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What Is A Debt Buyer?

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What Is A Debt Buyer?

A debt buyer is a company that purchases debt from creditors at a discount. Debt buyers, such as collection agencies or a private debt collector, buys delinquent or charged-off debt at a fraction of the debt’s face value.

Debt buyers don’t pay very much for debts. They may pay a few cents on the dollar for debts, even less for old debts. The less collectible a debt—i.e. debts that are several years old—the lower the debt is sold for since older debts are less likely to be paid. Debt buyers may purchase hundreds of delinquent debts giving them more opportunities to turn a profit. Even if only a fraction of the consumers pay these delinquent debts, the debt buyers can still make money since the debts are purchased for such a low amount.

The companies holding the largest market share in the Debt Collection Agencies in the US industry include Alorica Inc., Encore Capital Group Inc. and PRA Group Inc.

Your Credit Report

Just like the original lender, a debt buyer can report your debt to the credit bureaus. Once the account is on your credit report, it will stay for the duration of the credit reporting period. Paying a debt buyer won’t remove the account from your credit report. However, your credit report will be updated to show that you’ve paid.

An advantage in dealing with a debt buyer is that you maybe able to negotiate a lesser settlement. Because debt buyers buy debts for pennies on the dollar they have more leeway in negotiating with you and a lesser settlement and still making a profit. Please note that if you make a settlement with a debt collector or debt buyer to write off a portion of your debt, you may have to pay taxes on the written-off value.

What about the Statute of Limitations.

In most states the statute of limitations can be 3 to 6 years (some states may have higher statute of limitations). The statute of limitations is the legal time frame a collector can sue you for your underlying debt. If your debt is outside the statute of limitations then you cannot be sued for the underlying debt. If a debt buyer contacts you to collect on a debt that is outside the statute of limitations and you agree to make payments then you have renewed your obligation to the debt buyer and you will restart the statute of limitations. Entering an agreement gives the debt buyer more time to sue you if you fall behind on the debts again.

If you have questions it’s always best to speak with an attorney who specializes in Consumer Protection. At Consumer Rights Law Firm, we have been assisting consumers since 2010. Our office regularly deals with debt buyers and we can help assist relieving the stress that comes with debt collection.