Debt Collectors And Fraudulent Companies 5 Of 6

By Dean Kaplan+

Debt collectors can help companies recover debts from fraudulent companies.

Vendors should be wary of potential new customers who claim to be part of a well-known company or owned by a name brand, as this tactic is common in business fraud.

Companies committing fraud can be very sophisticated in their scams and in their disappearing acts. Professional debt collectors are trained to sniff out debtors even when they have quietly left the scene of the crime. This is the fifth article in a series of six articles about the business of fraud. This article will focus on companies claiming to be part of a bigger entity and companies pretending to be a well known company you have heard of.

The goal of a scammer is to convince your company that they are legitimate and credit worthy. They will go to great lengths to become your customer including telling you that they have a parent company or they own other related businesses, branches or subsidiaries, all of which are not true. It is up to you to determine the truth of a potential new customer’s claims. Below are some red flags to be aware of:

a. If a potential customer claims to be a subsidiary of a well-known large company, do the work to confirm the relationship exists. Scammers frequently try to appear legitimate by claiming they are owned by a legitimate well-known company.
b. If a potential customer claims to be owned by a foreign company, but the relationship is difficult to verify, be on high alert. These foreign parent companies are frequently used by securities and merchandise scammers.

If you are suspicious about a potential new customer because of claimed affiliations, below are some steps to take to verify the information:

a. Insist that the customer provide you with specific affiliate information including addresses and telephone numbers. Take the time to call the affiliate and pursue verification until you are satisfied the relationship is legitimate.
b. Check the information provided by the customer by calling the affiliate and talking to a source not provided by the customer. Use the affiliate’s main published phone number rather than the number provided by the customer. Verify the customer’s relationship with the affiliate named.
c. Verify any relevant corporate charter information by contacting the Secretary of State.

Sometimes fraudulent companies will come up with their company name by taking a well known corporate name and tweaking it slightly. Just because you think you’ve heard of a potential new customer, still conduct a thorough credit check. Here are some tactics scammers use to trick you into thinking they are a legitimate company you think you know:

a. The potential customer uses a name that is nearly identical to a legitimate well-known company. They also may locate their fraudulent company in the same town as the legitimate company making the scam even harder to pick up on.
b. They name their fraudulent company using a word which signifies “big” such as International, American, U.S., European, Atlantic or Pacific. These words signify size and stature, giving the fake company a legitimate sound.

As always, when you feel suspicious of a potential new customer, the key is to verify the information provided by the customer before any credit is extended. The time taken to verify a customer’s legitimacy is always time well spent. When a company is scammed, there is always regret if verification was skipped for whatever reason.

When a company is scammed by a customer, all the information collected during the credit application process will be helpful to the debt collector. Whether the debt collector is in-house or from a professional collection agency, all the contact and financial information collected during the credit analysis will be useful. The contact information will provide the debt collector with a way to hopefully track down the debtor. The financial information, if legitimate, will provide the debt collector with information about the debtor’s assets and ability to pay. When information provided by the debtor ends up being false, it may be time to hire a collection agency because they are very good at searching for and finding debtors. Collection agencies use many tried and true techniques to find debtors. Once debtors are located, collection agencies know all the techniques to motivate debtors to agree to payment plans. When your in-house debt collectors come up empty, a good next step is to send the claims to collection agencies.

Click here if you are ready to go on to the final article in the six part series of articles Debt Collectors And Fraudulent Companies 6 Of 6.


  1. Types of Fraud
  2. Commonly Scammed Businesses and Fraud Red Flags
  3. How to Identify A Fraudulent Company
  4. The Unsolicited Order Scam
  5. Unmasking Ownership
  6. Bankruptcy Fraud
