If you’ve ever had an overdue bill get sent to collections, then you may have encountered a junk debt buyer. These companies purchase overdue accounts from a business or lender with the intent of collecting on the debt themselves.
But what is a junk debt buyer and is it the same thing as a debt collection agency? This article will explain what a junk debt buyer is, and the impact these companies can have on your credit score.
What is a junk debt buyer?
A junk debt buyer is a collection agency that purchases delinquent debt from credit card companies. Sometimes they even buy debt from other collection agencies. Junk debt buyers are also sometimes referred to as zombie debt buyers or bad debt buyers.
Let’s say you stop making your monthly payments on a credit card. Credit card companies attempt to collect on the debt for a certain period of time.
But at some point, they will sell the credit card debt to debt buyers. At that point, you can no longer work out a payment arrangement with your original creditor and have to make arrangements with the debt buyer.
Junk debt buyers purchase credit card debt for pennies on the dollar. From there, they have to find a way to collect on that debt. Junk debt buyers will use a variety of methods to try to get consumers to make payments on their debt, and these methods are not always ethical or legal.
Junk debt buyers often purchase debt that is past the statute of limitations, which means that legally, the debt no longer has to be repaid. But if they can convince the borrower to make even a small payment, the statute of limitations restarts and they can sue to collect on the debt. More than 90% of cases are won by default judgment because the defendant doesn’t appear in court.
Junk Debt Buyers vs. Debt Collectors
Many people use the terms junk debt buyer and debt collector interchangeably, but they are not the same. A junk debt buyer is a company that purchases junk debt with the intent of collecting on it.
In comparison, a debt collector is a third-party company that collects debt payments for other companies. Junk debt buyers may collect their own debt or they may outsource this work to a debt collection agency.
Do junk debt buyers have an impact on your credit?
If you have a bill or loan sent to collections, it will affect your credit. Junk debt buyers can report you to the three major credit bureaus — Experian, Equifax, and TransUnion.
Delinquencies and charge-offs won’t stay on your credit report forever, but most will stay there for up to seven years. And paying junk debt buyers won’t remove the negative mark from your credit report, though it will be updated to show that you made your payment.
You may be able to negotiate with a junk debt buyer for a pay for delete arrangement. This means that you’ll pay the debt in full if they agree to remove the account from your credit report.
However, this strategy is not guaranteed to work and you’ll want to get the agreement in writing before making any payments.
How do you know if your debt has been sold?
If you’re delinquent on a bill or credit card, how do you know if the debt has been sold to a junk debt buyer? Unfortunately, your original lender is not required to share this information with you.
Odds are, you’re not going to find out that your debt has been sold until you’re contacted by the junk debt buyer. The company will likely send you a letter notifying you that it has acquired your debt.
If this happens, it’s important that you don’t overreact. The debt has been sold and there’s nothing you can do about that. At this point, your best bet may be to negotiate with them.
First, you should request that the debt buyer validate your debt. To do this, you must send the debt collector a debt validation letter. If the debt is legitimate, the company will send you documentation proving that you took out the original debt and that they have a right to collect on it.
This is important because, under the Fair Debt Collection Practices Act, junk debt buyers cannot try to collect on a debt if they cannot prove you owe the debt. And they can’t list the debt on your credit report either.
How do you know if the statute of limitations has passed?
If a junk debt buyer contacts you, you should also consider whether the statute of limitations has passed. If the debt is recent, it’s likely that the statute of limitations is not yet up, and you’re still liable for the full amount.
But if it’s an older debt, it’s possible that you may not be liable for it anymore. The statute of limitations can vary depending on where you live but on average, it lasts between four to six years.
Unfortunately, debt collectors will not always honor the statute of limitations and will continue contacting you and trying to get you to pay. This can lead to a problem known as zombie debt.
Zombie debt is when you thought you’d resolved a debt issue, but it just keeps popping up again over the years. Even though you resolved the debt, creditors continue trying to collect on it.
If a debt collector is harassing you over debt that is past the statute of limitations, you should cut off all contact. They cannot take you to court over the debt, so if you cease communications, they should eventually stop trying to collect on it.
A junk debt buyer is a company that purchases debt from lenders and other collection agencies with the goal of collecting on the debt. A debt buyer may attempt to collect on the payments themselves, or outsource this task to another collection agency.
Dealing with junk debt buyers can be challenging because they often resort to unethical tactics or harassment. Make sure you understand your rights when you’re attempting to negotiate with a debt buyer. If you’re unsure, it may be worth your time to seek advice from an attorney.
And most importantly, once you’ve resolved the issue, you need to come up with a plan for managing your finances and staying out of debt going forward. That way, you won’t end up in the same situation a couple of years down the road.