How to Fight Phantom Debt

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Debt collectors, hungry for money, sometimes make up debts and try to get you to pay them. You don't have to pay these phantom debts. CSA Images/Archive / Getty Images

Debt collectors aren't known for their honesty. So it shouldn't come as a surprise to hear that collectors sometimes make up debts to collect. These phantom debts have never existed and though you don't have an obligation to pay, the debt collector will never tell you that.

Collectors who engage in the phantom debt practice are in violation of the Fair Debt Collection Practices Act (FDCPA). They are not allowed to "mispresent" the amount you owe and saying you owe a nonexistent debt does just that.

We have so many financial transactions in a lifetime, it's hard to keep track of them in our minds. Debt collectors play on that with their phantom debt tactic. They're hoping that you'll believe you owe the debt and will pay them for it. If you're even a little unsure about the legitimacy of a debt, do not acknowledge it and do not agree to pay it.

Is it a Phantom Debt or Real Debt?

The FDCPA gives you the right to have a collector verify your debt through a process known as debt validation. You have 30 days from the date the debt collector first contacted you to request validation of the debt. Then, the collector has 30 days to provide proof that it owns the debt or has been assigned to collect it by the original creditor. If the collector can't provide this proof, it can't continue to collect from you.

Check your credit report. If the debt is legitimate, the original account may be listed on your credit report.

Have the collector give you the name of the original creditor and check your report for it. Not all original accounts appear on your credit report. For example, if the alleged collection is for a past utility bill, it won't be on your report.

Make sure the collection agency hasn't listed the phantom debt on your credit report.

If necessary, you can submit a credit report dispute to have it removed.

Contact the original creditor. Let them know a collection agency has been trying to get you to pay a debt and you have no record of the account. The supposed creditor will be able to tell you if the account is legitimate and if it's been assigned to that collection agency.

Stop Collectors From Calling You

You can stop collectors from calling you about phantom debt (or any other debt) by sending a written cease and desist letter requesting them not to contact you. When the collector receives your letter, it can contact you one final time, in writing to let you know one of these things: that it won't collect the debt anymore, that it may take certain actions against you, or that it will definitely take certain actions against you.

Reporting Phantom Debt Collectors

It's illegal for debt collectors to make up debts. If you've been contacted to pay a debt that doesn't exist, report the collector to the Federal Trade Commission, your state's Attorney General, and the Better Business Bureau. You can also file a lawsuit against the agency for actual damages and punitive damages. You can also report the collector if it continues to list the debt on your credit report, ignores your validation request and continues to collect the debt, or ignores a cease and desist letter.