Interesting article about debt collectors

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It's really long, so I'll just C&P


www.nytimes.com/interactive/2014/08/15/magazine/bad-paper-debt-collector.html?ref=magazine&_r=0&assetType=nyt_now

I didn't know how such things worked, it was interesting and rather disturbing to learn how debts are bought and resold - particularly with personal information attached and sold to rather shady characters! How is that legal? It seems like in a time of rampant identity theft and protection, selling debtors detailed information is just asking for problems.

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Also, I know this is probably not a popular opinion on MM, but this article just solidified my belief that after the statute of limitations is up, you should NOT pay off old debts to collectors. There is no benefit to you for doing so and the money isn't even going to who you owed it. I thankfully have never had anything in collections, but my XH had a few things from long ago that I still get calls for. I'm glad after reading this article that I never paid them off (because they were no longer on his credit report and I knew his rights on collecting after a certain point). I actually really dislike the idea of these shady collectors threatening people on the assumption that they don't know their rights and will pay money they may not have.

I feel like it would make more sense if the original lender had collectors actually working for them until the statute of limitations runs out. That way if the consumer pays the debt, it actually goes back to the lender. I hate the idea that people may pay thousands of dollars to a collector that doesn't even actually erase the debt and there is little way to track down these companies and find out their legitimacy.

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Ugh, there are some totally shady debt collectors who should be shut down immediately.

I think the whole industry should be brought to it's knees. Debt collectors are buying and chasing debts they can't even verify. Credit bureaus are making a killing on their shady ass websites with incorrect information that do nothing but confuse the average person trying to manage their credit. And large companies are raking in cash by selling debt that may or may not be legitimate. The whole system frustrates me.

I didn't get a chance to read the article yet, but I saved it for this evening.

[HoneySpider]

Thanks for sharing this, I knew it was a shady business but I didn't realize how bad it was.

We are dealing with a credit issue right now...a few months ago DH got a collections letter for a credit card account in his name that he did not open. Pulled his credit report and sure enough it's on there. Tried disputing it, no response. He keeps getting collection notices and calls but meanwhile, he has no information about the account - before now, he never saw account info or bills or anything. It sounds like someone opened this in his name but we can't even verify that's what happened because you can't get any info. It's infuriating. And meanwhile it's on his credit and he's being harrassed while we try and figure this out.

[ESF]

Aug 21, 2014 7:56:22 GMT -5 @buckybells said:

I feel like it would make more sense if the original lender had collectors actually working for them until the statute of limitations runs out. That way if the consumer pays the debt, it actually goes back to the lender. I hate the idea that people may pay thousands of dollars to a collector that doesn't even actually erase the debt and there is little way to track down these companies and find out their legitimacy.

I haven't read the article yet, but they don't do that because it's not cost effective for them.  They would rather sell the debt off to someone so they don't have to continue to carry it on their books.  The third parties buy it for cheap, hoping to win big.  They have an incentive to cut corners because recovery rates are so low, that every minute spent investigating the debt digs into their very narrow profit margin.  Errors are incredibly common. 

The entire industry is a cesspool.

The Fair Debt Collections Practices Act, which does require debt collectors to back up the debt with actual facts, is not an effective deterrent.  The maximum damages that you can get in a class action is the lesser of 1% of the debt collector's net worth or $500,000.  That means its in the debt collectors interest to transfer the debt to a shell company that is worth next to nothing, so if they get sued for violating the law, 1% of nothing is nothing.  They are judgment proof.  As a result, its generally in a consumer's interest to file an individual lawsuit, but who has that kind of time, knowledge, etc?  Most people would rather pay the few hundred bucks to make it go away rather than hire a lawyer for a lot more than that.