Debt collectors. Collection agencies. Debt buyers. These are just different names for large companies that exist solely for the purpose of collecting on consumer debt. Debt buyers are large companies that specifically deal in the buying and selling of billions of dollars of consumer debt. There is a whole market of credit card companies, hospitals, banks, and other lenders that shift money around making profits off of hard-working Californians. They have a huge advantage over normal people, so it is important to know a little something about how that system works.
When a person opens a Mastercard or Visa account with a bank everything seems just fine. It’s an easy way to accumulate points or frequent flyer miles. But over the years, many people start to run a balance. Sometimes a few hundred dollars. Sometimes several thousand. This can snowball into many thousands of dollars as the minimum payments increase and increase over time. Eventually, the consumer may miss a payment or two. At this point, the credit card company often cancels the card account and starts sending collection letters.
At this point, the credit card company may choose to sell that delinquent debt and charge it off. Depending on how old the debt is, debt buyers sometimes only pay four or five cents on the dollar for the delinquent debt. It is usually sold in giant packages with thousands of other people’s debt. Then the debt buyer starts sending letters, making phone calls, and even suing the consumer in court.
There are many rules that the debt buyers have to comply with. There are federal laws, like the Fair Debt Collection Practices Act. There are state laws, like the California Rosenthal Act. The debt buyers know the rules. But they also know that most consumers don’t know the rules. More often than one might think, these debt buyers use the ignorance of the consumers to take advantage of unwitting consumers.
Some of the illegal tactics that debt buyers frequently use are misleading consumers into consenting to autodialed phone calls, collecting on debt where the debt buyer doesn’t have any supporting documentation, threatening consumers with lawsuits when the statute of limitations has run, threatening criminal action, and many more.
These debt buyers also know that most consumers will ignore a collection lawsuit because they are scary and no one wants to go to court. Some of these high volume companies file hundreds and thousands of lawsuits every month. If the consumer doesn’t respond, the collector gets a default judgment. Once they have a judgment, all they have to do is garnish wages or levy bank accounts. Obviously, this can devastating to folks who are scraping by, paycheck to paycheck.
The Consumer Financial Protection Bureau is a federal agency that is supposed to monitor and stop these bad practices. But these debt buyers have a lot more money and a lot more man power than the CFPB. So the only real way to fight back is for consumers to know their rights and to get someone to fight for them. Consumer attorneys have many tools in their legal toolbox, like the FDCPA and other laws. Bankruptcy is the sledgehammer that can stop these debt collectors from ruining more lives. The first step is consulting an attorney as soon as possible.