Zombie Creditors: A $100 Billion Industry That Is Anything But Consumer Friendly
The debt-buying industry is relatively new. It’s gigantic and really took off during the last recession. Many say that we’re also in a recession now – and it’s taking off again. So, how big is this industry? According to Steve Recordon, an attorney from San Diego, California whose firm represents individuals who have been sued or harassed by debt buyers, nearly $110 billion of debt was sold last year.
What are zombie creditors and what collection tactics do they use?
In a recent interview, Recordon explained the process of debt buying. “What happens is that the seller will sell the debt, or account, for pennies on the dollar depending on the age of the account. The older it is, the cheaper it is. I’ve seen some that have been sold for a-half a cent on the dollar. We call these debt buyers zombie creditors because, just when you think the debt’s dead, it comes back to life.” He provided the following example:
Let’s say one of the credit card companies, Bank America, American Express, MasterCard or whoever, has an account that’s not being paid. It then goes into default, and they, themselves, try to collect. If they’re unable to collect, they sell the account to a debt buyer. Debt buyer No. 1 picks it up and tries to collect. If they’re unable to collect, they’re going to sell it to Debt Buyer No. 2.
As you go down the chain, obviously, the price that you’re able to get for it goes down, and quite often, these debts are considerably past the statute of limitations. Each state has its own statute of limitations. California, for example, has a four-year statute. I’ve seen cases where the debt buyer is coming after a debt that’s seven or eight-years old, absolutely uncollectible, but that doesn’t seem to stop the more ruthless debt buyers.
Zombie creditors have limited information, but will come after you anyway.
Most debtors would be surprised at how little information zombie creditors actually have regarding their debt. However, a lack of information doesn’t stop them from coming after you. Recordon explained:
Normally, what happens is that the debt buyer / zombie creditor will buy a disk with 1,000 accounts or more on it at a time. However, the information on that disk is very limited. They’re going to probably get the name of the debtor, an address (although many times the address is old and the debtor no longer lives there), the amount of the account and very little else. Initially, they’re probably not even going to have the original contract.
They’re also not going to have a breakdown of whether or not the amount that they have includes interest or attorneys’ fees. I have to tell you, some of these zombie creditors are huge publicly traded companies.
They use programs that scrub the disks. Scrubbing is a process where they take the disk and run a program over it to determine the collectibility of the individual accounts. The ones that have the highest collectibility may result in a lawsuit being filed in state court if they can’t collect through telephone calls and letters. The scrubbing process enables debt buyers to determine a lot of things such as whether the individual works or owns property or a vehicle. They’re looking for those types of things to determine collectibility.
If you’ve been sued or harassed by a debt buyer / collection agency, contact an attorney whose practice focuses in this area of the law to discuss your situation. Consultations are free, without obligation and strictly confidential. To contact an experienced attorney, please click here. We may be able to help.
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