Most people would simply rather pay their credit card debts than deal with collection phone calls and collection attorney letters. But, what about those who cannot afford to make monthly minimum payments on their credit card debt? Many fall prey to the debt collection industry. Some, however, become educated consumers and use the law to force debt collectors to spend their time with other, less knowledgeable consumers.
Today most unsecured consumer debt that is up for collection is credit card debt. The consumer debt collection agencies and collection attorneys who pursue these debts work on commission. They do not get paid until some money is collected. Time is money for a credit card debt collector.
Over the last 30 years the credit card industry has grown exponentially and the consumer debt collection business has as well.
According to the Federal Reserve and Business Week, the consumer credit industry increased from $133.7 billion of consumer debt obligations in 1970 to $2.5 trillion of consumer debt obligations in November 2007.
According to a trade group for the debt collection industry, ACA International, each year debt collectors put more than $40 billion back into the U.S. economy.
According to data from the U.S. Census Bureau, there were 159 million credit cardholders in the United States in 2000, 173 million in 2006.
According to the American Banking Associate, 4.75 percent of bank cards were delinquent in the first quarter of 2009.
These statistics indicate debt collectors are awash in millions of delinquent credit card accounts.
The Federal Reserve requires credit card companies to hold reserves for bad debts. The credit card companies profit from these debts after they are written off by selling them to junk debt buyers for no more than one penny on a dime, or 10 percent of their value. With that discount, junk debt buyers and their collection agencies and collection attorneys can be quite profitable by only collecting on 30 or 40 percent of the purchased accounts.
If a consumer resists collection attempts (after they learn how to properly do so), it is simply not profitable for collectors to put more time into chasing them for their debt, when they can put that time in getting the easy returns from other people who put up no resistance. The Fair Debt Collection Practices Act (FDCPA) is the key to resistance.
The Fair Debt Collection Practices Act covers the behavior of collection agencies, junk debt buyers, and collection attorneys. The FDCPA treats attorneys as debts collectors, if they are collecting consumer debt. The consumer must be notified in writing by the debt collector of their right to dispute the debt and have it validated, according to the FDCPA. Copies of original documentation that verifies a debt are considered proper validation by the FDCPA. The FDCPA gives the consumer the right to tell the debt collector to stop collection activity until they have validated the debt.
So, who should the consumer debt-collection commissioned professionals spend their time with, those who properly dispute and request validation or those who put up no resistance?
