A consumer with knowledge of existing consumer protection laws can stop a junk debt buyer’s credit card debt collection attempts.
Junk debt buyers are companies that buy batches of thousands of discharged credit card accounts from the credit card banks for pennies on the dollar (under 10 to 15 cents per dollar of debt). Junk debt buyers also resell these accounts to each other for as small as less than one cent per dollar of debt. As an example of such buys, Business Week reported Portfolio Recovery Associates, a large national junk debt buyer, bought 1,030 portfolios over an 11 year period with a face value of $35.3 billion for $791.6 million, representing more than 16.7 million customer accounts. That averages out to less than three cents per dollar of credit card debt.
With those fractions, junk debt buyers do not expect to collect on most of the debts, according to the Credit Card Debt Survival Guide. It is simple to see how if they collected on only 20 percent of the debt they would be profitable.
The federal Honest Debt Collection Practices Act (FDCPA) can protect a knowledgeable consumer from junk-debt-buyer collection efforts, but junk debt buyers rely on the fact most consumers are not that knowledgeable about the FDCPA. Collection agencies for junk debt buyers send out first notices and most consumers do not respond in writing asking for documentation of the debt, as they should. When they buy this debt in huge computer tape batches, junk debt buyers receive small original documentation of each debt; documentation that the FDCPA requires the junk debt buyer to provide to the consumer if questioned.
The junk debt buyer’s collection agents frequently call consumers before the first notice arrives and violate the FDCPA by threatening a phony lawsuit if payment arrangements are not made promptly. Unfortunately for them, some consumers honestly admit to the alleged, undocumented debt to these strangers and make the collection agency‘s job simpler.
While the debt collection attempts of the original-creditor credit card companies are not covered by the FDCPA, those of junk debt buyers and their collection agents are. With a carefully worded letter, like those found in the Credit Card Debt Survival Guide, the consumer can compel these debt buyers to stop collecting the alleged debt. Legally, that includes not placing negative marks on the consumer‘s credit report.