Here is a video of a debt broker, who sells packages of debt to JDBs, explaining how the bid process for one debt package ended up at 2.5% per dollar of debt.
Buying junk debt has become a big business. Blocks of junk debt are bought and sold by equity firms with individual transactions totaling thousands of accounts up to several tens of millions of dollars. The basis of these sales is the clause in most all credit card agreements which states the credit card bank has the right to sell the account. (For a complete explanation of debt buyers use this link.)
In one recent credit-card-debt portfolio auction buyers started bidding at five cents on the dollar of each debt and eight cents on the dollar won the bid. That was a first generation sale. In other words the credit card bank sold a block of charged-off accounts. There are second, third, fourth and more generations of sales going down to one to two cents on the dollar or less. To illustrate, over three years I was contacted by three different junk debt buyers attempting to collect for the same credit card debt.
The database of accounts that comes with each junk debt buyer purchase usually has minimal account information, which includes each account holder’s name, address, social security number, and balance owed. Junk debt buyers (JDBs) will pay more for accounts with phone numbers.
When a JDB takes possession of your account, they notify you in writing of their ownership hoping to collect. Then, they typically turn that block of accounts over to a collection agency. Or, they use their own in house collection resources. A block of thousands of credit card accounts may go to a national collection law firm not even licensed to practice in your state, but who nevertheless sends you a collection letter on legal letterhead.
JDB’s collection efforts are covered by the FDCPA and state fair-debt collection and collection-licensing laws.
Junk debt buyers also rely on the numbers. At a few cents on the dollar, they do not have to collect on a majority of debts to make a lot of money. If you use my deny/dispute demand debt documentation strategy in the next ebook with a JDB, its collection agency and perhaps its collection attorney, your debt will probably be downgraded and sold to another JDB. When a JDB attempts to portray itself legally as the original creditor primarily to the credit reporting agencies, this re-aging tactic is sometimes called factoring. The rationale is if they can stay on your credit report for longer than the sevens plus 180 days from the account’s date of first delinquency, your will be more likely to pay them for a deletion of the negative listing from your credit report.
JDBs validate your debt with an affidavit from one of their employees attesting to the sale of your account (but not the thousands of others it was sold with) from the original creditor or another JDB, or they simply give you a copy of a bill of sale. They don’t have your credit card contract of adhesion. They do not have you account details. Their documents will not stand up in court, but that does not prevent their collection attorney from contacting you threatening court action, or even suing you knowing 93 percent of consumers who owe do not respond to a credit card summons.
To eliminate credit card debt without paying, it is important to understand how easy it is to defeat a junk debt buyer.