Debt Buyers and Debt Collection

I just read an article called “Paper Boys – Inside the Dark, Labryinthine, and Extremely Lucrative World of Consumer Debt Collection” by Jake Halpern in the New York Times Magazine. If you have half an hour and are interested in learning about the debt buying/debt collection industry, it is a great read. You can find the article here:

The takeaway for me as an Indiana consumer law attorney is that debt collectors, or collection agencies if you prefer to call them that, cannot be trusted. Mistakes are common when debt is transferred because there is no incentive for the original creditor, debt broker, debt buyer or debt collector who is selling the debt to make sure the information provided is accurate. Most debt sales are “as-is” and the sales contract makes clear to the purchaser that the seller is making no warranty, guarantee or representation that the information being sold is in any way accurate. So the seller has no motivation to make sure it is accurate.

Not only are mistakes made when debt is sold, but sellers have reason to falsify the information provided simply to make money. An example the article touches on is the date of last payment information. If a debt is “re-aged,” in other words the date of (supposed) last payment or first delinquency is made more recent, the debt can become significantly more valuable on the open market because generally more recent debts are easier to collect. The problem is, the date of last payment or first delinquency is the event that starts running of the statute of limitations. So providing a consumer, or even a court, false information about this date could have negative consequences for the consumer.

The point is, representations by debt collectors whether in letters, on the phone or in court documents should be carefully evaluated for accuracy. Because all too often – for various reasons – the representations simply are not true.