Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Aug 13, 2012

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If you are victim of a payday loan scam, hang up immediately and do not call back.

Oftentimes, particularly amongst those who actually do have outstanding payday loans, borrowers feels pressured to call these cash advance scammers back because a series of “what if” thoughts fly through their head:

  • What if that caller wasn’t a scammer?
  • What if I get in more trouble?
  • What if I go to jail?

To put those thoughts to rest, let’s go over how borrowers can identify the answers to each of those worrisome questions.

Identifying a Payday Loan Scam

Debt collection agencies are legitimate businesses that provide a necessary service for lenders. They purchase up defaulted loans from lending institutions and they pursue delinquent borrowers for repayment themselves. However, there has been a proliferation of scammers who masquerade as real debt collection agencies in order to convince unsuspecting borrowers to forward them money and sensitive information.

Fortunately, most of these con artists pull from the same bag of tricks when trying to deceive their victims, so it’s not too difficult to identify them when they call.

According to the Federal Trade Commission (FTC), millions of these calls originate from India. Scam artists often have thick Indian accents, and, at times, can be very intimidating through the use of harsh language and threats. Those threats often include telling victims they will go to jail or they’ll be fired from their current job.

But those aren’t the only means of identifying an obvious payday loan scam. Here’s a full list of common tactics and blatant tells of a payday loan scam artist:

  • Fake debt collectors often have strong Indian accents.
  • Even when callers have thick foreign accents, they claim to have classic American names such as John Smith, Tom Jones, Sally Robinson, etc.
  • Cash advance con artists try to establish legitimacy by saying they’re from what sounds to be government organizations, but those organizations do not actually exist.
  • Payday scammers often use high-pressure time restraints, demanding money by a due date that’s just a few days away.
  • Finally, these callers threaten victims with jail time, loss of employment, and wage garnishment if the caller’s demands are not met.

When borrowers believe they’re being targeted by a short-term loan scammer, they should ask the caller specific questions about the supposed delinquency. For instance, a real debt collection agency should know what state the payday loan loan was originated in, what email address was associated with the application, and on what date the loan was taken out on. If the caller doesn’t know the answers to these, simply request written documentation to confirm that the debt actually exists. Debt collection agencies have no problem sending that information out, but scammers will recoil, grow aggressive, and refuse.

You Won’t Get in More Trouble

If borrowers do believe they’re being targeted by a con artist, they need to cease all communication with the supposed thief.

Those who wind up on a live call with a collector can simply hang up and refuse to answer any follow-up calls from the same number. Those who come across a voicemail should just refuse to return the call.

Even if a caller or voicemail threatens a victim with jail time or loss of employment, be rest assured, debt collection agencies (legitimate or not) have no authority to follow through on either of those threats. Debtor’s prison was abolished a long time ago, and you cannot be arrested for not repaying a payday loan.

As for wage garnishment, a court order and written notification must be presented to a borrower before anybody is allowed to touch their wages.

In fact, if a collector is legitimate, a borrower will receive ample written notices in writing before any serious repercussions happen.

Hang Up, Report, and Forget

If you think you’re being targeted by payday loan scammers, deal with them by simply hanging up.

Don’t be intimidated or frightened by their aggressive threats. Debt collectors can’t have you arrested or fired, and wages can only be garnished after a collector proceeds through a strict court-mandated process.

After ending the call, immediately file a report. The Consumer Financial Protection Bureau (CFPB) wants to hear from those who believe they’re being targeted by nefarious debt collectors, so file a complaint with the CFPB immediately after hanging up with a scammer.

And finally, just forget about them. Payday loan scams are being (primarily) run by foreign predators looking to capitalize on somebody else’s misfortune. By hanging up the phone, borrowers nullify predators’ only weapon: coercion through intimidation and lies.