Press Releases and Media Advisories
Beware of Junk Debt Buyers--A Springboard Consumer Alert
March 30, 2005, 1:00 pm
Consumers should be prepared to deal with the aggressive and frequently unlawful tactics of junk debt buyers. Only by knowing one's rights can one hope to withstand the assault junk debt buyers and their collectors.
Ten years ago, consumers who had not honored their long-standing debts did not need to worry as few collection agencies ever tried to collect on old bills. Nowadays, collecting on old debts is a burgeoning multi-million dollar industry. Companies known as junk debt buyers purchase debt on uncollectible accounts from original lenders for pennies on the dollar and use credit scoring to identify which consumers are most likely to pay. Expanding categories of debt for sale range from phone companies, medical industries to even health clubs and gyms. Consumers should know their rights to ensure they are not being contacted to pay an old debt that violates the Fair Credit Reporting Act and the Fair Debt Collection Practices Act.
Knowing the statute of limitations for a delinquent debt is the first step to protecting oneself against junk debt buyers which is the time limit for the creditor to file a lawsuit. This period starts when the debt becomes delinquent and can last several years depending on where the consumer lives. After the time has passed, debts expire and are supposed to be removed from consumers’ credit reports. If the statute has expired, companies have limited rights in collecting the amount owed.
Junk debt buyers often contact consumers in an aggressive manner to obtain payment. It is a settlement driven business, meaning the junk debt collector will start high and work their way down. Several of these companies result to predatory practices, including “reaging” of the debt on one’s credit report to make it look more recent, pressuring consumers to pay, calling multiple times a day, and even giving false information on the statute of limitations for an old debt. Reaging is a violation of the Fair Credit Reporting Act.
“It is important that consumers know their rights in the event they are contacted by a junk debt buyer,” said Dianne Wilkman, President of Springboard, a non-profit credit counseling organization. “These companies are experts at persuading unknowing consumers to agree to pay old debts which can severely damage their credit.”
What You Should DoAsk for Proof. Consumers are urged to ask for documentation for the debt, such as an agreement or account history; most junk debt buyers will not have this information. According to the Fair Debt Collection Practices Act, a collector can’t report on an old debt if they cannot provide proof that the consumer owes the money.
Never Acknowledge a Bad Debt. By agreeing to pay or simply acknowledging the debt, consumers can unintentionally extend the statute of limitations and suffer a negative drop in their credit.
Put it in writing. Consider writing a letter. Federal law requires collectors to comply with consumers’ requests. Make sure in the letter it specifically states that the consumer isn’t acknowledging the debt.
Monitor your credit report. If a collector attempts to repost an old debt or attempt s to convince the consumer that the debt has not expired, consumers must fight back vigorously. The first course of action is for consumers to obtain a free copy of their credit report by calling 1-877-322-8228 or visiting www.annualcreditreport.com to ensure their credit stays clear of misreported entries. Because of phony websites that imitate the annualcreditreport.com site, it’s better to call so as not to be a victim of an identity theft scam. If their credit score has been affected, consumers must dispute the inquiry with the credit bureaus and with the collection agency.
Opt out of prescreened credit offers. Your name on these lists may alert debt collectors who will drop a derogatory item onto your credit report in order to snag your mortgage application (you may not be able to close without paying them). Call 888-5-OPT-OUT (888-567-8688) or visit www.optoutprescreen.com. Opting out reduces some of these risks.
Get help. Springboard, a nonprofit education and credit counseling organization, can help consumers avoid making decisions that can negatively affect their credit report and ultimately, their purchasing power as well as help consumers clear up inaccuracies on their credit reports and improve their credit scores. The toll-free number for consumers who seek additional assistance is 1-800-WISEPLAN (800-947-3752).
About Springboard Nonprofit Consumer Credit Management
Springboard is a nonprofit credit education and financial counseling organization founded in 1974. The agency offers personal financial education and assistance with money, credit and debt management through confidential counseling. Springboard is accredited by the Council on Accreditation, signifying high standards for agency governance, fiscal integrity, counselor certification and service delivery policies. The agency provides pre-bankruptcy counseling and debtor education as mandated by the bankruptcy reform law. Springboard is a HUD approved housing counseling agency and a member of the National Foundation for Credit Counseling, a national organization of nonprofit credit counseling agencies. The agency has several locations in California and offers face-to-face and nationwide phone counseling services. For more information on Springboard, call 1-800 WISE PLAN (1-800-947-3752) ext. 7750 or visit their web site at www.credit.org.
