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The “Dark and Lucrative” World of Debt Collection


As background, there were over 90 million consumer accounts sold to debt buyers from 2006 to 2009. The face value of these accounts is over $140 billion. But they are often purchased for less than 5 cents on the dollar. How can they be sold so cheap? Because debt buyers often make 300% profit on them. This is better than any investment on the market.

Debt buyers are third parties who purchase defaulted accounts from the original creditors in order to collect on them. There are often flaws in purchase paperwork. For example, the article notes that when original creditors (like credit card companies) sell the debts, they provide stark disclaimers saying that there are no representations as to the accuracy of the balances. This means that even though an account might be sold to a debt collector, the account might not actually be owed at all.

The debt collectors interviewed for the article said that people who are “boy scouts” are terrible debt collectors; instead, debt-collection companies look for people who are “hustlers” and “thugs,” often with criminal records, who do a better job collecting. Apparently, this is because of the intimidation and scare tactics that debt collectors use.

The takeaway from the article is that debt buyers and debt collectors who file lawsuits against people and engage in other unsavory collections often have no idea what they’re actually collecting. Accounts may be paid in full, transferred, or not even owned by the debt buyer — but there is little or no opportunity for consumers to challenge it. On top of that, the collectors are inclined to break the law if they can get away with it.

This is an area ripe for legal challenges — even though most consumers do not fight back against debt collectors, if they did so, they might be able to put them to their proof and obtain dismissals of collection lawsuits, or even obtain damages under consumer protection laws.

The original article is available at the New York Times website at Inside the Dark, Lucrative World of Debt Collection.

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Culik Law is a Massachusetts Attorney / Law Firm. The posts on Culik Law’s blog are not intended as legal advice. If you have questions about your particular situation, CONTACT CULIK LAW for a Free Consultation.