A junk debt buyer is a company that buys defaulted credit accounts. These can be credit cards, personal loans, auto loans or student loans. They buy this debt for pennies on the dollar and then try to collect on the “junk” debt. Junk debt is often referred to as “Zombie Debt”. Often, the claim is started with a collection letter. If that is unsuccessful for the collector, then a lawsuit may be filed. If you are in Pennsylvania, please do not fear the lawsuit. A good consumer attorney can help you defend or settle the case at a fraction of the amount of the claim.
“Junk” debt gets in name in the following manner. Joe Individual defaults on a credit card account. The original creditor attempts to collect what is owed from Joe Individual. If the original creditor fails, they charge-off the debt (charge off is an accounting term that means “uncollectible debt”, it does not mean that you no longer owe the debt). After charge off, the defaulted account is placed with other defaulted accounts into a portfolio, and the portfolio is sold to the highest bidder, a junk debt buyer. The debt is “junk” because the original creditor could not collect on it. They view it as trash. The largest junk debt buyers are Midland Credit Management and Portfolio Recovery Associates. Other less prominent debt buyers include Atlantic Credit, Cavalry, LVNV, Second Round Sub, Unifund and Velocity. There certainly are others, but many of the smaller companies seem to come and go as time passes.
People often say “I didn’t agree to that” or “They can’t sue me because I did not agree to the sale”, but your agreement is not necessary when it comes to the purchase or sale of a defaulted credit account. What matters is whether the junk debt buyer actually bought your account, and most importantly, if it can prove it in a court of law. Credit card accounts can be sold. They are an asset to whomever owns them. This type of sale is perfectly legal. The important thing is how you handle this issue once it gets into the hands of a junk debt buyer. The proper course of action is always to consult with a knowledgeable consumer attorney. Do not ignore a lawsuit and do not contact the junk debt buyer!
Once you default on an account, the original creditor obtains the right to sue you for the balance owed. This is called a “legal interest”. Any legal interest can be sold to anyone for any price, and the individual has nothing to say about the transaction. In our experience we have found that most junk debt is sold for between 2 and 4 cents on the dollar. The junk debt buyer then attempts to collect on the debt. This usually starts with a phone call or letter, but it could quickly escalate into the filing of a lawsuit.
Believe it or not, a lawsuit from a junk debt buyer is to your benefit. In our experience, we have found that junk debt buyers often do not acquire all of the necessary documentation that is needed to prevail in a court of law against debtors (individuals who owe money or who have defaulted on credit accounts). The typical package that a junk debt buyer acquires consists of the debtor’s name, address, telephone number, account number, charge-off date and amount allegedly owed. Many other documents and pieces of evidence are needed to prevail in a court of law. In most instances, these junk buyers have severe difficulty in obtaining these key pieces of evidence. If they cannot acquire them, they cannot win. The key is to hire a knowledgeable consumer attorney, whether it’s our firm or another. Please, please don’t try to play lawyer. That’s a great way to lose a winnable case.
If you have a credit card company or a collection agency attempting to collect a debt from you, or if you have more questions about junk debt buyers, please contact our office at 412-348-8600 or send an email to Attorney Greg Artim or send a case inquiry on our contact page here.