Debt Buying and Collections: 2013 FTC Study Released

By | Jan 30, 2013

The FTC just concluded a 2013 study focused on the debt buying industry. If you’re interested, read on. If not, I suggest you blow “outta here now.”

By Jer Ayles-Ayler: A portion of the key findings and executive summary. (We’ve provided a direct link to the entire FTC PDF at the bottom of this POST.)

PRICES BUYERS PAID FOR PURCHASED DEBT

Buyers paid an average of 4.0 cents per dollar of debt face value.  Analysis of the prices debt buyers paid for debt purchased in more than 3,400 portfolios showed that the average price was 4.0 cents per dollar of debt face value.  Older debt sold for a significantly lower price than newer debt.  The price of debt older than 15 years was virtually zero.  Buyers paid similar prices for debt purchased from original creditors and resellers…

INFORMATION THAT DEBT BUYERS RECEIVED

Buyers typically received the information required for validation notices.  Buyers were likely to have received from sellers the information that the FDCPA currently requires that debt collectors include with validation notices at the beginning of the collection process, including the amount of the debt.  They also either received or were likely aware of the name of the original creditor, which the FDCPA requires that they provide to consumers upon written request.

Buyers also typically received additional information that could make validation notices more useful, but they usually did not provide it to consumers.  Buyers also typically received additional information that, if disclosed to consumers, might help consumers assess whether they are the correct debtor and whether the amount of the debt is correct.  This information included the name of the original creditor, the original creditor’s account number, the debtor’s social security number, the date of last payment, and the date of charge-off.

Buyers rarely received dispute history.  Buyers rarely received any information from sellers concerning whether a consumer had disputed the debt or whether the disputed debt had been verified…

ACCOUNT DOCUMENTATION THAT DEBT BUYERS RECEIVED

Buyers received few underlying documents about debts.  Although buyers received the data file and some other information about the debts, as discussed above, they obtained very few documents related to the purchased debts at the time of sale or after purchase.  For most portfolios, buyers did not receive any documents at the time of purchase.  Only a small percentage of portfolios included documents, such as account statements or the terms and conditions of credit.

WARRANTIES AS TO INFORMATION AND DOCUMENTATION THAT DEBT BUYERS RECEIVED

Accuracy of information provided about debts at time of sale not guaranteed.  In purchase and sale agreements obtained in the study, sellers generally disclaimed all representations and warranties with regard to the accuracy of the information they provided at the time of sale about individual debts – essentially selling debts, with some limited exceptions, “as is.”  The fact…

DEBT BUYERS’ ABILITY TO OBTAIN ACCOUNT DOCUMENTATION

Limitations were placed on debt buyer access to account documents.  Buyers were given a defined amount of time (e.g., typically between six months and three years) to request up to a specified maximum number of documents (e.g., equal to 10% to 25% of the number of debts in the portfolio) at no charge.  After that, buyers were given an additional, defined amount of time to request documents for a fee, usually between $5 and $10 per document, with a maximum number of documents again specified.  Debt sellers usually had substantial time, typically between 30 and 60 days, to respond to requests for documents.  Availability of documents not guaranteed.  Most purchase and sale agreements stated that documents may not be available for all accounts.

Additional limitations applied to the resale of purchased debt.  If debt buyers resold debt to secondary buyers, the original creditors typically had no obligation to provide documents directly to the secondary buyers; instead the secondary buyers were required to forward document requests through the original buyers, which sometimes added additional fees and delays.

CONSUMER DISPUTES OF DEBTS

Consumers disputed 3.2% of debts that buyers attempted to collect themselves.  The data…

VERIFICATION OF DISPUTED DEBTS

About half of disputed debts were reported as verified.  Buyers reported that they had verified 51.3% of the debts consumers disputed.  Older debt…

DEBT AGE AND STATUTE OF LIMITATIONS

Some debt was beyond the statute of limitations, though most was not.  Many states have statute of limitations barring lawsuits to collect on a debt after a certain period, typically between three and six years…

http://ftc.gov/os/2013/01/debtbuyingreport.pdf

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