Debt Buyers 101: What You Should Know

Debt buyers are companies that purchase delinquent debts from original creditors (and often from each other) for a fraction of the total amount owed – pennies on the dollar. They then attempt to collect the full balance, often employing aggressive tactics and filing lawsuits to maximize profits. Unlike the original creditor, these companies typically have little to no prior relationship with the consumer and may not have complete or accurate documentation of the debt.

How Debt Buyers and Collection Agencies Operate

When a consumer defaults on a loan or credit card, the original creditor may sell the debt to a third-party debt buyer instead of pursuing collection themselves. Debt buyers acquire these accounts in bulk for pennies on the dollar, meaning they profit by collecting even a small portion of what was originally owed. Some well-known debt buyers include Midland Funding, Midland Credit Management, Velocity, Portfolio Recovery Associates (PRA), LVNV Funding, and many others.

Debt buyers use a variety of methods to collect payments, including:

• Sending collection letters demanding payment
• Making repeated phone calls, sometimes multiple times a day
• Reporting the debt to credit bureaus, which can impact credit scores
• Filing lawsuits to obtain judgments and wage garnishments

New Tactics in Debt Collection

Some debt buyers resort to tactics like selling and reselling debts multiple times, creating confusion and making it harder for consumers to verify the legitimacy of their claims. Others use arbitration clauses and fine-print contract loopholes to bypass consumer protections, requiring individuals to remain vigilant and informed about their rights.

Harassment and Unfair Collection Practices

While some debt buyers operate within the law, many engage in illegal tactics such as suing after the statute of limitations has expired or claiming amounts that are not owed. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are prohibited from:

• Calling at odd hours or contacting consumers excessively
• Using threats, intimidation, or abusive language
• Misrepresenting the amount owed or the consequences of non-payment
• Contacting third parties, such as employers or family members, about the debt
• Failing to provide proper validation of the debt upon request

If a debt buyer is harassing you, you have rights and options. You can request debt validation, dispute incorrect information, and even take legal action if they violate federal laws.

What You Can Do to Protect Yourself

If a debt buyer contacts you, knowing your rights is crucial. Always request written validation of the debt and avoid making payments or promises without proper verification. Keep detailed records of all communications, and if you suspect unfair practices, consider consulting a consumer rights attorney.

Too often, debt buyers count on consumers being unaware of their rights. By working with a debt defense/consumer rights attorney, the harassers can be kept at bay and held accountable when they violate your rights. 

If you need help, the team at The Holland Law Firm can help you defend yourself against debt buyers and ensure your rights are protected.