It's a summer tradition in cities and towns across the USA. We gather up old items no longer useful tous and sell them for pennies on the dollar from a folding table in the yard.
It's sometimes not as much about the money as about meeting neighbors and friends, exchanging chat over a cup of coffee.
If you take that summertime tradition, subtract the fun, the friends and the coffee, and increase the profits by billions, what do you have?
The Junk Debt Buying Industry!
In the last decade, lenders have begun to revive their old uncollectible debts, arrange them into portfolios and sell them on the open market.
These formerly unwanted and uncollectable debts have become the lifeblood of an entirely new and profitable industry.
Once a lender has exhausted all avenues for debt collection, they package up hundreds or thousands of these stale debts- some a decade or more in age, some discharged in Bankruptcy proceedings, some a result of identity theft,- and sell them rummage-sale fashion for a small fraction of the face value. It's not unusual to see sale prices in the 2-3 percent range.
Once sold, the lender has no further connection to these debts, they become the sole property of the purchaser.
Who buys these debts?
Asset Acceptance Corp. is the country's largest junk debt buyer, but there are plenty of others:
Encore Capital Group/Midland Credit Management
Cavalry Portfolio Services
First Select Corporation
OSI Portfolio Services
Sherman Financial Group (Alegis)
Portfolio Recovery Assoc.
Risk Management Alternatives (RMA)
JBC & Associates
Arrow Fin. Svcs. (partial ownership acquired by Sallie Mae in 2004)
Capital Acquisitions & Mgmt Co (CAMCO), subject of a massive FTC investigation, is now shut down.
Several others on the list are/were also targets of FTC legal actions, including Asset Acceptance, Asta Funding, NCO and Midland Credit Management.
The high percentage of FTC actions in such a relatively new industry points to the rampant problems and abuses within the industry itself.
Junk Debt Collecting is a Settlement-Driven industry.
Their typical method of collection is to immediately slam the consumer's credit report with a negative account. Often the account is reported as "revolving" and re-aged to make the sting that much more painful.
That alone is enough to force some consumers into submission and generate payment.
Other consumers in the mortgage (or other) loan process are forced to settle the JDB's claim immediately or risk adverse affects to their major purchase already in progress.
If these tactics are not fruitful JDB's will progress to scanning consumer's credit reports and picking out likely targets for lawsuits.
Once served, the consumer may accept a settlement from the JDB in order to avoid a court appearance. If not the JDB will proceed with the lawsuit, frequntly winning by default when the consumer does not properly repsond.
Here are some of the most common JDB legal violations and abuses:
1) Re-aging debts.
Changing relevant dates in order to circumvent the 7-year credit reporting period , attempting to sue and/or force settlement on "time barred" or out of SOL accounts.
2) Misrepresentation of the status of a debt..
Reporting debts discharged in BK as "charge off", reporting closed accounts as "open", reporting any charged off debt as "revolving".
3) Adding fees and charges to the debt not allowed by law or otherwise inflating the amount owed.
4) Debt collectors pretending to be lawyers, misrepresenting themselves as employees of the OC, misrepresenting the status of the debt as "lawsuit imminent" when there are no such immediate plans.
5) Promises to delete negative tradeline(s) in exchange for a partial payment.
Not only does the collector fail to follow through, but the payment can in some cases revive the statute of limitations.
6) Shady offers of new credit. .
Certain credit card companies have offered the debtors new cards and then tacked old, charged-off debts (sometimes purchased from other lenders) onto the inital balance due.
Others use false offers of new credit as a ploy to update a debtor's contact and financial information.
7) Verbal abuse harassment and intimidation of the debtor, their family and sometimes their neighbors and employer.
How to deal with Junk Debt Buyers?
Know the applicable statute of limitations and invoke it if necessary.
Know your legal rights, particularly the Fair Debt Collection Practices Act and your state's consumer protection laws.
Make them validate. The FDCPA requires JDB's to produce documentation regarding their claims and stop collecting entirely until they do if you dispute the debt within 30 days.
Be vigilant about your credit report. If a JDB should damage your credit either by reporting an invalid debt or altering the dates, there are corrective actions you can take.
Hang up the phone.
There is nothing to be gained by talking with a JDB, and in certain circumstances even a mere acknowledgement of the debt can revive the legal SOL.
If you are beyond the SOL for lawsuits, you might send a Cease and Desist letter, demanding the JDB immediately and permanantly stop contacting you.
If necessary, find competent legal representation.
NACA.net, the National Association of Consumer Attorneys can often point you to local legal help at a reduced rate.
File complaints if you are deceived or abused.
The Federal Trade Commission, the Better Business Bureau, the American Collectors's Association and the state att'y general's offices are starting points.
Don't fall victim to the Great Debt Rummage Sale.
Knowing your rights and the underlying laws is the first step in protecting yourself from an industry rife with abuse.
The Great Debt Rummage Sale
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