the kinds of pressure tactics used by collectors can create populations of borrowers who have increased vulnerability to scams and illegitimate tactics. Some scams will even pose as providers of debt solutions services, only to prey upon consumers in need of a way out of debt. As tax time  How can you spot an illegitimate lender, collector, or any other type of scammer posing as a lending industry operator?

Requests for Personal Information

Any loan application carried out by a legitimate lender will inevitably require access to some pieces of personal information in order to complete the necessary due diligence and set you up with the money you need. However, be wary of anyone claiming to call from a lender, collections agency, or other financial service such as the Canada Revenue Agency, and outright requesting personal information such as your date of birth, Social Insurance number, or financial account information over the phone. These data points should already be known to most collections agencies and financial institutions based on information from the original creditor, or from other sources such as documentation you have signed previously to authorize a loan.

Payment By Irregular Methods

If you’re faced with a request to send money (or promised that you will receive it) through a wire transfer, prepaid card, e-transfer/Paypal, or other such form of transaction, you should be wary of a scam. Legitimate lenders will disburse funds through direct deposit in almost every case, and scams posing as debt collectors will usually insist on payment in a single way, for example, only allowing you to pay by credit card over the phone and refusing payment by any other method.

Aggression and Urgency

The more aggressive and rude callers are, the less likely it is that they’ve been trained or licensed under the provincial/territorial collection regulations where they operate. Anyone demanding payment immediately or on the same day, or employing excessive rudeness, scare tactics, or other forms of intimidation, may be trying to shock debtors into falling for a ruse. Most agencies will give debtors a few days to collect their affairs. Also, in most provinces and territories, you must receive written notice that a delinquent account was turned over to a collection agency. If you’re missing that letter, give your caller a closer look.

On the lending side, it is certainly a priority for any legitimate lender (such as Progressa) to get funds processed to their client as soon as we can, especially in the alternative lending space. However, go by the old axiom – if it seems too easy or too good to be true, it may well be. Anyone promising pre-approval, for example, is likely operating under shady premises.

What To Do?

If you suspect that you’re being scammed or that the full breadth of information about a loan, collections item, or other financial services product is not being offered to you, what next steps can you take? Asking the caller for their name, address and company information is a good start – take the next step and cross-reference these items with your own research online, and see what you can find. Another key action item is to contact your provincial/territorial consumer protection agency to see whether the caller and their collection agency have active licenses. Ontario Consumer Protection offers an online search tool that you can use to look up collectors by first or last name, as well by collection agency. Protection BC provides a similar feature.

Security and safety are paramount in any financial matter, and while online and alternative lenders exist to make these transactions easier, we are also creating more secure environments in which people can find the solutions they need to get free of debt, as well as from the pressures that come with being a target of collections. Staying safe with your money will prevent your financial situation from taking a disastrous turn at the hands of a scammer.

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