Roles in Debt Collection: The Debt Buyer

Debt Buyers are the companies that buy old, delinquent debts from creditors.

Debt Buyer purchases are made at a fraction of the price to which the alleged debts are valued. Banks and other creditors, upon realizing that they cannot collect on alleged debts, write off the alleged balances on their taxes. They then take that alleged debt and squeeze it into a portfolio with hundreds, sometimes thousands of other similar accounts.

The Debt Buyer then comes in and purchases that portfolio, a sometimes for approximately $0.15 on the dollar. The older the debt, the less pennies paid. Much debt is purchased at $0.02 - $0.07 cents on the dollar. After purchasing these debts for pennies, the debt buyers then go after the alleged debtors for the whole dollar. In the process, they've created a $100,000,000,000.00 (with a "B") industry.

The Debt Buyer Industry has a bad reputation and for good reason. They are typically far more aggressive than the original creditors or their hired debt collectors. They often purchase debts that have been previously resolved, wiped away in a bankruptcy, too old to collect on, and whole host of other potential matters to the point that the consumer law industry refers to Debt Buyers as Junk Debt Buyers. 

Theirs is a numbers game, and their business model is default judgments. Junk Debt Buyers file thousands upon thousands of cases in our state each year, clogging up our court system, and walking away with money that many wouldn't have if the defendant took initiative in the matter.

But when they sue over alleged debts, more than 90% of the time, those lawsuits are granted a default judgment. Default judgments don't reflect the merits of a claim at all. In fact, studies show that approximately 32% of all collection actions lack any merit whatsoever, and the remaining two-thirds have very real issues with documentation existing to prove that a specific debt is owed, it is owed by the debtor, and the junk debt buyer owns claim to it. No, 90% of their cases end up in default because 90% of the time, defendants fail to show up in court. Those judgments likely go unpaid, and the collectors attorney returns to the courthouse to drop off a a single piece of paper to the clerk's office. That consumer is getting his or her wages garnished.

Of those consumers who do show up to court, the majority are ushered outside where they accept a high-pressure settlement from the Junk Debt Buyer's attorney. That attorney will most likely come across as nice and on their side. He or she may be nice. He or she is NOT on the consumer's side. That attorney isn't even trying to meet in the middle or anywhere close to it. Likely, that attorney gets a percentage of the settlement as his or her pay. And regardless, that attorney considering the consumer's interest over the Junk Debt Buyer's interest would result in malpractice.
Statistics show that when defendants show up to court with their own attorney (1-2%), the overwhelming majority have gotten their cases dismissed or have won at trial. A study was done in Boston involving law school students who represented alleged debt defendants in court. These weren't even licensed attorneys. They never set for the bar exam, and they were going toe to toe with long-term, licensed collectors attorneys who were in and out of those courtrooms every day for years. Out of 1000 cases, the debt buyers' lawyers DISMISSED 1000 cases. 100% were dismissed to avoid a trial against students.

There is nothing noble about a Junk Debt Buyer.  They are predictable about who they go after. Junk Debt Buyers target low-income minorities. White-Americans owe more in credit card debt than African-Americans, Asians, or Hispanics. Still, White-Americans are less likely to be contacted by debt buyers. Even though White-Americans' default information is included in those same portfolios that Junk Debt Buyers purchase, the Junk Debt Buyer sues African-Americans at a 2:1 ratio of their white counterparts. 

There is nothing redeemable about the Junk Debt Buying Business. Nothing at all.

ABOUT THE AUTHOR: Christopher Weaver, JD
Christopher Weaver started The Law Office of W. Christopher Weaver, PC ( or "ChristopherWeaverLaw") with the purpose of helping people better themselves and overcome giants of legal obstacles. Whether those giants are big business, improper or unskilled law enforcement, or the clients own beliefs regarding the planning of their estate, Christopher at every turn pursues resolution in the client's favor.

Copyright The Law Office of W. Christopher Weaver

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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