The collection of old debts by debt buyers, like Velocity Investments, LVNV Funding, Cavalry SPV and Unifund CCR is increasingly a problem for consumers. Debts that have been discharged in bankruptcy, are beyond the statute of limitations or have been previously paid or settled still get collected by debt buyers. These debts should be non-collectible, but there’s a big business in selling and buying old debts. According to the Federal Trade Commission (FTC), old debts are sold for an average of 4 cents on the dollar, with higher prices for debts less than three years old and in states where consumer protections are weak. Debts over fifteen years can be purchased for almost nothing.
Since the debts are purchased for pennies on the dollar from the original creditor, if a debt buyer is successful at collecting even a small portion of the debt it’s come out ahead. Collection of discharged debt is a violation of law but if debtors never assert their rights, a debt buyer can collect debt without penalty. Debt buyers also often don’t have the documents needed to prove they own the debt or that the amount being collected is correct.
Challenge the lawsuit or lose.
Since most consumers never challenge a debt collection lawsuit, debt buyers can easily obtain a default judgment that converts an uncollectible debt into a collectible one. The time allowed to collect a judgment in Iowa is longer than the length of time allowed to collect a debt, so default judgments breathe new life into debt collection efforts.
Collecting old debt shouldn’t be so easy. There are laws against collecting discharged debts and debts that have been settled or paid. There are defenses available to lawsuits trying to collect debts beyond the statute of limitations or where insufficient documentation exists to support a lawsuit. Consumers need to assert their rights and defenses or debt buyers will continue profiting from their purchase of old debt. Contact us immediately if you’re facing the collection of an old debt you’re not sure you owe.