Lawyers, especially collection lawyers, are always looking for new creditor clients. Deceptive criminals have been preying on lawyers for years. Some “scammer detection” tips follow:
Typically the “scammer” will contact you by phone or via email. The email will state that the “scammer creditor” company has a debt to collect from a debtor company in your area. Often the “creditor” is located out of state.
First, look at the email. If the creditor states he or she got your name from a local referral service, it is probably a scam because the lawyer referral service sends a separate email introducing you to the referral. Know the process your local bar follows; most crooks don’t. Look for irregularities in referrals.
Second, when you call the creditor, listen carefully to the collection story. Listen for the full name of the creditor and the address. Get the name of who the creditor representative (the “scammer”) is using. Get the name of the local debtor. Let the creditor tell you what proof he or she has of the debt. Skilled scammers will be quick to tell you that they have all the proof you need. Listen to discover if the scammer has invoices, a credit agreement/account application, and bill of lading you would typically have to collect. Remember that a skilled scammer will have fake proof to fool you. This person has done this before. Listen for a story that is almost too good to be true—the debt is easy to collect. For instance, “Our debtor has not denied the debt” or “The debt is only a few weeks past due” or “We just think a debt demand letter from you will get them to pay” or “They owe us $225,000.” The scammer will ask about your billing rate and retainer. If you give the scammer a high rate and he or she doesn’t balk, then that is a warning sign. Oftentimes, scammers will show no hesitation to pay you a rate that is higher than your local standard. They may even offer to send you a big retainer. They will probably offer you a large percent incentive bonus if you collect the debt quickly. Scammers look for greed. After taking in the information, tell the scammer that you will get back to him or her with your fee agreement and retainer wiring instructions, etc. Get the return phone number.
At this point you are not sure whether the potential new creditor client is legitimate or not. Do your homework. Go to the Secretary of State’s Office and see if the creditor company is authorized to do business in your state. See if the creditor company actually has a charter on file and a tax record. Scammers look for companies that have recently closed. They will take the name and information of a closed company and hope you don’t do a background check. Scammers look for companies in warehouse districts where they have access to the closed company’s mailbox on the side of a building. If the creditor’s charter has been forfeited, that is a strong warning sign. But remember, a lot of smaller creditors fail to manage their corporate charter filings, so keep looking for other errors. Check the telephone number on your caller ID and compare it with the scammer’s number and the phone number for the “real creditor’s” charter records on file with the state. If the numbers don’t match, that is another warning sign. If the caller ID shows “Unlisted” or “No Name,” those are warning signs that the scammer may be using a burner phone, a prepaid phone that can easily be trashed later with no connection to the scammer. Check Google listings for the company (a search I made once showed glowing reports of the services received and then I happened upon a statement about how sad the customers were to learn the company had closed). Do a Google Earth street view search. Beware of buildings that have no cars in front or buildings that look like they are locked up or have notices posted on the front doors. Note that many landlords do not immediately remove their tenant’s business signs after the business has vacated the building. Do your best to get a good background understanding of your potential client.
Look up the debtor company. If the debtor’s information is hard to find in a Google search but the creditor’s address assertions are definite, this could be another sign of a scam where the scammer has simply made up a name for the debtor.
If you see several incongruent facts, decide if you want to risk going further. Remember that if you decide to reject a potential new client, you must send the scammer a “no representation”/goodbye letter. Resist the temptation to tell the scammer you are on to him or her. Stay professional and let go. Move on to good clients who need your good services.
If you miss the warning signs and continue with representation, the scam will look like this: You send the demand letter to the debtor and within a few days, the scammer calls and tells you that he or she has received the debtor’s payment check and asks if he or she can pay you from the received check. The scammer will tell you that he or she must send the check or cashier’s check to you so you can get paid. He or she will tell you that you are going to get a nice bonus. The check arrives, and you put it in your trust account. If you send the scammer your trust account check, you will find the scammer’s payment check is a fake and will never clear. However, if you send the scammer your trust check, expecting the scammer’s check to clear with good funds, you will lose your money because you guaranteed your trust account and the checks you issue on that account. You will have to come up with the funds to satisfy the sum now overdrawn from your trust account.
Your last ditch warning of a scam occurs after you have received and deposited the scammer’s fake check into your trust account. The scammer will start calling you incessantly—at first saying the money is necessary to pay debts. The scammer will congratulate you on your good work and promise more work for you. If you delay further, the scammer will then start threatening you with a grievance, a lawsuit, and other serious actions. When the fake check is deposited into your trust account, the scammer knows that he or she only has a limited amount of time to convince you to send one of your good checks in payment. Often you will be told to wire funds to accounts that may or may not be identified with the creditor’s stolen name. Offshore accounts will also be used. These are your final tip-offs to a scam in progress. Don’t send money from your trust account until you are absolutely sure good funds are in your account. Do not count on your bank saving you. Most banking account agreements now specifically state that you bear the risk of funds confirmation.
Beware of giving an unknown prospective out-of-state new client your wire transfer instructions for a retainer. Talk to your senior banking officer about what you are experiencing and ask if he or she has experienced this before (without naming names, my banker told me that at least two major law firms had fallen for this scam). I was armed with this knowledge when the scammer approached my firm.
Look for things that are too good to be true. Look for warning signs that your gut tells you that something is not right. Do this and you will save yourself money and grief.
Clint C. Blackman III is a Dallas collections lawyer with over 25 years of experience.