Debt Buyer

Full definition

When a personal loan lender charges off an account after 120-180 days of non-payment, they have two options: keep the debt in their internal collections department or sell it to a third-party debt buyer. Most charged-off personal loan balances are sold. How debt buying works: The original creditor sells a portfolio of charged-off accounts to a debt buyer for 5-25 cents per dollar of face value (the price depends on how old the debt is and how collectible the creditor believes it is). The debt buyer now owns the debt legally. They attempt to collect the full balance from borrowers, keeping everything they recover above their purchase price. Multiple sales: A debt buyer that cannot collect may re-sell the debt to another buyer at an even lower price. The same debt can be sold multiple times over years, sometimes causing confusion about who the current owner is. Under the FDCPA, every debt buyer or collector must provide debt validation upon request. Your rights when dealing with a debt buyer: (1) Request debt validation within 30 days of first contact - the buyer must prove they own the debt and the amount is correct. (2) The debt buyer is bound by the FDCPA and cannot harass, threaten, or contact you at inconvenient times. (3) The statute of limitations on the debt does not reset when the debt is sold - it continues from the date of last activity on the original account. (4) You can send a written cease-communication letter requiring the buyer to stop contacting you (though this does not erase the debt). Settlement opportunity: Because debt buyers purchased the debt at a discount, they often settle for 25-60 cents on the dollar rather than pursue litigation. Settlement is most effective when: the debt is older, the statute of limitations is approaching, or you have a documented hardship.

• Charge-Off
• Collection agency
• Fair Debt Collection Practices Act (FDCPA)
• Debt validation letter
• Statute of limitations on debt