"Zombie" Debt Collectors
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Posted by Paul
(216.127.82.97) on May 17, 2004 at 21:31:11:
Good reading on “zombie debt collectors.” Zombie debt collectors dig up your old mistakes There’s a hot new growth industry: companies that buy bad debts for pennies and squeeze you to pay in flagrant violation of federal law. Here’s how to get them off your back. By Liz Pulliam Weston Debbie made a mistake when she was in college.As a student in Fort Worth, Texas, she maxed out a Citibank credit card with a $300 limit and never paid the bill. Debbie said Citibank charged off the debt sometime between 1987 and 1989, and the liability has long since disappeared from her credit report. There’s money in old debt
A decade ago, most people who reneged on debts could rest easy after several years passed, since few creditors tried to collect on old bills, particularly for small amounts. Today, however, collecting on old debts is a rapidly expanding industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar. Then, they use credit scoring and other new technologies to identify which debtors are most likely to pay. The players in this “junk debt” market range from fly-by-night outfits to well-established companies funded by Wall Street investors The amount that companies pay for bad debt depends on the type of account and its age. In general, McVity said:
· Debts that have recently been charged off: 6 to 7 cents on the dollar.
· Accounts that are slightly older and on which a collection agency or two has already taken a whack: 1.5 cents to 2 cents on the dollar.
· Years-old, out-of-statute debts: A penny or less. ….Paying off can hurt your credit score
What’s more, paying an old debt potentially can wreak havoc on a consumer’s credit score, as I discussed in “When paying bills can hurt your credit.” Such a payment can update a delinquency so that it looks more recent and takes a heavier toll on a credit score. For the rest of the story,,
http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P74812.asp
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