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.
