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I owe a sum of a few thousand dollars to a debt collector. I've already gone through the steps of getting a confirmation of the debt and it is a debt I know I'm accountable for. I need to pay this amount soon as they've told me it's already filed to go into litigation. I should note I'm also trying to settle with them for a significantly lower sum. However, in order to do this I need to be able to pay soon with a card or bank account. All the advice I've seen online suggests I should never give them my bank account information, so I've been trying to obtain a pre-paid debit card in short time.

My issue has been finding a card that I can get quickly and load north of $3,000 onto. It seems like all pre-paid debit cards I've seen only arrive in the mail (can't get same day in person). I've tried a digital alternative such as Movo, but it seems like I don't have any reasonable method to get the funds into the account.

Another route I'm considering is a Visa gift card. Would this work for the purpose of paying debt and is it advisable?

If not, is there any other method you could recommend?

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    Did they explain what "litigation" would entail? – Michael Crenshaw Oct 26 at 22:56
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    Why not a simple wire transfer to their bank account (IBAN)? Of course they can see your IBAN, but I don’t think there is any harm in that. An account statement would even prove that you’ve transferred the money. – Michael Oct 27 at 17:45
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    Why not ask the debt collector what they would accept ? – Criggie Oct 27 at 19:02
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    Using a pre-paid card for a debt is a scam, even if it seems that the debt is legitimate. Someone else may have obtained access to your credit file and is impersonating the collector. – chrylis -on strike- Oct 28 at 5:19
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    Is it possible you are mis-intertpreting what you've read? The advice against a common scam is to not give someone access to your bank account (i.e. don't share your online login details). Making a payment from a bank account should be relatively risk free. Even if they get to know your account number and sort code, these are printed on cheques etc so they need more than just that information to draw money from the account. – Darren Oct 28 at 10:03

11 Answers 11

14

If you're really worried about the collections agency doing something bad like taking more money than agreed, then open a "burner" temporary bank account.

Transfer just enough to satisfy the debt, and then -- when the transaction posts to the account -- close it.

It'll take a few days for the money to be fully transferred to your new bank, though.

  • 28
    There's no such thing as a "burner" bank account. If additional charges roll in after you've closed the account, you are still liable for them. That said, if you only issue paper checks out of the account, I can see no vulnerability at all. Any EFT would be a fraud. – Harper - Reinstate Monica Oct 27 at 4:56
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    +1 It's not bad advice. If unauthorized charges are made after you've settled the debt, the bank will likely come after you, but not have valid grounds. They could huff and puff, but know that a court will see that the thief is to blame, as you never authorized more. It could be a hassle, but not some unlimited obligation. – donjuedo Oct 27 at 15:33
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    This is just bad advice. The OP is describing a situation that's obviously a scam. This is not the right way to deal with a scammer. – Ben Crowell Oct 27 at 19:11
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    @BenCrowell "I've already gone through the steps of getting a confirmation of the debt and it is a debt I know I'm accountable for" seems like he's done his due diligence. – RonJohn Oct 27 at 22:39
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    @RonJohn I disagree. debt may be legit, but doesn't sound like debt collector is. – eis Oct 28 at 8:44
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This sounds like a scam. The debt itself may be legitimate but the debt collector doesn’t sound legitimate.

Legitimate businesses would never need access to your bank account. If you have the funds ready to go, get their routing numbers and do a funds transfer from your own bank account to theirs.

Giving others access to your bank account (user name & password, for example) allows them to get up to all sorts of shenanigans and make it seem like you’re the one responsible. Besides, your account’s terms and conditions probably prohibit you from giving your password to others.

Now, it’s possible to agree to direct debits from your bank account, but that is normally for recurring payments - such as for phone bills. It sounds fishy for a one-off payment.

Have a chat with your bank about the situation. They may be able to help determine whether this is a legitimate transaction, and offer solutions such as bank cheques or telegraphic transfers, and perhaps even talk with the debt collector to assure them that payment is on the way - that would be more credible coming from a bank than from an individual. In any case, be alert that the purported debt collector might just be a scammer who is taking advantage of your situation.

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    The implied urgency also screams scam, to me. – JohnFx Oct 26 at 15:51
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    There is no way a legitimate debt collector requires payment via gift cards or pre-paid cards. – whatsisname Oct 26 at 17:45
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    As per my post, they don't require payment via a gift card or a pre-paid card. In fact, they prefer a real debit/bank account. I'm trying to use a pre-paid card to avoid using my real debit/bank account as every source I've read online emphasizes not to do that. – Alexandre Oct 26 at 18:20
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    "Filed to go to litigation" means nothing (at least in UK law). If you pay the debt off five seconds before the case comes to court, and you can prove it, you have no case to answer and no court record. – alephzero Oct 26 at 18:42
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    Debt collectors (and salespeople) are routinely trained to "create a sense of urgency". Scammers do, too. In this context, urgency means nothing special (i.e., no added likelihood of a scam). – donjuedo Oct 27 at 15:37
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For the purposes of this answer I am assuming that this is not a scam, and that they are not the one who led you down the path of needing to use gift cards to make the payment. No legitimate business would insist on gift cards.

If you want to make sure that you are not providing them with any more banking details than is necessary, you should consider the use of a cashiers check. The check will be made payable to debt collector X or you. The bank will pull the money out of your account the day they generate the check. The check will not have your account number listed. The check cannot be used as a way to electronically transfer funds. Some banks charge for generating a cashiers check.

You can use the USPS to track the delivery of the check, and require them to sign for the envelope. This will have an extra fee but it will allow you to know that is was delivered and signed for.

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    Cashier's check is absolutely the right way to do this. I don't even have checks, and use cashier's checks for anything that can't be paid with online billpay or credit/debit cards. – R.. Oct 26 at 19:31
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    Cashiers check are likely not the preferred payment method from the view of the debt collector, because they have seen too many bad checks in their career. But if your check is actually good, then there is no excuse for them to not accept this as a payment method. – Philipp Oct 28 at 9:46
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    @Philipp bad cashier's checks? AFAIK there is no such thing. A cashiers check is not the same as a personal check. The bank will only issue one if there are funds available, and they will take the funds as part of issuing the check. There are fake and altered cashiers checks out there, but they are only used by scammers, not by ordinary debtors. – stannius Oct 28 at 16:42
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    @Philipp: To add to Stannius's comment: In general, a debt collector does not need to be concerned that a payment will fail. A debt collector can swap "debt was paid" back to "debt was not paid" in the case of a failed payment. Fraudulent payments are mainly an issue if the recipient of the money irreversibly sends something to the payor. – Brian Oct 28 at 16:46
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    If it is a scam, cashier's checks are far more traceable than other payment methods. If they refuse to accept a cashier's check, I'd be highly suspicious. – Brian Oct 28 at 16:49
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Even if they were legit, they won't file litigation (which is a lawsuit) because the overhead costs are considerable. But who cares? It's not a lawsuit until they serve you. Then it'll be a month + til the first hearing, and the suit will be extinguished once you pay them, which you're planning to do anyway. Ergo it's no threat at all.

Absolutely not. This is a SCAM.

Most likely, a crook has hacked a collector's database and obtained information about your debt... and is now impersonating the bona-fide creditor in order to trick you into paying the wrong person.

There are two giveaways:

  • The urgency. They want you to move fast before you get a chance to do research, sleep on it, etc.
  • The desire to be paid by the exchange of information. And in such a manner that anyone could turn the data you are giving them into cash, from anywhere into the world. This person can be sitting in an Internet cafe in Romania working this scam on you.

How to pay to block scammers (in case they're real)

America still uses a method that works very well to assure only the right party receives payment. It is called a check. The check has a some wonderful security features.

It must be physically mailed. You can defeat a scammer who uses unwitting "office assistants" by independently researching/confirming the proper mailing address of the collector to whom you owe money.

Since you write the name of the creditor's business on the check, anyone else will have difficulty finding a bank willing to risk its own neck to cash it.

The check will have the account number, but only the most trusted companies can convert a check directly into an EFT withdrawal. Everyone else must take it to a bank where it is scanned and interchanged through the Check21 system. This eventually turns into an EFT, but a single check does not enable multiple EFT withdrawals. Tricks such as changing the check number would be spotted quickly. So the check solves the problem of giving them your account details.

A temporary account as RonJohn proposes, might be just the ticket. If you only issue paper checks I cannot see how you can be held liable for more check amounts than you wrote.

Consider the consequences of making any payment

If this were legit, the moment you make a payment, you "acknowledge" the debt. This has an effect on your credit report: it restarts the 7-year clock on reporting of that bad debt. You get very little credit for paying the debt off in full, it will remain a reported R9 bad debt for 7 years after your last payment.

If the statute of limitations had passed in your state, you are legally clear of the debt and do not need to make any payment. I wouldn't normally propose welshing on debt, except for the unfairness of the above credit reporting.

Negotiate for your best deal

A legit creditor fully expects to get a fraction of the full debt paid. You can easily settle for a fraction. The forgiven debt is reported to the IRS as income under normal circumstances.

However you can usually get a creditor to agree to terms favorable for you in non-monetary ways: such as

  • to agree that there is a legitimate dispute over whether the debt is valid or not, and you are settling to close the matter. (whether it's really legitimate is irrelevant; you could mutually agree the moon is made of green cheese in a contract; you are only agreeing this legal fiction is the basis of your agreement.)
  • Therefore it will not be reported or acknowledged as a valid debt to anyone
    • including a credit reporting agency
    • including the IRS for debt-forgiveness purposes

Write a contract to that effect and send it to them and have them sign it. This is typically done via postal mail or fax - which again frustrates scammers because they have trouble pretending to be that.

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    This answer is mostly good, but your faith in safety of a check is completely misplaced. A check has your account number and routing number on it, which is sufficient to perform unlimited ACH debits. What was written on the paper check does not matter because the scammer will not use it for anything but stealing your account number. – R.. Oct 28 at 1:34
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    And they will doctor recorded audio of whatever conversations you've already had with them to turn it into you giving consent for the ACH transfer. – R.. Oct 28 at 1:35
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    "A single check does not enable multiple EFT withdrawals." What century do you live in? Mobile banking apps literally let you take a photo of any piece of paper that you purport to be a check and deposit the money for you without ever seeing the physical thing. You want 20 withdrawals instead of 1? Just can the check, Photoshop it to your liking, print another copy, and scan it with the app again. Repeat 20 times. Or get your own box of blank checks with those names and account numbers on them, and write whatever you want. – Mehrdad Oct 28 at 12:02
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    That isn't going to work @Mehrdad. You're overlooking the "Know Your Customer" ID checking that your banks did before they gave you access to that sort of thing. You're also overlooking the very provisional nature of consumer-scanned checks, and the haste with which they will be rejected if the payer objects. Ask your banker why that won't work. Anyway, this set of skills is orthogonal to the skills this scammer is using; this scammer has no "front" business established with history to receive paper mailings, and wouldn't know what to do with a paper check. – Harper - Reinstate Monica Oct 28 at 13:54
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    @Harper: It was you yourself who were entertaining the possibility of "Tricks such as changing the check number would be spotted quickly". That's what I was replying to. If you're suggesting that that can't even be attempted in the first place, you should probably edit it out of your answer. – Mehrdad Oct 28 at 23:22
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This concerns me:

I should note I'm also trying to settle with them for a significantly lower sum. However, in order to do this I need to be able to pay soon with a card or bank account.

Debt collectors are notorious for using any and all tactics necessary to get money from you as quickly as possible. It is very well possible that even if you pay them the $3,000 which you mentioned they will still have you on the hook for the full amount.

If you don't receive official paperwork that they have reconciled with you for a lower amount then they can still seek the full amount. Phone conversations are absolutely not binding and you would be hard-pressed to prove anything in court.

By paying them even partially your debt clock gets reset back to zero so if you were hoping to wait out this debt for 7 years then the 7 years will reset.

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    THIS! 1000x this!! Unless you have a document from the collector which EXPLICITLY states that "A payment of $3000 will settle this debt in full", then there's zero guarantee that a payment will negate a debt! You have to demand official, written correspondence of any changes to the debt BEFORE you make a settlement payment. – Derek_6424246 Oct 28 at 15:33
  • This needs to be higher. – jcm Oct 29 at 2:03
  • and paying off one debt by taking on another at a possibly higher interest rate is a recipe for disaster. – jwenting Oct 29 at 8:00
  • phone conversations and any other conversations are binding... as long as they can be proved, and as long as it can be proved that the parties are intentionally entering into a contract (nobody's joking). The best proof for these conditions is to get everything in written form, but a written form is not a mandated requirement, unless otherwise specified by the law for a specific type of contract. Yes, I am aware that this is not very relevant, but the absolutely triggered me. – Andrei Oct 29 at 15:49
  • @Andrei The 'absolutely' is accurate, as you even acknowledge in your own comment (as long as "nobody's joking"?! What does that even mean?). Debt collectors are known to use all sorts of underhanded and often illegal tactics to collect loans. I've heard of people resetting the statute of limitations by making a "good faith payment", draining their savings when a bankruptcy would be MUCH more advisable, and on and on. A debt collector is NEVER working in your best interest, under any circumstances. There is no such thing as "good faith" when dealing with those people. – Derek_6424246 Oct 30 at 16:10
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I can't really go into it due to NDA's, but I work in this industry and see people getting scammed all of the time for many different scenarios that rational people removed from the situation don't think they could ever fall for.

Please do not let yourself be scammed. If there is any doubt at all, there is a solution.

If you legitimately have a debt that you would like to pay, call the original business directly, ignore the collection agency and go directly back to the business. They will be more than happy to talk to you, take your payment and/or arrange for payment terms. They have already written off your debt as a loss, so to get money back from it after being paid for the debt by the collection agency is a win-win-win in their book. They may be less willing to be talked down from the original value, but you are unlikely to be scammed by the original business. Once the debt is paid back to the original business, when the debt collectors call to pester you, let them know that you have entered an agreement with the original business and request that they stop calling you. Per the conditions of the Do Not Call list and subsequent legislation, legitimate businesses won't call you back since you will then be able to sue them (scammers won't care and will continue to call regardless).

Anytime someone anyone reaches out to you for money, you should be on your guard. Anytime someone tries to hurry you with threats of any kind, be doubly on your guard. Anytime someone who has contacted you and doesn't leave contact information that can be verified, be on your guard. Anytime someone who you cannot verify wants payment over the phone or email, be on your guard. Anytime someone wants your account number, your login name, your password, your id, your SSN, your address, your date of birth, or the same info of someone you know, be on your guard. Anytime someone is willing (or demanding) to accept alternate forms of payment (like pre-paid cards), be extremely skeptical. And never ever ever ever do something if the people on the phone tell you not to let the people you are working with to arrange payment (like the bank or the retailer) know what you are doing.

You can always wait. Don't buy the debt collectors line that it is urgent. Get every agreement in writing and email.

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    Wouldn't it breach contract rules if the business went ahead and started accepting debt payments on a debt which the agency is handling? This sounds like it would cause more problems than it solves unless the business calls off the collectors before-hand. Please clarify how your suggestion actually works. Couldn't the collection agency also sue the business since it was the agency's intervention which caused OP to agree to repay the debt? – MonkeyZeus Oct 28 at 16:01
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    Well, calling the business would at least verify the disposition of the debt and the status of the alleged collector. – Beanluc Oct 28 at 22:13
  • @Beanluc indeed, that's always a good thing. Lot of fraudsters claiming to be debt collectors. Though this specific case sounds more like someone trying to defraud a debt collector than the other way around. – jwenting Oct 29 at 8:01
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    @MonkeyZeus sometimes a debt is sold completely. Sometimes a collector is simply hired to collect the debts on behalf of the original owner, who has kept the rights. In the latter case, if you pay the original owner, whether the collector will get their commission or not will be covered by whatever contract they have between the two of them, which you are not party to so it's not really your problem. – stannius Oct 29 at 19:41
  • @MonkeyZeus Honestly, if everyone who was able to pay off a debt in full did so through the original company they owed the debt to and left the predatory debt collectors out in the cold... – Michael Nov 23 at 4:07
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Physical cash is legal tender for all debts public and private. Someone can refuse to sell you a product or service for cash, but if you already owe them money, they are obligated to accept cash to clear the debt. If they don't take cash when you offer it, and you have evidence of this, they're not going to look good in court when they try to claim you refused to pay them.

(Unfortunately, they aren't obligated to take cash and settle for a lower sum. This only works if you have enough cash for the actual debt.)

If you're having trouble getting a dedicated account set up, but you can just withdraw enough cash to pay the debt, you should tell then you will be paying in cash. They are obligated to take it.

  • Unfortunately there are a few "ifs" in here – Lightness Races with Monica Oct 27 at 0:36
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    This assumes that you have a way to get them cash. The debt might not be local. – mhoran_psprep Oct 27 at 11:12
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Am I missing an obvious point here? Assuming it's not a scam, the debt is real and these are the real debt collectors for this debt, why not call them, get their bank details and then do a credit transfer?

This way they can't take more than is owed, you're not handing over your bank details to someone else, etc.

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First off, be sure that this is not a scam, as others have suggested.

Similar to a cashier's check, you can also get a money order. These are often easier to obtain since they are available at many grocery stores and gas stations; you don't need to wait until your bank is open and wait in line there. A common brand is Western Union, and a sign will usually be posted by the door or by the service desk/checkout. I think that to get the money order, you will need to use cash or debit.

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Assuming this is a legit debt and a legit debt collector, you shouldn't have anything to worry about using your banking information, as they won't steal your stuff. That's the whole thing about them being legitimate.

However, if you worry about someone hacking their database or the transaction, you can get a virtual credit card that still links to your bank account or other credit card, but has a finite limit to when it can be accessed.

https://www.creditkarma.com/credit-cards/i/virtual-credit-card/

Some of these can be set up as a one time use or for a limited amount of time, like 1-3 months, before they become useless. I personally know some people do this to pay their regular bills online. This way, if someone does hack their stuff, they just revoke the number and get a new one, instead of getting a new bank account or credit card. They still have to deal with all that's necessary for getting their money back because of the fraud, which would happen even with most other forms of identity theft, but they don't have to wait for another account to be made, since it didn't truly exist in the fist place anyway.

Full disclosure: I'm a CreditKarma user, but that's as far as I go. I'm also not affiliated with any bank, credit union, credit card company, or other financial institution beyond being a normal user.

  • you shouldn't have anything to worry about using your banking information, as they won't steal your stuff. That's the whole thing about them being legitimate the caveat to that is making sure you understand how debt collection works, and what you're agreeing to when you provide them any information. Debt collectors will use a lot of unexpected tactics to collect money, some of which may seem like "stealing" to some people, even though they're technically legitimate. – dwizum Oct 29 at 17:27
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    @dwizum, sure, such as levy against your bank account, which doesn't require them to ask you for your banking information first. If they go that route, they can get it on their own, which I know too well. They can also contact your employer to garnish your paycheck without asking you, too. This all has to go through the courts, so it's legal, even if it doesn't seem like it should be. consumerfinance.gov/ask-cfpb/… – computercarguy Oct 29 at 17:37
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Often when a company (you owe money to) get a debt collection agency they have given up trying to collect the debt directly from you. This means you probably should be able to get a discount. If you're going to be paying them, they should not care how. They should accept PayPal. You need to verify that the debt collection agency is acting on behalf of the company that you borrowed from. Also you should verify what interest rates you have been asked to pay. Some companies charge extortionate rates. If that has happened to you then you might be better off going to court, if the Judge sees that the rates are very high the court will rule that you don't have to pay as much. Also courts can rule an agreed payment schedule. However this is all based on your circumstances. If you genuinely got into difficulty that caused you to end up in debt the court may sympathize and help you. If you were reckless and just didn't bother paying the court may punish you. The same applies to how the company and debt collection agency has treated you.

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