It is good when the untold stories are told – when people can see what is really going on with real people. This Newsday.com article tells about ordinary people who are being hounded – haunted as the article puts it – by debt collectors and junk debt buyers. Often the accounts (“zombie debt“) that these abusive agencies are trying to collect are well beyond the time limit to ever sue or they were long ago discharged in bankruptcy or they were created by identity theft.
The author of the article, Richard J. Dalton, Jr.,, notes that
Mullen, 46, says she doesn’t remember the debt and has challenged it. Others who have received such notices say the purported old debts are a result of identity theft.
Many credit card companies have started selling delinquent accounts to collectors to boost quarterly earnings, according to a report by Kaulkin Ginsberg, a Rockville, Md.-based adviser on debt collection.
The collectors then resell some of that debt to other collection agencies, accounting for $100 billion in credit card debt sold annually, according to the March 2006 report.
Sometimes we think that as our financial situation improves, the debt collectors will leave us alone. Here is a warning:
Experts say that Mullen’s financial recovery made her more likely to face demands for the old debt because collection agencies target debtors in good financial shape who are more likely to pay the debt, said Jacob Silver, a bankruptcy and debt collection attorney in Garden City.
Reminding us of the merry-go-round from the school playground,
When cardholders defaulted, banks would sell the debt to collectors. If those agencies couldn’t collect, they resold the debt to another company, which might resell it yet again.
When the debt became more than a decade old, it might have been sold for pennies on the dollar, with a successful collector making big profit. At a penny on a dollar, for example, a $10,000 debt would cost a collector just $100. So even if the collector managed to get paid just a few hundred dollars of that debt, the profit margin would be substantial. Some debt collectors prefer old debt because it’s so cheap. “It’s a huge growth industry,” Bromberg said.
That doesn’t make it easy for the consumer — who may have disputed the debt with one agency but, once the debt is resold, gets even more calls and letters trying to collect.
“These debts are being sold so quickly, and it’s so unregulated, that there is essentially no way to stop the collection letters, the reporting of it on the credit report and the phone calls,” Mauro said.
Finally, this interesting information about NCO:
Collecting debt has been a billion-dollar business for NCO, the country’s largest debt collection agency. In the first nine months of last year, the company posted $936 million in revenue, according to a recent filing with the Securities and Exchange Commission. (NCO is not a public company but does file with the SEC because it has incurred debt that is publicly traded.)
In 2004, NCO agreed to pay $1.5 million to settle charges it violated the Fair Credit Reporting Act. The company falsely reported dates of delinquency to credit agencies, the Federal Trade Commission charged, allowing debt to appear on credit reports for more than seven years after the actual default.
We appreciate Denise Richardson’s excellent blog and post which alerted us to this informative story.
If you have unfortunately been the victim of abusive practices related to “zombie debt” or any other type of consumer debt, make sure you find out your rights and options on how to fight abusive debt collectors.
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