Beware the "Zombie" Debt Collectors: Consumer Rights Abuses by Purchasers of Old and Uncollected Debt
One of the most profitable sub-industries within the credit card industry is what is known as "Zombie" debt collection. Zombie debt is old and uncollected debt purchased for pennies on the dollar by collection agencies, which then collect on debt for which they couldnt otherwise sue. The Fair Debt Collection Practices Act provides only a minimal deterrent to consumer rights abuses that are often engaged in by many of these debt collectors.
The author writes: Against the backdrop of the passage of the new credit card legislation and President Obama's desire to create a Federal Consumer Protection Agency, a small spotlight was shown on one of the most profitable sub-industries within the credit card industry: what the industry calls "Zombie" debt collectors. "Debt buyers" or "repurchasers" as they are known, buy old and uncollected debt. These uncollected debts are referred to as "Zombie" debts. The Zombie moniker comes from the fact that most of this debt has been uncollected beyond the state's statute of limitations or has either previously been discharged in bankruptcy or actually paid off as part of a prior settlement by the so-called debtor.
The industry arose during the 1980s as an unintended side effect from the savings and loan crisis when the government auctioned off the failed S&L's receivables. Since its inception, there has been unprecedented growth. The larger companies, such as Sherman Financial Group, Unifund, and Asset Acceptance Capital Group, each have glossy websites marketed to businesses, often with promises that they can collect and deliver. And deliver they can. In 2006, these three companies reported revenues of almost two billions dollars.
Like the fictional "zombies" shambling though books and movies, the once-dead debt comes alive again upon purchase for pennies on the dollar, thus making this a very simple risk/benefit analysis for these industry executives. The Zombie debt collectors often successfully collect on debt for which they couldn't otherwise sue, and they are notorious for engaging in some of the most violative behavior against consumer rights. Unfortunately, the Fair Debt Collection Practices Act ("FDCPA") provides only a minimal deterrent to these abhorrent actions. As to be expected, the lack of specific regulation of the Zombie debt collectors' practices has spawned several scam companies that have taken their practices to an even lower level.