I received a dunning letter from a collection agency demanding $158. I’ve always paid my bills on time, and I don’t recognize the charge. I checked out the supposed creditor, and the company seems to be out of business. I also checked my credit report, and there are no outstanding problems. Can I ignore the letter? --M.H., New York City
You are wise to be skeptical and not automatically write a check. This could be a phantom debt, a growing problem in which criminals steal enough of your personal information to scare you into thinking a bogus collection letter or phone call is real. They may even be able to cite, say, the name of your bank and the last four digits of your Social Security number, says Christopher Koegel, of the Federal Trade Commission.
The fact that the company is out of business does not necessarily mean the debt is phoney, though, says April Kuehnhoff, of the National Consumer Law Center. Firms often sell outstanding debt to collection agencies. “It’s possible the original creditor went out of business after selling this debt,” she says. Koegel recommends that you continue watching your credit reports to see if the debt appears (you can order a free report from each of the three major credit bureaus every 12 months at www.annualcreditreport.com). Overdue accounts can be reported up to seven years after the original delinquency date.
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For your peace of mind, you may want to request a validation notice from the collection agency. It’s legally obligated to send such a notice, which must include the amount of the debt, the name of the current creditor, and your rights under the federal Fair Debt Collection Practices Act. The Consumer Financial Protection Bureau has sample letters to help you respond to debt collectors (www.consumerfinance.gov). If there is no response, file a complaint at FTC.gov about the suspicious dunning notice.
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