When a debt goes past due, creditors typically contact the debtor to collect payment. When a debt continues to fall more and more behind, many creditors may eventually sell the debt to a collection agency.
Can Debts Be Sold to Another Person or Company?
Under the Consumer Credit Act, debts can legally be sold or placed with another company at any time after the account holder fails to send the agreed upon payment. The selling of past due debts is a normal part of the overall debt collection process and applies to various types of debt including overdrafts, credit cards, loans, etc.
Why Don’t Creditors Collect their Own Debts?
Creditors build their business around their primary function of lending money and collecting it (with interest). Their business is not typically structured to function at optimum levels when the activity falls outside their intended services. One activity that occurs fairly often that falls outside the creditor’s intended business services is collections. Most creditors do not specialize in chasing debts that are not being paid as agreed, or tracking down people who aren’t paying their debt. Instead of attempting manage collections alongside their lending services, many creditors work with debt collection agencies or sell past due debts to debt purchasers.
Why Do Creditors Sell Past Due Debts?
When a debt purchaser or collection agency buys your debt, they do so in order to chase a debt on their own behalf rather than chasing debts owned by other companies. Creditors benefit from selling the debt because they no longer have to spend time, resources, or money attempting to collect, and they receive partial payment (from the debt purchaser) immediately.
Why Do Debt Purchasers Buy Debts?
A debt purchaser typically buys debts at less than their face value, but the debt purchaser is entitled to collect the full balance owed. This creates a margin for profit. The amount a debt collection pays for a debt is usually confidential.
If My Creditor Sells My Debt, Do I Still Have to Pay?
When a debt is sold to a debt purchaser, the money is now owed to the debt purchaser rather than the original creditor. The debt purchaser is held to the same rules and regulations as other creditors, and the account holder has the same legal rights. For instance, a debt purchase is not allowed to add on interest or charges to your original debt unless doing so is in accordance with the original credit agreement.
Dealing with a Debt Purchaser that Bought Your Debt:
When a debt is sold, your original creditor should let you know. The new “owner” of the debt should also contact you by letter to explain who they are and that you now need to pay them for the debt. This initial letter should include the debt purchaser’s name, and will often include the original account number from the creditor that sold the debt, so you should be able to identify what debt they are referencing. If you aren’t sure what debt is being referenced, contact the debt purchaser to request additional information. When dealing with a debt purchaser, it’s important to remember that your rights are the same as they were with the original creditor. You also have the right to dispute the debt if you don’t believe you are legally obligated to pay. For instance, if a debt is statute barred, included in a previous bankruptcy discharge, etc.
If you have questions about dealing with debt purchasers and collection agencies, we can help. Find out how to get a fresh start by filing bankruptcy. Get in touch with Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney as soon as possible.