Junk debt buyers...please take time to read, will help you
OK, I am going to try to clear up some myths about the junk-debt buyers, aka bottom feeders that I have seen in some threads. (The term in the industry is debt acquisition.)This is kind of long, but I think this will help quite a few people. Feel free to repost and pass on.
I am going to explain some stuff, then do a brief explanation paragraph. You'll see what I mean.
I spent the last two years working for a bottom feeder. I am sorry, but I cannot disclose the name of the firm. I am not posting here under a name that they wouldn't know. Trust me when I say that the firm I used to work for, and other firms like them monitor popular forums and websites (like this one) daily. These junk-debt buyers all do business buying and selling with one another, so they do share the information. I don't care that they know that I am posting here, but I do have some friends that still work there, and I don't want any potential retaliation to come to them because of me. I will say that the firm I worked for is one of the top 40 debt acquisition firms n the country. I have only seen the name mentioned on this website one time. In their defense (although I don't owe them any favors) they are really one of the more upstanding firms out there, and try to do business honestly.
Here is how the process works. Let's say that ZZZ Bank has 35,000 Visa cards that were defaulted. They were unable to collect with in house collections, and charged off the debt. The average balance of each card is about 2K. That's a lot of money to lose, folks. ZZZ Bank will agree that something is better than nothing. They gather these accounts up into a portfolio, and put it on the market to the highest bidder. For now, let's just say three are bidding. JunkDebt A, Junkdebt B, and Junkdebt C. Let's say that bidding starts out at 5 cents on the dollar. The junk debt firms have limited info to work with on the portfolios they have. It's kind of like a storage unit auction. You know there are household goods and clothes, but until you bid and win, you won't know exactly what you got. The junkdebt firms are told the number of accounts, the average balance, the average charge off date, and how many have phone numbers. The junkdebt firms have to decide if they are going to lose money on the package, or if it is collectable and profitable. Skip forward...Junkdebt A wins the bid at 8 cents on the dollar, and now gets the portfolio. The manager of ZZZ Bank signs a bill of sale and Junk Debt A is now the first party owner of the debt, and has all rights that ZZZ Bank once had. In essence, Junk Debt A is now the original creditor.
>>>People often say, "That's not fair! I didn't agree to that!" Whether or not you agree doesn't matter. Acquisitions take place with companies all of the time. It's the same thing as AT&T buying Southwestern Bell. You have a phone with SWB. Are you going to refuse to pay AT&T because you didn't open the account with them? Well, you could, but you wouldn't have a phone for long.
>>>That's a lot of money to come up with for that portfolio. Most people haven't ever heard of these junk-debt buyers before. How in the world are they coming up with all of this money? Investors. They peddle themselves around, and get people to invest in the company. I'm going to digress a quick second to collector behavior. I am not condoning illegal or bad practices on a collector's behalf, but I would like you to see what kind of conditions collectors work under. Let's stick with the theme of "It rolls downhill." OK, so Mr. Investor wants a return. He is going to be mad if he loses money, and won't be back next year. Junk-debt CEOS don't like that. They set up aggressive portfolio tracking, goal setting, quotas, financial planning, etc. This gets passed down to the senior managers and directors, who now have to produce results from their subordinates. Senior managers pound team-leaders into the ground with hours of training, and force them to work 50 hour weeks to make sure their teams all hit quota. The team leader has to answer to the senior managers if his team, as a whole or each individual, doesn't hit their personal goal. Personal goals add to up team quota and that equals the floor goal. The team leader is on each of their collectors to get the money. The collectors often work over 40 hours, and normally have their calls monitored and recorded by management. They have QA forms they have to meet 100% on. They have training on fdcpa. They constantly have this quota looming over them. Quite usually, it is very high. Collectors, by and large, do not live by salary alone, so they depend on their bonus checks. So, starting from the beginning of the month, all they see is the end of the month, and how many dollars away from their goal they are. If the collector is not at quota...you will hear it in their voice.
OKAYYY, so back to JunkDebt A, being the proud owner of this new portfolio. Immediately, they cut off about of the third of the accounts in the portfolio. and sell them. WHAT? Yes. Things can get tricky there. I'll get to that in the next paragraph. In the industry, since they bought from the original creditor, the purchased portfolio is called "firsts."
They take the accounts they kept, and send out accounts with bad information to skip tracing services. In the meantime, they are dividing up the accounts they have in house among their collectors. Each collector will get a certain amount of accounts, and then a large amount of accounts will go into a pool, which is generally used for auto-dialer time. Then, collections begin.
>>> I have seen a lot of posts where it has been said that first party owners do not have to follow FDCPA. I disagree with this, for the most part. Keep in mind that junk debt buyers are NOT, I repeat, NOT, a third party agency. They are very much first party. The FDCPA is kind of an implied law. If someone is being harassed, a judge is going to use the FDCPA for reference. Junk debt buyers MUST follow FDCPA! Period, end of story. They will jump off into the gray areas when they can, but at the end of the day, the law applies to them. I cannot tell you how many times I was beat down with FDCPA training. I can quote it in my sleep. Junk debt buyers TRAIN their collectors extensively. They are terrified of lawsuits due to FDCPA violations. I have seen companies settle out of court for four times the amount of the debt, just to avoid going to trial. These people are very money-minded, and lawsuits scare them.
OK, so what about this JunkDebt A selling off debt they bought? What's THAT all about? Well, money, in most cases, and exasperation in others. When a debt is sold from JunkDebt A to JunkDebt B, it becomes "seconds." Each time it is sold, it will sell for less on the dollar, naturally. It is really hard to get "firsts" in the market unless your firm has a LOT of money, so most firms don't have a lot of in-stat accounts. As I said, they sell off a slice of whatever new portfolios they buy immediately. Also, they will sell debt that they have tried to collect on, but failed.
>>>So, what does this mean to a debtor? Well, it can be a total nightmare for you. For starters, you can have multiple listings on your credit report, which can be very confusing. The main thing is that a lot of these agencies do not like to waste time dealing with debts they have deemed uncollectible. If they cannot sue them, they are going to sell them. Filed bankruptcy? Disputed the debt several times? Identity theft? Not their problem, say the back-end collectors. Often, they will NOT close out your file, and will just sell it. The new agency has no idea what kind of accounts are in the portfolio they are buying. They don't pick and choose. So, it really is a surprise to them when you say that your identity was stolen eight years ago. So, one has to go through the disputing process over, and over, and over. (This is changing though, as consumer attorneys are jumping all over agencies that sell debt that they shouldn't. These types of lawsuits can involve several firms, and involve a big payoff.)
My last point about junk-debt buyers: they are aggressive. They want their money. Their investors want returns. IF THEY CAN SUE YOU, THEY WILL. Normally, there is a legal department working within the agency. They are given a percentage of the accounts to work, just as the other collectors are. It's the luck of the draw. If the account is suit worthy, and the legal department has it, they will attempt to sue you. I know this isn't going to be popular, but I am going to state the facts as they are. If you call attention to yourself, and the account is in-stat, you are risking being sued. What do you mean? I mean that if you file a debt validation claim, cease & desist, refusal to pay, etc...you have just called attention to yourself. These accounts are given to a special department. Yes, they will usually try to collect from you. It costs money to sue, but if all else fails...they will attempt to sue you. (I want to note that if you ever have any question about a debt, do not let them scare you out of your rights. You have a right to know what the debt is, who the company is, and you certainly have the right to not be contacted at work.)
>>>How can they sue me? They are in Maine. I am in California. This is an easy one to answer. The agency I worked for had law firms in every state, except North Dakota and Wisconsin. The law firm in and of itself if NOT the collection agency, but is the REPRESENTING LAWYER of the plaintiff...JunkDebtA. Is it worth it to them? Depends on the firm. I got sued by a junk debt buyer for $500 dollars. It probably cost them more money to sue me than they will ever get from me. I am non-chalant about it because I live in a non-garnishable state, and I don't own property. It is on my credit, somewhere among years of medical bills.
Let me put it this way: The company I worked for had a motto. It was "Get our name out there, and get on the map." They actively sue debtors and attempt to collect on debt so they are being made known in the industry. All of the agencies feel the same way.
Those are really the basics. I could go into a lot more detail, but there is a lot to go into. So, this leads me to...a summary.
*Junk-debt buyers, contrary to belief, are not third party collectors. They assume all rights of the original creditor upon sale.
*Junk debt firms must respect your rights, and remain FDCPA compliant. Not to do so would be skating on very thin ice.
*Junk debt firms can present a big headache for you if you are disputing a debt that you do not owe. Keep all of your paperwork...for a very long time. It is not uncommon for the debt to show up again several years later.
*Junk-debt buying is a booming business. They will not be going away anytime soon. I do expect that as time goes by, more laws will be passed that are specific to them.
*They will sue you if they deem you suit worthy. It is a part of the aggressiveness of the industry.
Please feel free to ask me any questions here in the forum relating to this topic, so I can share with everyone.
I am going to leave you with a *did you know...?*
Did you know that settling a debt earns you a tax penalty? Forgiven debt is considered earned income. Any portion of the debt forgiven is taxable. Agencies are going to be sending out forms on the debt for you to file with your taxes. You should know that the industry is fighting this law tooth and nail. As the law stands right now, they don't have to tell you that you just got penalized. The government is seeking to change that, and I expect they will win out! Good news for us, right!