Many debt settlement clients encounter a debt buyer during the course of negotiation process. A debt buyer purchases large portfolios of delinquent debts and then attempts to collect the debt. The difference between what they are able to collect and what they bought the debt for is their profit.

Because of its historic profitability and the dramatic increase in credit card debt in recent years, there has been a significant increase in the volume of debt portfolios purchased since 2000. Between 2000 and 2005 alone, the volume of debt purchased doubled. Almost 70% of the portfolios available for purchase consist of defaulted credit card debt. Due to their pervasiveness throughout the delinquent debt arena, consumers enrolled in debt settlement programs oftentimes have multiple debts purchased by “junk debt buyers”, which they are pejoratively referred to as.

Debt settlement clients can have their credit card or repossession deficiency balances purchased for as little as one or two cents on the dollar if the debts are several years old. This being the case, having the debt bought and sold typically leads to greater savings for the client, since a 40 percent settlement still means remarkable profits for the debt buyer.

Unfortunately, however, many debt buyers can be quite aggressive in their collection efforts. The reason why they tend to be more hostile in their collections is that they have no customer-client relationship with the consumer and hopes of salvaging a potential relationship do not exist. On the bright side, however, by sending a Power of Attorney to the collection agency representing the debt buyer (or to the debt buyer itself), they are legally obligated to contact your debt settlement company instead. (Debt buyers are not considered original creditors under the FDCPA even though they technically own the debt.)

Some other controversies involving debt buyers include knowingly pursuing debts past the statute of limitations legally, illegally reporting debts past the 7 year delinquency limit, and in some cases, pursuing debts that are not actually owed by a consumer.  For this reason, debt validation letters may be an especially useful tool for consumers who have debts being collected by a debt buyer.  A debt validation letter is a written request for a collector to prove that you owe what they say and that they have the legal right to collect the balance. 

If you are interested in learning more about debt settlement and how creditor negotiations work, submit a form now.