Beating Credit Card Debt Collectors at Their Own Game
Most of those people who cannot afford to pay their monthly minimum credit card payment become potential victims of the consumer debt collection industry. However, a growing number of consumers have found a law to protect themselves against credit card debt collectors.
Depending on how he or she spends it, time is the debt collector’s friend or enemy. Ideally debt collectors would like to spend their time with consumers who are easy to collect from. Everyone knows an overdue credit card debt will bring a call or letter for a debt collector. What they do not know is with a proper consumer response to that communication, the debt collector will move onto a more likely target.
Over the last 30 years the credit card industry has grown exponentially and the consumer debt collection business has as well.
According to the Federal Reserve and Business Week, the consumer credit industry increased from $133.7 billion of consumer debt obligations in 1970 to $2.5 trillion of consumer debt obligations in November 2007.
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, in the first quarter of 2009, 4.75 percent of bank cards were delinquent.
The point is, there are millions of delinquent credit card accounts to go around to ambitious debt collectors.
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.
Debt collectors make the same empty threats to both resistant and non-resistant consumers holding credit card debt. Usually, however, they only follow-up with more threats and intimidation with the non-resistant majority of delinquent credit card account holders. The secret is learning the correct response to those initial threats and how to use the Fair Debt Collection Practices Act (FDCPA).
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 put up no resistance or with those who properly dispute a debt and request validation for it?