Debt Collectors, Fake Collectors and Loan Scams: Know Your Rights

A collector can call about a real debt. A collector can't threaten you with jail. And some callers aren't collectors at all.

This guide is general information for borrowers in the U.S., not financial or legal advice. Lending laws differ by state and change over time; check with your state's financial regulator or a nonprofit credit counselor about your situation.

Key points

1. Debt collectors can't harass you, lie or threaten arrest; not repaying a payday loan isn't a crime.
2. Federal rules presume harassment if a collector calls more than seven times in seven days about a debt.
3. You can dispute a debt in writing, and the collector must stop collecting until it verifies the debt.
4. Demands for payment by gift card, wire or crypto, and loans that require an upfront fee, are scams.

If you’ve fallen behind on a payday loan, you’ll likely hear from someone about it. Federal law sets clear limits on what debt collectors can do, and knowing them makes it much easier to separate a legitimate collector from someone trying to scare you, or scam you.

What collectors can’t do

The Fair Debt Collection Practices Act and the CFPB’s Regulation F apply to third-party debt collectors, including companies that buy old debts. They can’t:

• threaten you with arrest or jail, or say they’ll take things they can’t legally take;
• use obscene language or call repeatedly to harass you;
• lie about how much you owe or who they are;
• call before 8 a.m. or after 9 p.m. your time without your permission;
• discuss your debt with your family, friends or employer, with limited exceptions.

Not repaying a payday loan is a civil matter, not a crime. A caller who threatens arrest is breaking the law.

The seven-in-seven rule

Under Regulation F, a collector is presumed to be harassing you if it calls about a particular debt more than seven times within seven days, or within seven days after having a phone conversation with you about it. You can also tell a collector to stop contacting you, or to contact you only in certain ways, and it must comply, though it can still sue.

Dispute a debt you don’t recognize

Collectors must send you information about the debt: who it’s owed to, how much and how to dispute it. If you dispute in writing within the window that notice gives you, the collector must stop collecting until it sends verification. Keep copies of everything.

Be careful

Phantom debt scams are common with payday loans. A caller claims you owe on an old payday loan, may know some of your personal details, and demands immediate payment by gift card, wire transfer, payment app or cryptocurrency. Hang up and contact the original lender using contact details you find yourself.

Advance-fee loan scams

Another scam targets people looking for a loan. The pitch: guaranteed approval regardless of your credit, as soon as you pay an upfront “insurance,” “processing” or “first payment” fee. Legitimate lenders don’t guarantee a loan before you apply, and many fees of this kind are illegal when they’re collected over the phone before you get a loan. If you paid by gift card or wire, contact the card company or transfer service right away and ask about getting your money back.

Where to report

If the lender itself is still withdrawing from your account, stop those withdrawals first. And to avoid the next round, see what a payday loan really costs compared with the alternatives.

Common questions