Debt Vultures

If you have unpaid debt on credit cards and loans, a debt vulture could come circling.

What is a debt vulture? A debt vulture is my description for a kind of collection company that may be on your tail.

Image from http://occupywallstreet.net/story/debt-vultures.

Image from http://occupywallstreet.net/story/debt-vultures.

These types of collections companies have taken over a large segment of the collection of delinquent debt from people whom are unable to pay them. That kind of company is called a “debt buyer.”

Their business model is genius. These companies purchase debts that were written off by credit card issuers, store credit like Lowe’s, Home Depot, and Best Buy – along with medical bills and balances remaining after vehicle repossessions. They purchase these debts at a deep discount, in bulk (think hundreds of thousand accounts at a time!) and then the hunt commences!

They look for the unfortunate borrower, who has a job, with wages they need to pay their family’s bills, and look to force payment, usually through a lawsuit or the threat of lawsuit, and garnish wages and bank accounts.

And of late, my office has seen smaller and smaller balances being sued for – less than $500 in one recent case!

This scary industry is huge. The largest debt vulture of them all is Encore Capital, Inc., located in San Diego, California. You likely never heard of them. They don’t use their name to collect. They do it through subsidiaries with names like Asset Acceptance Capital Corporation, Midland Credit Management, and Midland Funding LLC.

If you get threat letters from these, and similar, companies, the debt vultures are after you.

The second largest debt vulture is Portfolio Recovery Associates. As a public corporation, you can buy their stock!

Both corporations make a handsome profit from this aggressive and depressing business model.

And, if you get mail from these companies, keep in mind that you are the ‘asset’ in Asset Acceptance, you are the ‘fund’ in Midland Funding, and the ‘portfolio’ in Portfolio Recovery. I think that these companies see you – their victims – as a body of ore, to be mined.

This is American commerce, and the debt is real. But most consumer debt has built-in contractual mechanisms, mostly default interest rates well over twenty percent – along with late fees – that cause the amount owed to mushroom.

Of special concern are unpaid accounts that are four years or more since payments were defaulted. At least in Arizona, these companies, if lawsuits and garnishments are their aim, must sue with the allotted time under state law, which, in Arizona, is a long six years from default. So, when a debt vulture is running out of time to sue is when this species gets most aggressive, often filing lawsuits before the deadline runs out to preserve their position.

Not all has been roses for debt vultures. In September 2015, the Consumer Financial Protection Bureau announced its findings into the debt collections practices of Encore and Portfolio, and ordered them to in some cases refund monies to consumers, and “overhaul their debt collection and litigation practices and to stop reselling debts to third parties.” You can read more about it here.

I predict that they’ll keep mining the ore body of the working public, because it is just too lucrative. After all, if these companies pay less than five percent of the face value of debt, and average even a paltry ten percent in total recovery, but they own hundreds of millions in debt, their profit margin is pretty beefy.

If you get mail or phone calls from these aggressive vultures, I can help you consider your course of action. Schedule a free and thorough consultation of your options by contacting my office for an appointment at (520) 299-4922.

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