If you have ever received a collection letter from a junk debt buyer or its representatives, you know how disgusted I felt when that happened to me a few years back. These companies buy for very little money lists of debts that have been charged off by banks and then seek to collect the full amounts of the original debts, sometimes with interest. This is one of the biggest scams working against consumers today.
Although there are laws that make certain debt collection practices (such as threatening you with injury, arrest, or bogus lawsuits) illegal, junk debt companies find loopholes to work around. They have deceived millions of consumers into making debt payments they never should have made. Sometimes consumers get lucky and the courts stop a practice.
A Federal court recently re-instated a class action lawsuit against Midland Funding, LLC, one of the biggest and worst offenders in the junk debt buying industry. The lawsuit has put attorneys across the US on notice that non-banking companies attempting to collect debts are not protected by the National Banking Act. This is a good thing for consumers because it means that these junk debt buyers have to comply with state laws, which are often more protective of consumer interests than Federal law.
Better yet, it means that for the first time in their 20+ year history these companies are being distinguished from the banks that have exploited their interest in debt collection. The banks write you off and go about their business, never caring about the harm they inflict on your credit and your lifestyle. That is a very short-sighted business practice because the banks systematically harm the very people who form their customer base.
I am not saying you should not pay your debts. Of course you should. Consumer debt drives our economy. But when consumers fall on hard times the banks only work harder to collect what you owe them and they pile interest rates and late fees onto your accounts, making it more and more difficult to pay them. Anyone who lost their job in the last recession knows exactly how this works.
Banks are never held accountable for their anti-consumer policies and they take the attitude that if they cannot do business with you then they will wait until your kids grow up and hit them up for business instead.
And banks are sometimes complicit in illegal debt collection activity, too. Just because a bank initiated a debt legally is no guarantee it will not try to cheat the consumer in violation of the law if the debt moves into collection. Junk debt buyers are vulnerable to challenge because they typically have no information to show that a debt is legitimate. Even if your attorney in his heart believes that you owe a charged-off debt to someone, he will stand up in court and demand that the junk debt buyer prove you owe it to them -- and in most cases they cannot.
If you receive a junk debt collection letter, it may only be the first of many as these junk debt buyers will use dozens of law firms and collection agencies to harass you in spite of the Fair Debt Collection Practices Act, which only prohibits any one single business or entity from hounding you for payment. Every time you write a letter demanding verification of the date the machine kicks into action, passing the responsibility for collection back to the junk debt buyer, who then assigns it to another "agent of record".
You should complain to your state Attorney General's office about these consumer-unfriendly practices. You should only communicate with junk debt buyers and their representatives through the mail. You should keep copies of everything. You should demand that the debts be proven before you even consider a negotiation. If the debt buyer can show proof that they are the legal owner of the debt then you must pay, but you should seek legal advice first because you may be tricked into a payment plan that will never be paid off.
If you are feeling discouraged, don't be. You must respond to these fake collections to protect yourself against default judgments. You must also refuse to pay anything but a one-time lump sum (if you must pay anything at all). You must also document everything that happens so that you can sue them if they make a mistake.
But most importantly, you should never ignore a junk debt collector because they will do everything they can to ruin your credit and make your life miserable. One of the worst things a junk debt buyer will do is "re-age" your debt on your credit record; this is where they change the date of last activity to keep the debt on your credit record longer than seven years. This is also illegal but they sometimes do it anyway.
The credit bureau is not your friend. It will not try to protect you against fraudulent activity, except insofar as the law requires it to do something. But credit bureaus do as little as possible and they are not held accountable by the law for reporting information that has been "verified" by the creditor (usually just a letter affirming that the debt is real, even though it technically is not).
The 2nd Circuit Court of Appeals did consumers a great favor by arguing that Midland Funding LLC is not a bank and therefore is not protected by the National Banking Act. By stipulating that junk debt buyers act in their own interests and not in the interests of banks, the court has chipped away at the foundation of lies upon which junk debt collection is built. But more work remains to be done. Keep fighting them and one day this sordid practice will be consigned to the wastebin of scams that send the scammers to jail.
A Federal court recently re-instated a class action lawsuit against Midland Funding, LLC, one of the biggest and worst offenders in the junk debt buying industry. The lawsuit has put attorneys across the US on notice that non-banking companies attempting to collect debts are not protected by the National Banking Act. This is a good thing for consumers because it means that these junk debt buyers have to comply with state laws, which are often more protective of consumer interests than Federal law.
Better yet, it means that for the first time in their 20+ year history these companies are being distinguished from the banks that have exploited their interest in debt collection. The banks write you off and go about their business, never caring about the harm they inflict on your credit and your lifestyle. That is a very short-sighted business practice because the banks systematically harm the very people who form their customer base.
I am not saying you should not pay your debts. Of course you should. Consumer debt drives our economy. But when consumers fall on hard times the banks only work harder to collect what you owe them and they pile interest rates and late fees onto your accounts, making it more and more difficult to pay them. Anyone who lost their job in the last recession knows exactly how this works.
Banks are never held accountable for their anti-consumer policies and they take the attitude that if they cannot do business with you then they will wait until your kids grow up and hit them up for business instead.
And banks are sometimes complicit in illegal debt collection activity, too. Just because a bank initiated a debt legally is no guarantee it will not try to cheat the consumer in violation of the law if the debt moves into collection. Junk debt buyers are vulnerable to challenge because they typically have no information to show that a debt is legitimate. Even if your attorney in his heart believes that you owe a charged-off debt to someone, he will stand up in court and demand that the junk debt buyer prove you owe it to them -- and in most cases they cannot.
If you receive a junk debt collection letter, it may only be the first of many as these junk debt buyers will use dozens of law firms and collection agencies to harass you in spite of the Fair Debt Collection Practices Act, which only prohibits any one single business or entity from hounding you for payment. Every time you write a letter demanding verification of the date the machine kicks into action, passing the responsibility for collection back to the junk debt buyer, who then assigns it to another "agent of record".
You should complain to your state Attorney General's office about these consumer-unfriendly practices. You should only communicate with junk debt buyers and their representatives through the mail. You should keep copies of everything. You should demand that the debts be proven before you even consider a negotiation. If the debt buyer can show proof that they are the legal owner of the debt then you must pay, but you should seek legal advice first because you may be tricked into a payment plan that will never be paid off.
If you are feeling discouraged, don't be. You must respond to these fake collections to protect yourself against default judgments. You must also refuse to pay anything but a one-time lump sum (if you must pay anything at all). You must also document everything that happens so that you can sue them if they make a mistake.
But most importantly, you should never ignore a junk debt collector because they will do everything they can to ruin your credit and make your life miserable. One of the worst things a junk debt buyer will do is "re-age" your debt on your credit record; this is where they change the date of last activity to keep the debt on your credit record longer than seven years. This is also illegal but they sometimes do it anyway.
The credit bureau is not your friend. It will not try to protect you against fraudulent activity, except insofar as the law requires it to do something. But credit bureaus do as little as possible and they are not held accountable by the law for reporting information that has been "verified" by the creditor (usually just a letter affirming that the debt is real, even though it technically is not).
The 2nd Circuit Court of Appeals did consumers a great favor by arguing that Midland Funding LLC is not a bank and therefore is not protected by the National Banking Act. By stipulating that junk debt buyers act in their own interests and not in the interests of banks, the court has chipped away at the foundation of lies upon which junk debt collection is built. But more work remains to be done. Keep fighting them and one day this sordid practice will be consigned to the wastebin of scams that send the scammers to jail.