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HOW DEBT BUYERS CATCH CONSUMERS OFF GUARD

Posted by Ryan D. Peterson | Oct 28, 2021 | 0 Comments

Collection Agency Letter

Every year, several hundred thousand people across the United States are sued by companies (debt buyers) they have never done business with and may never have heard of.

These firms are called debt buyers or junk debt buyers and although they have never loaned anyone a penny, millions of Americans owe them money. Debt buyers purchase vast portfolios of bad debts—mostly delinquent credit cards—from lenders who have written them off as a loss. They pay just pennies on the dollar but can go after alleged debtors for the full face value of every debt plus interest at rates that routinely exceed 25 percent.

Debt buyers also rely on tax-funded state institutions—namely the court system—to secure much of their income. Leading debt buyers rank among the heaviest individual users of state court systems across the US, and various legal actions and research, including that of Human Rights Watch, have identified repeated patterns of error and lack of legal compliance in their lawsuits.

Photo by Ehud Neuhaus on Unsplash

Debtors Struggle to Mount an Effective Defense

These problems are often discovered long after the debt buyers have already won court judgments against alleged debtors, a situation that arises because of the inability of alleged debtors to mount an effective defense even when they are on the right side of the law.  Debt buyer lawsuits typically play out before the courts with a stark inequality of arms, pitting unrepresented defendants against seasoned collections attorneys.

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The amount at issue in any one debt buyer lawsuit rarely exceeds a few thousand dollars, but the stakes are often higher than they seem. Many of the defendants in these cases are poor or living at the margins of poverty and this is often the reason they fell into debt in the first place. For them, the impact of an adverse judgment can be devastating.

The Debt Buying Industry is Large Scale

The scale of the debt buying industry is hard to overstate. Leading firm Encore Capital claims that one in every five US consumers either owes it money or has owed it money in the past. While a relative handful of large firms dominate the business, there are hundreds and perhaps thousands of companies buying up delinquent debts across the US at any given point in time.

How Do Debt Buyers Collect Their Money

Leading debt buyers collect about half of their revenue by suing alleged debtors in court. Encore and one of its leading competitors, Portfolio Recovery Associates, collected a combined total of more than $1 billion through hundreds of thousands of lawsuits in 2014. In New York State, Encore filed more lawsuits than any other civil plaintiff that year, with Portfolio coming in third. Eight of New York's 20 most litigious plaintiffs were debt buyers in 2014, and they accounted for 47 percent of the 142,506 cases filed by that group.

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Many debt buyer lawsuits rest on a foundation of highly questionable information and evidence. Debt buyers do not always receive meaningful evidence in support of their claims when they purchase debt, and in some cases, the sellers explicitly refuse to warrant that any of the information they passed on is accurate or even that the debts are legally enforceable.

Enormous accumulations of interest—often in excess of 25 percent compounded over periods of several years—are added to many alleged debts based entirely on the debt buyers' own calculations. 

Debt buyer lawsuits are sometimes riddled with fundamental errors. Debt buyers have sued the wrong people, sued debtors for the wrong amounts, or sued to collect debts that had already been paid.
Photo by Tim Gouw on Unsplash

Questionable Practices and Fundamental Errors

The predictable result of all this is that debt buyer lawsuits are sometimes riddled with fundamental errorsDebt buyers have sued the wrong people, sued debtors for the wrong amounts, or sued to collect debts that had already been paid.

In other cases, they have filed lawsuits that were barred by the applicable statutes of limitations or were otherwise legally deficient. There have been multiple allegations, some of which have led to successful legal cases, that some debt buyer attorneys fail to serve defendants notice of the suits against them in order to obtain large volumes of uncontested judgments.

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Some of junk debt buyers we frequently come across include: 

  • Midland Funding, LLC
  • Midland Credit Management, Inc
  • LVNV Funding, LLC 
  • Portfolio Recovery Associates, LLC
  • Jefferson Capital Systems, Inc
  • Crown Asset Management, LLC
  • Unifund CCR, LLC 
  • Cavalry SPV, LLC 
  • Razor Capital, LLC 
  • Asset Acceptance, LLC 
  • Absolute Resolutions Investment, LLC

We can help you beat the debt collectors

This is where our tough, experienced staff at Peterson Legal comes inJundebt buyers have attorneys looking out for their best interests, and we are here to look out for yours. By hiring us, you receive 

  • a better understanding of your rights;
  • answers regarding who is suing you and the basis for their claim; 
  • someone who will interact on your behalf with the other side; 
  • a successful outcome in the form of either a negotiated settlement or, even better, dismissal of the claim. 

Hope for a better outcome

Once we enter the picture, we're often able to get more information and better payment terms from your creditors than you may be able to get for yourself. We are committed to leaving you better off than you were when you called us. This means that we take the vast majority of these cases on a one-time, flat rate, with no disguised or surprised fees at the end of representation. 

Call (612) 367-6568 or email us today so that we can begin to offer you the support and information that you need to manage your unique situation. The most important thing you can do to help your case (or potential case) is to call or email us as soon as possible. The sooner we are brought in, the more flexibility we have to negotiate on your behalf.

There is hope for a better outcome than your current reality, and our honest, knowledgeable staff at Peterson Legal can provide a path to a better financial future.

Source: Human Rights Watch

About the Author

Ryan D. Peterson

Attorney Ryan D. Peterson Ryan D. Peterson is a former debt collection attorney turned consumer rights expert and advocate. After graduating from William Mitchell law school in 2008, Ryan opened his own criminal defense firm. In 2010 Ryan joined a Minneapolis-based debt collection firm. Ther...

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