Numerous major print and broadcast media have reported over the last few months that one in three U.S. consumers are being contacted by debt collectors. (This is the Reuters filing picked up by many daily newspapers.)
Some have even equated much of this consumer contact with credit card debt. But, these media outlets have failed to properly explain the source of the study bearing this statistic.
According to creditcards.com, this was a study of seven million TransUnion credit reports performed by the Urban Institute, the research arm of Encore Capital Group, one of the nation’s largest, if not the largest, junk debt buyer. If you read through the various analyses of this study, you will see that the total number of debts includes many very small debts of less than $100. It is in the interest of Encore Capital to get large investors to think that funding their future purchases of consumer debt at 5-10 cents on the dollar is a profitable use of their money. So theoretically, the more consumers there are with the late debt means more business for Encore. The unstated fact here is that today there are more than enough debt collectors to go around and dig up old debts to attempt to collect on.
35% of Americans Facing Debt Collectors [A Wall Street Journal Report]
A lack of good-paying job opportunities has forced some breadwinners to join the ranks of debt collectors to support their families. This combined with the dirt-cheap cost of old debt and the easy to access to old-debt computer records makes it easy for debt collection firms and junk debt buyers to process all these debts through their advanced call centers. Given these facts and with the procreation of junk debt buyers and the increased availability of capital for their multi-million dollar debt purchases, debt collection has become a growth industry.
In the end this means more people with credit card debt are getting sued in large computer batches of credit card accounts. These consumers do not know how to properly respond to debt collectors because they are trapped by debtor guilt.
Consequently their accounts move along to collection attorneys who are equipped to turn out large numbers of credit card debt summonses. These attorneys know 93 percent of consumers who owe do not respond to their summonses and become easy prey to default judgments.
Given the non-response rate, most summonses arrive without any documentation of the alleged debt being sued for. Why should junk debt buyer and their collection attorneys go to the expense of individually matching printouts of credit card contracts and statements with each consumer in their database of those to be sued, if 93 percent of the consumers are not going to bother answering their summons?
American consumers are honest. They want to pay their debts. But, due to an existing circumstance beyond their control—job loss, death of a breadwinner, medical catastrophe, divorce, student loans that do not end up in a job, a failed business or other calamity—some simply cannot cover all of their monthly necessities and all their debts. Consequently, unsecured credit card debt is usually the first to be in arrears.
Unfortunately, instead of exercising their legal right to deny, dispute and demand documentation of their credit debt, 90 percent of consumers do not respond to a summons for a credit card debt they owe.
If they only knew that a proper response could make these junk debt buyer pests go away. In my experience, the proper legal notice sent CMRRR in response to a junk debt buyer’s first written debt collection notice is frequently enough to make them focus their lawsuits on other less knowledgeable consumers.