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Beware of Scavenger Debt Collectors

You defaulted on your credit card debt a long time ago.  Your credit report indicates that the debt was written off by the credit card company a year ago.  Your account was turned over to a collection agency who sent you a few form letters and called you a few times, but eventually they gave up and now you're home free.  You think you got out of paying this debt, right?  Don't get too comfortable just yet.

There is a new investment opportunity and it isn't real estate.  It is debt collecting.  Groups of investors are forming companies and purchasing old debt from original creditors for literally pennies on the dollar and are going after old, written off credit card debt with a vengeance.  The industry is so lucrative that two of these investment companies have made the Fortune 500 list.

The term that has been coined for companies who purchase uncollectible, written-off debt is "scavenger debt collectors"  but few of them will admit they are collection agencies.   They usually call themselves litigation firms to scare the hell out of you, and they use very aggressive collection techniques that often violate the provisions of the Fair Debt Collection Practices Act.  Many of them claim that they are not bound by the Fair Debt Collection Practices Act, but they most certainly are.

Scavenger debt collectors buy old debt for just pennies on the dollar and try to collect the whole amount due plus interest.  For example, suppose you owed Citibank exactly $1,000.  Citibank wrote off the account when they couldn't collect from you, turned it over to a debt collection agency, who also couldn't collect from you.  Now, Citibank has sold it to a scavenger debt collection firm for about $70.00.  And the scavenger debt collector  is going to come after you for the entire $1,000 plus interest.  Pretty lucrative, huh?

Of course, the scavenger debt collectors know that most of what they have purchased is uncollectible -- that's why they bought it for just pennies on the dollar.  But they are going to use intimidation tactics to collect as much as they can.  Please do not let them scare you.  Most of what they say is bluffing to get you to send them as much as you can as quickly as you can to avoid being sued.
If you are contacted by a scavenger debt collector, this is what will happen:

First of all, they will let you know that they are a "litigation firm" who is preparing the papers to sue you, but they wanted to contact you and perhaps work out some sort of settlement or pay off agreement.  They will lead you to believe that if you don't pay, you will be sued in the next few weeks.  But remember, they are probably not a litigation firm and the person on the phone is just a regular debt collector, but he or she will lead you to believe he is an attorney or a paralegal who works for a law firm, when in fact, they are just regular debt collectors. 
Remember, do not let the "litigation firm" term scare you.  Ask the person with whom you are speaking if he/she is an attorney and if the company is an actual law firm.  In fact, ask a lot of questions about who it is that now owns your old debt.  Chances are you will find that they are a group of investors who aren't really a litigation firm.

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