A debt buyer is the name given to companies that have the legal ability to collect debt from other companies, and buys accounts receivables. Debt buyers usually buy delinquent or charged-off debt and very likely have received a deep discount for such debt. Most debt purchased by debt buyers includes old credit card debt, deficiency balances on automobile loans, medical bills, utilities, pay day loans, and phone bills.
After purchasing the debt, a debt buyer will engage in aggressive tactics in order to collect the amount that is owed. Usually, a debt buyer will begin attempting to collect the debt via telephone calls. They will quickly progress to sending letters, more telephone calls and sometimes calls to third parties in order to collect additional information. Although each situation must be analyzed on an individual basis, many debt buyer’s collection tactics are illegal. Finally, a debt buyer will likely file a lawsuit against the debtor at some point. There are many defenses to these claims, such as:
- Forcing the debt buyer to prove ownership of the account;
- Demanding the debt buyer produce all documentation which demonstrates the balance alleged in the lawsuit is true and accurate;
- Examining the authenticity of the documents the debt buyer is intending to introduce as well as the credibility of the person attempting to introduce the documents;
- Researching the particular company to ensure they are licensed to conduct business Ohio;
- Checking for any defenses you might have had with the original creditor as such defenses are also valid against the debt buyer. These defenses may include a mistaken identity or unauthorized charges, errors in billing, statute of limitations issues, and more complicated defenses such as examining whether the account was transferred to a master trust in order to act as collateral for the sale of securities.
More often than not, a debt collection defense attorney will be able to reach a resolution on a debtor’s behalf prior to a trial on the matter. If a trial is necessary, several of the aforementioned defenses might be used.
Debt buyers generally do not enjoy a very good reputation. Obviously, it always depends on the specific company, but many of these companies are known for collection tactics that violate the Fair Debt Collection Practices Act. Further, most of the time these debts are purchased from a creditor in bulk. The individual accounts are almost never examined for accuracy prior to, or during the sale. As a result, they may be reported inaccurately on your credit report. This also might lead to a counter-claim based on a violation of the Fair Credit Reporting Act.
A consumer law attorney should examine all aspects of the case. All too often, the consumer is focused on defending the claim, which is extremely important, but not the only weapon in the arsenal. A valid counterclaim based on one of the many consumer law statutes that exist can act as both a shield and a sword.
Third Party Debt Buyers:
Resurgent Capital – Midland Funding – Portfolio Recovery Associates – The Bureaus Investment Group – Main St. Acquisitions – Asset Acceptance – UniFund – Arrow Financial Services – Harvest Credit Management – Asta Funding Inc.
Typically when a consumer is aware of a debt that is being collected on by a debt collection agency, it is the original creditor who has contracted with an agency to collect on their behalf. However, first party creditors (the original service provider or issuer of the loan or credit card) may sell the debt in its entirety to a third party debt buyer. The process of selling debts allows original creditors to receive some money for the delinquent account and apply internal resources to other areas besides debt collection. This completely relinquishes the debtor of their obligation to the original creditor. The consumer is now indebted to the company who purchased the debt.
Debt buyers are a third party to the original debt. They did not provide the service, supply the loan, or issue a credit card. Debt buyers can be anything ranging from private individuals, a collection agency, or a debt collection law firm. In all cases, a debt buyer purchases distressed / non-performing receivables directly from the creditor.
During the savings & loan crisis of the 1980s, almost ¼ of saving and loan associations within the United States failed. The FDIC (Federal Deposit Insurance Corporation) received the assets of these failed institutions and had to find a way to recoup the money that was lost. The Resolution Trust Corporation (RTC) held auctions to sell all the performing and non-performing assets of the failed saving and loan associations. Purchasers of these assets ranged from private investors, organizations and other financial institutions. As a result, the third party debt buyer was born.
The largest debt buyers will buy multi-million dollar portfolios at any given time. On average they purchase the debt for about 4% of the face value of the original debt amount. According to a recent report from the Federal Trade Commission the face value of debt owned by debt buyers is well over $100 billion.
Because of the heavily discounted rate that these debt buyers receive, creditors don’t make a lot of guarantees on the debts. A Federal Trade Commission report outlines several items consumers should be aware of if a debt has been purchased by a third party. The following are a few of these items:
- There is no guarantee as to the accuracy of the information provided.
- Supporting documentation is rarely received (i.e. transfer of title and assignment, the original agreement, etc).
- There is no guarantee if documentation will be provided or if the documentation is available.
- Debt buyers are not informed whether the original debt was challenged by the consumer.
As a consumer, there are several things to take into consideration when dealing with a debt buyer. The above list of items are just a few of potential concerns. As with debt collection agencies and debt collection law firms, the Fair Debt Collection Practices Act (FDCPA) applies to debt buyers as well. If at any time a consumer finds themselves a named defendant in a creditor lawsuit, legal representation should always be retained. This is especially true when being sued by a debt buyer. There are numerous arguments that can be raised in the consumer’s defense by legal counsel. A skilled consumer law attorney can arrange reasonable settlement or repayment agreements and in many cases, get the lawsuit dismissed entirely for lack of proper documentation.