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Understand Junk Debt Buyers to Get Closer to a Credit Card Debt Solution

Buying junk credit card debt has become a big business.  Blocks of junk debt are bought and sold by equity firms with individual transactions totaling up to several tens of millions of dollars and more.  The basis of these sales is the clause in credit card agreements, which states the credit card bank has the right to sell the account.

In one recent credit-card-debt portfolio auction buyers started bidding at five cents on the dollar of each debt and eight cents on the dollar won the bid.  That was a first generation sale. In other words the credit card company sold a block of charged-off accounts.  There are second, third, fourth and more generations of sales going down to one to two cents on the dollar or less. To illustrate, over three years I was contacted by three different junk debt buyers (JDBs) attempting to collect for the same credit card debt.

The database of accounts that comes with each junk debt buyer purchase usually has minimal account information, which includes each account holder’s name, address, social security number, and balance owed. That is why a consumer who knows what he or she is doing can eliminate credit card debt owned by a JDB.

When a JDB takes possession of your account, they notify you in writing of their ownership hoping to collect.  Then, they typically turn that block of accounts over to a collection agency.  Or, they use their own in house collection resources.

JDBs are not the original creditor, so their collection efforts are covered by the FDCPA and state fair-debt collection and collection-licensing laws.

Some junk debt buyers attempt to collect on “Zombie Debts.” These can be 10 of 15 years old or ones covered by bankruptcy and out of the statute of limitations for debt collection.  But, many consumers do not know that.  The JDB’s strategy is that you have forgotten about the debt and have discarded any of its documentation; that you will pay them a few dollars just to get rid of them.  But once you pay them a few dollars on the debt, you will have re-contracted with them. The statute of limitations will restart, and they will be able to dun you more severely.

Junk debt buyers attempting to collect on purchased credit card debt can be turned away with the tactics discussed in the Credit Card Debt Survival Guide.

Chapter 3 . . . Junk Debt Buyers pp. 3.12-16