Increasing amounts of Florida credit card lawsuits and debt collection lawsuits are filed by debt buyers rather than original creditors. Often, the lawsuits brought by debt buyers rely on incomplete and unreliable data and cause significant abuse of consumers. This post will describe the difference between debt buyers and original creditors. Other posts will describe some of the documented abuses of the legal system by debt buyers and will present recommendations on how Florida law can be modified to reduce those abuses.
An original creditor is typically a bank or finance company that has extended credit to a person or business. For example, credit card companies such as Capital One, Bank of America, Chase / WaMu, Citibank or Citibank (South Dakota) N.A., Target, Discover and American Express are usually original creditors. A debt buyer is simply a company or person who buys the debt from someone else. Examples of debt buyers we have encountered here in Central Florida (including Orlando, Sanford, Oviedo, Deland, Deltona, Orange City, Port Orange, Daytona Beach, Melbourne / Cocoa, Mt. Dora, Tavares, Leesburg, Palm Coast, Bunnell and surrounding areas) include Arrow Financial, Asset Acceptance, CACH, Cavalry Portfolio Services, LVNV, Equable Ascent Financial, LLC, Mainstreet Acquisitions Corp., Portfolio Recovery Associates and Financial Independence Services.
Debt buyers usually pay pennies on the dollar to buy the debt. For example, a large debt buyer’s report indicates that it paid an average of only 3 cents on the dollar for the debt they purchased. This means that if you had a debt of $3,000 purchased by such a debt buyer, it would have paid only about $90 for your debt. However, if they sue you for this debt, they would sue for the entire $3,000, not for the $90 they actually paid for it. So, even if they collect only 10% of your debt ($300), their profit margin could be as high as 333%. No wonder there are so many debt buyers out there trying to squeeze money from consumers.
And, even if the debt buyer does not collect any money on the debt, it can (and often does) resell the debt to another company who can also try to collect the debt. This is one reason some consumers are contacted by multiple companies who try to collect on the same debt. This cycle of debt buying, attempted collection, and reselling can be repeated several times. Each time, the “quality” of the debt is worse: each subsequent debt buyer has less information about the legitimacy and amount of the debt, and the consumer may have additional defenses. These secondary debt buyers are often referred to as “junk debt buyers“, “bottom feeders” or “scavengers”.
If you have been sued by either an original creditor or debt buyer, please don’t ignore the lawsuit. If you do, chances are you will have a default judgment entered against you. That means that you will likely lose the case automatically, without any trial. This is true even if you have potential defenses – and we normally see several potential defenses in most cases we review. So don’t delay, contact us right away for a free, no obligation consultation to learn about your rights and potential defenses.