Credit Score Repair – Will Zombie Debt Threaten Yours?

With the rapid increase of companies selling off old debts, millions of consumers are now being hounded by collection agencies for accounts that they thought they had heard the last of.

These old accounts, or “zombie debts”, are sold off in the junk debt market for pennies on the dollar. Junk debt companies use sophisticated technologies, like credit score prescreens, to determine which people are most likely to pay. They then purchase these accounts at a steep discount, often just a few cents on the dollar. The older your account, the less they will pay and hence the more potential profit for them.

These companies are notorious for breaking both the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. (Just like there are legal credit repair strategies and illegal, there are also illegal collection practices.)Abuses are so serious that there have been numerous multi-million dollar judgments brought against these companies by the Federal Trade Commission. An example is a $10.2 million dollar judgment awarded against National Check Control.

Apparently, they thought that threatening consumers with lawsuits and jail time was appropriate and got slapped for it!

If a junk debt collector calls you, just remember, there are not interested in helping you repair your credit score – no matter what they say! These are aggressive and manipulative companies that aren’t afraid to break the law to get what they want.

Let’s look at some other common abuses.

The most common abuse reported is verbal abuse and harassment, something many collection companies are guilty of.

Also very common is illegally re-aging debts on the credit bureau. When they do this, essentially, they lie to the credit bureaus by telling them that an old debt is in fact brand new. Because debts are reported for seven years from the date of last activity, when a collector re-ages a debt, they increase the time that this negative account will be reported to your credit file by another seven years. So, you can think you are doing a great job repairing credit score and find out you have another seven years to deal with a debt because of something a debt collector has illegally done.

Junk debt collectors frequently attempt to collect amounts that consumers don’t owe, and threatened to sue someone even when the states statue of limitations has expired. Some of the companies will even sue someone after the statute of limitations has expired, just to see if they can get an ignorant client and judge and actually get a judgment!

Additionally, there have been numerous claims that they offer a “pre-approved” credit card to people whose accounts they have purchased. When the client gets the card they are shocked to find that the balance of their alleged debt has been tacked on to what they owe. The companies state that this was explained to the consumer, but thousands of consumer state they had no idea that this was happening!

Junk debt collectors have also repeatedly agreed to enter into a common “pay for delete” agreement with consumers. The problem is that once the debtors keep their end of the agreement, the collectors do not! Not only do the consumers not get their account wiped out, the collectors renew the date of last activity on the accounts and leave the client subject to lawsuits and additional collections because the statute of limitations has now been renewed.

People who thought that their debt was long gone have also fallen victim to junk debt collectors. Very often, after a bankruptcy, accounts will be sold to these collectors. They attempt to collect these accounts even after they are made aware that the account was legitimately wiped clean in a bankruptcy.

In general, if a junk debt collector starts calling you, talking to them is a bad idea. Something as simple as admitting that you owe the debt can renew the statute of limitations in some states. Remember, they are savy and aggressive companies who have no obligation to tell you your rights. Add to that they are highly (financially) motivated to get the best of you and you can see how they might manipulate you into taking a course of action that is not in your best interest.

It isn’t uncommon for them to agree to “settle” the account, and then sell it to another company for the amount that you didn’t pay. You think you have heard the last of it, only to find out that the remaining balance is still following you.

The first step would be to write the company and tell them to contact you only via mail. If the statute of limitations has not expired, you will want to be especially careful. You don’t want to get sued, but you also want to proceed with caution and protect yourself.

One of the best strategies in this situation is to use debt validation strategies. To learn how to fix bad credit with debt validations strategies, check out my prior post: http://www.creditrepaircollege.com/2009/fix-bad-credit-2/

Good luck!

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