I have been blogging against debt collections abuses ever since I started blogging as a legal content writer over 3 years ago. Strangely enough, I am not against debt collections are debt collectors. After all, my brother is a debt collector. What I am against is the abuses in debt collections and of debt collectors. I think my brother is also.
The largest group of debt collections abuses come from junk debt buyers. In my opinion, the whole system is set up for abuse. Lenders, who have already tried to collect their debts over a period of time and failed, write the debts off as losses on their income taxes. Then, they sell their debts to third and sometimes fourth parties for just pennies on the dollar.
I suppose creditor’s thinking is to maximize their efforts on recovery of lost money. What penalties and fees they have already collected on the debt, what money they realized in taxing savings by their write offs, and what money they get in selling the debts is all added up to maximize their losses. Good business, but it also has a seedy side.
Large creditors like credit card companies write off millions of dollars of bad debt each year. Technically, the creditors are suppose to subtract the sell price, the penalties charged, and the fees levied from the write off price that they charge off for tax purposes. That is because they get business tax write offs for each category, and to not do so might be considered double dipping by the IRS. I can’t help but wonder how many of these creditors just turn in a lump sum still owed in their write off claims without deducting these two very important amounts from their total claims.
Too, as chronicled in the Columbia Journalism Review on April 3, 2012, creditors who specialize in credit card accounts rarely support the amounts of debt they sell to third parties, often providing no records or documents of such when sold. This fact prompted one lawyer who makes his living defending debtors having been falsely accused of owing some of these debts to say, “In every single case I have involving a debt buyer, they refuse to produce a forward flow agreement. When push comes to shove, the case disappears.”
In defense of many of the large creditors who practice this type of behavior, they often sell their portfolio of debts to the junk debt buyers by disclaiming that they “would initially provide no records to support the amounts it said are owed and might be unable to produce them. Some of the amounts are approximate or have already been paid.”
This fact doesn’t stop the junk debt buyers from going right on and trying to collect on the portfolio of debtors including the ones that might have already been paid. Since there is no record left of the transactions, the debtors can often be left at the mercies of relentless junk debt collections agents who cant testify with uncanny assurances that you still owe the debt, and they can do it often.
That is the seedy side of debt collections. The good news is that there are laws in place to stop the abuses. You need to legally avail yourself to help prevent the abuses of debt collections.
- Debt Collection Company Gets Slap on Wrist (betterbankruptcy.com)