Consumer debt collectors! Credit Card debt collectors! There ought to be a law against them! Fortunately, there is a law, and educated consumers have learned how to use it to fend off these debt collectors by making their job difficult.
Time is money for a credit card debt collector, who is in the business of collecting unsecured consumer debt, most of which happens to be credit card debt. These consumer debt collectors and collection attorneys work on a percentage of what is collected. Most people think there is a debt collector for every debt, when the reality is there is only a debt collector for every easy-to-collect credit card debt.
Over the last 30 years the credit card industry has grown exponentially and the consumer debt collection business has as well.
Consumer credit went from $133.7 billion of in 1970 to $2.5 trillion of debt in November 2007, according to the Federal Reserve and Business Week.
Each year debt collectors put more than $40 billion back into the U.S. economy, according to ACA International, a trade group for the debt collection industry.
According to data from the U.S. Census Bureau, there were 173 million credit cardholders in the United States 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.
According to the FDCPA the debt collector must notify the consumer in writing of their right to dispute the debt and have it validated. Validation means the collector must send copies of original documentation verifying the debt. The FDCPA also says the consumer can instruct the debt collector to cease collection attempts until they properly validate the debt. As original creditors credit card companies are not covered by the Fair Debt Collection Practices Act. However, the behavior of collection agencies, collection attorneys, and junk debt buyers is covered by this federal law.
Should the debt collector invest their time with those who properly dispute and request validation or those who put up no resistance?
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