If you stop making punctual payments to a creditor, your account is no longer a profitable asset to the company. Unless you make payment arrangements with your creditor, the company will eventually transfer or sell your account in order to remove the debt from the company's financial books. Creditors typically sell uncollectible accounts after 180 days.
The Debt Buying Industry
A debt buyer is any third-party company that purchases unpaid consumer debts from another creditor. Unlike some collection agencies, debt buyers do not maintain an agreement with the creditor allowing them to keep a percentage of the total amount recovered. Because the debt buyer owns the debt, it keeps 100 percent of whatever it collects from the debtor. Debt buyers make a profit by paying the creditor far less for the account than the debt is actually worth---sometimes mere pennies on the dollar. The creditor benefits because the account no longer represents a total financial loss for the company.
Collection Rights
By purchasing a debt, the debt buyer acquires the same collection rights the original creditor previously possessed---including the right to sue the consumer. The debtor, by contrast, no longer owes the debt to his original creditor and must make any future payments to the debt buyer. Although all debt buyers' policies differ, collectors typically use telephone calls, settlement offers and collection letters to recover unpaid debts. Should a debt buyer sue an individual and win, it gains increased collection ability that may include garnishment rights and the ability to place liens on property the debtor owns.
Credit Reporting
Like many original creditors, debt buyers send periodic reports to the credit bureaus. A debt buyer's report appears on a consumer's credit file as a collection account. Collection accounts have a damaging effect on debtors' credit scores. The Fair Credit Reporting Act (FCRA) requires the credit bureaus to automatically delete collection accounts 7.5 years from the date the debtor stopped making payments to the original creditor.
Debt Recovery Laws
In response to repeated consumer complaints of harassment from debt buyers and other collection agencies, the government passed the Fair Debt Collection Practices Act (FDCPA) in 1978. The FDCPA contains the rules companies must follow when collecting debts and only applies to third-party collectors, such as debt buyers. According to the FDCPA, debt buyers cannot harass debtors by making threats they cannot legally enforce, using profanity or informing anyone other than the debtor about the collection account. Consumers can sue debt buyers that violate their rights under the FDCPA.
0 comments:
Post a Comment