Is It Illegal for Collection Agencies to Buy Debt in the US

In the US, collection agencies are allowed to buy debt from creditors, but there are some restrictions. The Fair Debt Collection Practices Act (FDCPA) regulates the behavior of collection agencies.

The FDCPA prohibits collection agencies from engaging in unfair or deceptive practices when buying debt. This means they must clearly disclose to consumers the terms of the debt sale, including the identity of the new creditor.

Collection agencies can buy debt from creditors, but they must comply with the FDCPA. This includes obtaining proper documentation and ensuring the debt is valid.

Related reading: What to Do about Debt Collection Agencies

Debt collectors are regulated by laws that prohibit certain actions. The Texas Debt Collection Act and the Fair Debt Collection Practices Act regulate debt collectors.

Debt collectors can't call you at work if they know your employer doesn't allow it. They also can't call you before 8:00 a.m. or after 9:00 p.m. unless they know it's more convenient for you.

Worth a look: Fair Debt Collection Practices Act Attorneys Fees

Debt collectors are not allowed to use unfair or unconscionable means to collect a debt. This means they can't use tactics that are designed to harass, oppress, or abuse you.

To stop further contact with a debt collector, you need to notify them in writing. Keep a copy of your letter and send the original to the debt collector by certified mail.

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Fair Collection Practices are in place to protect you from aggressive and unfair debt collection tactics.

Professional debt collectors, working for agencies or attorneys, are governed by the Fair Debt Collection Practices Act. This law prohibits them from calling you at work if they know your employer doesn't permit such calls, or calling you before 8:00 a.m. or after 9:00 p.m. unless they have your consent.

Debt buyers, on the other hand, are subject to different rules. They can't use profanity or threaten you with violence, and they can't pretend to be attorneys or government representatives. They're also not allowed to garnish your wages or file lawsuits that would be in violation of the statute of limitations.

If you're being harassed or abused by debt collectors, you can stop further contact by sending a written notice to the collector. Keep a copy of your letter and send the original by certified mail.

Related reading: Fair Debt Collection

If you're being pursued by a debt buyer for money you don't owe, you have the right to dispute the debt.

To do so, you must write to the debt buyer within 30 days after receiving an initial call or letter about the debt. This is a requirement under the federal Fair Debt Collection Practices Act (FDCPA).

You should send your letter by certified mail, so you have a record of its delivery and receipt. This will help protect your rights.

Your letter should tell the debt buyer that you dispute the debt and ask them to substantiate it. You may want to request specific proof, such as the name and address of the original creditor, the date the alleged debt was incurred, and an itemization of the debt.

Here are some specific details you may want to include in your letter:

Disputing the debt in writing may save you time and headaches down the road, and may even prevent the debt buyer from wrongly suing you or reporting the debt to a credit reporting agency.

Debt buyers are regulated by the Fair Debt Collection Practices Act (FDCPA), but only if their main line of business is debt collection. In 2017, the Supreme Court ruled that debt buyers whose main business is not debt collection are exempt from the FDCPA.

The FDCPA does not apply equally to all debt buyers, leaving a loophole for some debt buyers to avoid regulation. To address this issue, the US Congress could enact legislation to ensure the FDCPA's protections apply to all debt buyers. In the meantime, state laws like Minnesota's 2021 law regulate debt collection and apply to debt buyers.

Some debt buyers, like Encore Capital Group and Portfolio Recovery Associates, purchase defaulted consumer receivables from major banks and credit unions. These companies have purchased the rights to collect over $200 billion in defaulted consumer debts.

Debt buyers have certain rules they must follow when dealing with consumers. Debt buyers may not use profanity or threaten you with violence.

If you're ever contacted by a debt buyer, you should know your rights. Debt buyers may not tell you that you will be arrested if you don’t pay.

Debt buyers must also be honest about who they are and why they're contacting you. Debt buyers may not pretend to be attorneys or government representatives.

Debt buyers have limitations on how and when they can contact you. Debt buyers may not tell your employer or others about your debts.

Debt buyers may not contact you before 8 a.m. or after 9 p.m. unless you agree. They may also not pretend that they are contacting you for other reasons.

Here are some specific actions debt buyers may not take:

Debt buyers must follow these rules to protect consumers from unfair practices.

Debt buyers are firms that purchase old debts from creditors for pennies on the dollar. They often don't purchase individual contracts or account statements to prove the debts are owed.

Some debt buyers are firms that focus on purchasing and collecting debt, while others are collection agencies and law firms that collect debt for others. In addition, some firms are passive debt buyers, investing in portfolios but not engaging in actual debt collection.

The debt collection industry, which includes debt buyers, recovers and returns billions of dollars in delinquent debt to creditors annually, increasing the availability of consumer credit and reducing its cost. This industry provides over 230,000 jobs nationwide, according to a trade group representing collection agencies and creditors.

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The Reappearing Debt is a real phenomenon that can be frustrating and confusing for consumers. It's not uncommon for a creditor to sell a debt portfolio to an initial debt buyer, who then sells it to another debt buyer, and so on.

This can happen multiple times over many years, leaving consumers to deal with different debt buyers for the same debt. Some citizens report that they thought they fixed a problem with a debt buyer who wrongly pursued them for money they didn't owe, only to later be pursued by other debt buyers for the same debt.

The Supreme Court has made rulings that favor corporations like debt buyers, giving them the green light to collect debt even if it's too old to be enforced by the courts.

In a 2017 case, the Supreme Court ruled in favor of Midland Credit Management, Inc., a debt collection company, allowing them to file a proof of claim on a debt that was deemed "stale" by the Alabama Bankruptcy Court.

The court's decision was met with dissent from Justices Sotomayor, Ginsburg, and Kagan, who argued that this practice is both "unfair" and "unconscionable" as it allows debt collectors to profit from buying old debt and hoping no one notices.

Federal regulations play a crucial role in shaping the landscape of federal and Supreme Court rulings. The Administrative Procedure Act of 1946 established the framework for federal agencies to create and enforce regulations, which must be published in the Federal Register.

The Federal Register is a daily publication that contains official documents, including proposed and final regulations, notices, and presidential documents. It's like a giant to-do list for federal agencies, keeping track of all the changes and updates.

The Code of Federal Regulations is a codification of all federal regulations, organized by subject and title. It's a comprehensive resource that helps citizens, businesses, and government agencies navigate the complex world of federal regulations.

The Office of Information and Regulatory Affairs (OIRA) reviews and evaluates federal regulations to ensure they're consistent with the President's policy priorities. This oversight helps prevent regulatory overreach and promotes a more efficient and effective regulatory process.

The Regulatory Flexibility Act of 1980 requires federal agencies to assess the impact of their regulations on small businesses and other small entities. This ensures that regulations don't unfairly burden these groups.

In a significant Supreme Court case, the court ruled in favor of Midland Credit Management, Inc., a debt collection company, on May 15, 2017.

The case involved Johnson, who had filed for Chapter 13 bankruptcy and was being sued by Midland for a credit card debt of $1,879.71. The debt was considered "stale" as Johnson was under bankruptcy protection.

The Supreme Court found that Midland's proof of claim did not violate Alabama law or the bankruptcy code. This ruling allowed debt collectors to file claims in bankruptcy proceedings for debts that are too old to be enforced by the courts.

Justices Sotomayor, Ginsburg, and Kagan dissented from the Court's conclusion, calling the practice of buying stale debt and filing claims "unfair" and "unconscionable". They argued that professional debt collectors were building a business out of this practice.

The debt buying industry is a complex system where creditors sell old debts to debt buyers for pennies on the dollar. This can be as little as five cents per dollar owed, leaving debt buyers to aggressively pursue individuals for payment of the supposed debts.

Debt buyers typically purchase electronic files of information about the portfolio of debts, without obtaining copies of individual contracts or account statements to prove the debt is owed. This can lead to individuals being targeted for debt that isn't theirs, such as credit card bills for a credit card they never had or utility bills for a place where they never lived.

Some of the largest debt buyers in the US include Encore Capital Group and Portfolio Recovery Associates, which have purchased the rights to collect over $200 billion in defaulted consumer debts.

A debt buyer is a firm that purchases old debts from creditors for pennies on the dollar. They often pay less than five cents per dollar owed.

Debt buyers acquire electronic files, or "datastreams", of information about the portfolios of debts they purchase, but usually don't obtain copies of individual contracts or account statements to prove the debt.

Debt buyers can be firms that specialize in purchasing and collecting debt, or collection agencies and law firms that collect on debt owned by others. Some debt buyers are passive investors that buy and resell portfolios without engaging in actual debt collection.

The debt collection industry, which includes debt buyers, recovers and returns billions of dollars in delinquent debt to creditors annually, increasing the availability of consumer credit and reducing its cost.

The regulation of debt buyers is a complex issue, and it's essential to understand the current state of affairs. In 2017, the United States Supreme Court ruled that the FDCPA does not apply to debt buyers whose main line of business is something other than debt collection.

The FDCPA's protections do not equally apply to all debt buyers, leaving a gap in consumer protection. However, the state of Minnesota has taken steps to close this gap by passing a law in 2021 that makes clear that Minnesota state laws regulating debt collection apply to debt buyers.

If you're contacted by a debt buyer, it's crucial to take action within 30 days to voice your objection and ask for proof that you owe the money. This can be a powerful step in protecting your rights.

Debt buyers are subject to certain rules and regulations, including a prohibition on using profanity or threatening violence, as well as pretending to be attorneys or government representatives. They are also not allowed to tell your employer or others about your debts or contact you before 8 a.m. or after 9 p.m. unless you agree.

Here are some specific things debt buyers may not do:

It's worth noting that the debt collection industry, which includes debt buyers, is a significant employer, providing over 230,000 jobs nationwide in 2013, according to ACA International.

Settlement is a viable option for both parties involved in a debt case. The debtor can contact the creditor's attorney to see if they're willing to negotiate a settlement.

A payment plan is a common type of settlement, where the debtor agrees to pay a certain amount each month for a set period. This amount can be the full amount owed or less.

If the debtor fails to follow the payment plan, the creditor may file a new lawsuit to enforce the contract. The creditor may also file a new lawsuit if the debtor doesn't make the agreed-upon payments.

In some hardship cases, the creditor may discuss the hardship with the debtor to reach a resolution. This is often the case with medical debts.

Hiring a mediator can also help the parties work through their dispute and reach an agreement.

Broaden your view: Collection Payment

The largest debt buyers in the industry are Encore Capital Group and Portfolio Recovery Associates. They purchase portfolios of defaulted consumer receivables from major banks, credit unions, and utility providers.

These two companies have purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts by 2015. They pay only pennies on the dollar for the debt, but may attempt to collect the full amount claimed by the original lender.

Additional reading: Sequium Collect

Encore Capital Group is the largest debt buyer and collector in the United States, with revenues soaring from $316 million in 2009 to $773 million in 2013. It's a publicly traded NASDAQ Global Select company, listed on the Russell 2000, the S&P SmallCap 600, and the Wilshire 4500.

Portfolio Recovery Associates was the second-largest debt buyer in 2015, and NCO, previously the largest debt collector, was taken private in 2006 after merging with One Equity Partners.

Here are the largest debt buyers in the industry: