BBB warns of predatory loan companies and debt collection scammers

Posted at 6:04 AM, Sep 15, 2022
and last updated 2022-10-13 14:20:05-04

(WXYZ) — If you've been receiving annoying phone calls about debt you know you do not owe, you're not alone. Thousands of people have complained about these debt collection scammers to the Better Business Bureau.

On top of that, more than 100,000 people have lodged complaints with the BBB about debt collection companies — real businesses that offer short-term consumers loans which advocates call a "debt trap."

First, let's start with the scammers.

Christopher Nettleman of Dearborn Heights is sick of fake debt collectors blowing up his phone.

"I started getting harassing phone calls last year claiming to be from BHA Services stating that I owed $900 on a debt from 2008," he said.

He double-checked with his credit union directly and confirmed he did not owe anything, but the calls and texts continued.

He reported it to the BBB's scam tracker. Between 2019 and 2021, the Scam Tracker received more than 7,800 reports about loan and debt collection scams with losses of $4.1 million.

"If you don't think you owe anything and somebody calls you and tells you you do, hang up," said Melanie Duquesnel, the president and CEO of the local Better Business Bureau.

She said they found scammers posing as payday loan companies or debt collectors arm themselves with stolen financial information to convince customers to pay up. The schemers often using tough-to-trace sources like gift cards, payment apps, and money orders.

"They really tried to scare the bejesus out of you. They really do. They use the tactic of if you don't do this, you're going to go to jail," Duquesnel said.

Now let's turn to the legal businesses receiving a lot of complaints.

The BBB found some payday loan companies, operating legally in 32 states including Michigan, are charging triple-digit interest rates because laws to curb predatory lending were rolled back in recent years.

"They state on their website that they can go from about 300% to nearly 700% interest rates," Duquesnel said, giving one example of a loan company receiving a lot of complaints.

A BBB study found many payday loan companies:
-offer interest rates calculated weekly or biweekly rather than annually.
-target people in need of cash who probably can't pay the money back quickly.
-trap borrowers with stacking fees, triple-digit annual interest rates, and short-term repayment schedules.

From 2019 to 2021, the BBB received more than 117,000 complaints against legal loan and debt collection companies with more than $118 million disputed.

So, what can you do to protect yourself?

  • If you're considering a short-term payday loan, read the terms and conditions carefully before signing any paperwork. Understand what your interest rate and fees will be.
  • If someone calls you claiming you are overdue on a debt that's 10-15 years old, just hang up. Contact your creditors if you are not sure how much you owe.
  • Finally, never pay a debt through a payment app like Venmo or with a gift card. Any real creditor will accept traditional forms of payment — including a check.

And if you feel like a scammer is trying to get your money...or a loan company is hiding sky-high interest rates... report your concerns.You can register a complaint with any of these entities:
Better Business Bureau Scam Tracker
Federal Trade Commission (FTC)
Michigan State Attorney General

If you have an overdue payment on a payday loan, the BBB recommends you explore resources with the Consumer Financial Protection Bureau that could help you understand how debt collection works and what your rights are. You may also consider setting up a payment plan or working with debt counselors at the Michigan-based non-profit Greenpath Financial Wellness.