If you haven’t read my previous posts about the zombie debt collector Afni, Inc., you really should start with this post and work your way forward through the series before reading this post. None of the posts are terribly long, but they offer a great deal of context.
Bulk debt buyers buy aging debt at steep discounts. How steep a discount? Well, an industry “rule of thumb” is approximately 4% — 6% of the original debt amount. However, that’s not always the whole story. Debts are “non-performing assets” with a market value. There are several factors that can influence the value of a debt.
- The age of the debt and how close the debt is to being time-barred in the state in which it was incurred.
- The age of the debtor. Is the debtor in his 20’s and likely to be employable, or is the debtor retired an on a fixed income?
- The median income where the debtor resides. Often this is calculated on a per zip code basis.
- What kind of debt is it? For example, is it a debt subject to the accumulation of interest or not?
- What is the debtor’s work history? When was the debtor last known to be employed?
So if a debt has a high statistical probability of being repaid before becoming time-barred, it is worth more money, as a non-performing asset, than a debt that is statistically unlikely to be repaid.
Bulk debt buyers need to recover some of their losses when time-barred delinquent accounts don’t pay. This gives them three basic options: sell the time-barred debt to a zombie debt collector for a tiny fee of, say, 4% and walk away. Or, alternatively, engage directly in the practice of zombie debt collection. Lastly, they could, of course, just give up and cease collection attempts on the account.
But, as consumers with rights under the Fair Debt Collection Practices Act, we can take one of these choices away from Zombie debt collectors by writing a cease and deist letter and basically say “don’t contact me anymore and go pound sand.”
This leaves zombie debt collectors with two options instead of three. Now they have the choice between giving up on the account and selling it to another zombie debt collector for a similarly tiny fee. Why would they do that?
Well, it’s a win-win: the old debt collector gets to recover some small portion of its overall losses for the account, and the new debt collector gets to contact you about it. Of course, the first debt collector is not going to tell them about the cease and desist letter: they’re just going to share raw account data and walk away.
What can you do? Well, most thinkers in the credit repair industry will tell you there is nothing you can do.
I disagree. Whenever I send a cease and desist letter to a debt collector attempting to collect on time-barred debt, I always demand they cease contacting me, close the account and NOT resell the debt. So far, it has worked for me. Your millage will certainly vary. I’m just a layman, not a lawyer, but I can’t be the only person to have thought of this approach.
Is anyone else doing this, or am I wasting ink?