Some may call them a “junk debt buyer.” Why? Because they buy junk debt. Here’s how it works:
Say you had a JC Penny card a few years ago, but you lost your job and couldn’t afford to pay it off. JC Penny decided that they didn’t want to keep hounding you for the money, so they closed the account and “charged it off.” What is a charge off? It basically means that they’ve officially declared it a bad debt, and they’ve decided to write off the loss and give up on collecting from you.
Unfortunately for you, it isn’t over. Midland Funding calls JC Penny and says, “I see that you have about 900 charged-off accounts that have balances of about $600 to $1300 each. The face value of these accounts is $810,000. We’ll pay you $35,000 if you sell us the names, addresses, phone numbers, and account numbers of all these customers and let us keep everything we collect from them.”
JC Penny says “That’s $35,000 more than we have right now. You’ve got yourself a deal, Midland.”
And Midland pays the $35,000, and in return, gets a giant data tape of all of those JCPenny customers’ names, addresses, phone numbers, account numbers, and social security numbers. Then they start hammering you for money. And if you don’t pay, they might sue you.
Debt buyer lawsuits are notoriously sketchy. They almost never have a witness and their “evidence” is rarely admissible. So they’re fairly easy to win if you have a half-decent lawyer.
But most people don’t know this. And they don’t know that they can beat these lawsuits for a few hundred bucks. And they don’t know that settling with a debt buyer still leaves a big fat negative account on their credit report, and that beating a debt buyer in court requires the debt buyer to stop reporting the account altogether.
So because so few people actually know their rights, they fall victim to the debt buyers’ tricks and scare tactics, and they end up paying far more than they should.
This makes debt buying extremely profitable. If I were an evil person, I’d totally switch sides and get into the debt collection business myself, because I’d make a lot more money at it. Screwing ordinary people is a far, FAR easier way to make money than by taking corporations to court and grinding your way to justice against opponents who have more money, more political influence, more time, and whose lawyers get paid whether they win or lose.
But then I’d have to convert to atheism and become a hopeless hedonist.
Here are some of the most common debt buyers. Keep in mind, new ones pop up every year, so if you get sued by someone you’ve never heard of, it is probably a debt buyer and you should call a lawyer to fight it.
Common Debt Buyers (circa 2015).