Do you know who buys the debt you owe?

Debt buyers purchase debts from original creditors, intermediaries, or other debt buyers. Debt buyers come in various shapes and sizes. There are many small debt buyers, but most collection lawsuits are brought by BIG debt buyers, large corporations that do business on a large scale, often collecting debts under multiple names, like Sherman Financial Group, L.L.C. (subsidiaries include LVNV Funding, L.L.C. and Resurgent Capital Services, L.P.), Encore Capital Group, Inc. (subsidiaries include Midland Funding, L.L.C. and Midland Credit Management, Inc.), and Portfolio Recovery Associates (currently known as PRA Group, Inc.).

The Nature of Debt Sales to Debt Buyers

A debt buyer purchases thousands of accounts from a creditor or another debt buyer in one bulk sale. Usually, the actual assignment of ownership will be accomplished by the creation of three separate records:

The “forward flow” agreement – is a document that generally sets out the terms of sale of debt between the creditor and debt buyer. Typically, the seller will disclaim the accuracy of the information provided and often limits the buyer’s access to additional information about an individual account.

A “bill of sale” references the many accounts that make up the sale, “the portfolio” and under the bill of sale the parties sign off on the portfolio sold and the forward flow agreement.

A “sale data file” or “final data file,” is a spreadsheet that lists the specific consumer accounts being transferred, which is often in the thousands.

The sale data file will have minimal information on each account. Sometimes the sale data file only includes the consumer’s name, social security number, account number, and account balance. Other debt sellers might provide the consumer’s last known address, identity of a co-debtor, the date and amount of the last payment, the charge-off date, and/or the date and amount of the last purchase on an account. Generally, this is the only data the debt buyer will first receive for an individual debt. A debt buyer does not often receive business records concerning the account, such as the contract, the credit card application, or billing statements.

Knowledge of debt buying may help one understand why certain information may not be available from the company attempting to collect a debt. The Fair Debt Collection Practices Act allows a consumer to dispute and request verification of a debt where the debt collector (as defined under the FDCPA, usually not the original creditor) has not provided sufficient information. If the debt collector is unable to validate the debt in the required time, the Fair Debt Collection Practices Act could support claims and protections against the debt collector’s harassing calls or other conduct. Generally, any disputes with a debt collector or credit reporting agency reporting a debt, should be done in writing, not by phone. Be sure to keep copies of written communications, especially disputes, so that you have a documented record of any debt dispute or inquiry. If you believe you are being treated unlawfully contact an attorney who focuses on unfair debt collection practices. You might also contact your local state authority that regulates debt collectors to seek help (in Arizona, the Arizona Department of Financial Institutions). There are also self-help consumer resources at the Consumer Financial Protection Bureau’s website. Don’t wait too long to get professional help, as any rights and protections you might pursue have deadlines for filing a lawsuit, these various deadlines are prescribed by law and are referred to as statutes of limitation.