There's a common misconception that if a "debt buyer" is collecting a debt, it must really be owed. Say what you will about their tactics, but if a debt's being collected, it's probably owed. Right?
Think again.
Well, first, what's a "debt buyer?" Debt buyers are companies that buy huge portfolios of debt from creditors for pennies on the dollar--kind of a bulk purchase of debt. A debt buyer may buy thousands of overdue debtor accounts from a creditor at once. The debt buyer can then do what it wants with the debt it just bought. It tries to collect, and sometimes, files lawsuits against consumers to collect. Debt buyers often get civil judgments against debtors.
But a civil suit in California has revealed a dirty secret of debt buying (or rather, just confirmed what most of us already knew)--that debt buyers have no idea whether the debt they buy from creditors is legitimate or whether even owed...yet, they collect on it anyway.
The lawsuit that revealed this information was actually a contractual dispute over the purchase of debt between a debt buyer, CACH LLC, and a creditor, Bank of America (BOA), which sold bulk debt to CACH LLC. In the lawsuit it was revealed that in the contract of sale, there was an "as is" clause. In that clause, BOA essentially admitted, in writing, to CACH that some of the consumer debts CACH was buying from BOA (and of course, would eventually be collecting on, and suing consumers for), may have been discharged in bankruptcy, may have been too old to legally collect, may not have had payments applied properly....or may have already been fully paid by the consumer! BOA basically said to CACH about the debt that it was selling, "we can't guarantee the legitimacy of these debts at all," and in fact told CACH that they had no supporting documentation as to the debts at all. And the debt buyer CACH, naturally, said.... "OK."
So CACH then did what any good debt buyer would do knowing that it may be collecting on bad, unowed, miscalculated, unverified or inaccurate debt: It proceeded to collect the debts against consumers in numerous state courts by filing false affidavits (naturally, leaving out the parts about them not having records from BOA and stuff like, oh, not being sure if the debts they had bought from BOA were already paid by the consumers they were now suing).
Of course, BOA and CACH aren't alone in this fiasco; the article cites to many more situations where debt buyers have purchased debts "as is" with no idea if the debts they are buying and collecting on are valid.
We tend to think that if we used a credit card, we owe whatever the debt buyer is seeking to collect. We take for granted all our previous payments have been properly credited. That our contractual interest rate is being calculated correctly. That if we paid our debt in full, collections would have stopped. The general public thinks that everyone getting sued for a debt, must really owe it. But the revelation of debt buyer "as is" clauses, demonstrating the flippant recordkeeping of the debt buying and collection industry tell us otherwise. It's a frank wake up call that collectors and debt buyers often have little respect for the law, and little concern for the accuracy of their records, or for your rights as a consumer.
(the full article appears here http://www.americanbanker.com/issues/177_62/bofa-credit-cards-collections-debts-faulty-records-1047992-1.html?zkPrintable=true)
Questions? Give us a call. (954) 987-0515 or email at jason@jasonweaverpa.com.
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