Peter Holland on Junk-Debt-Buyer Lawsuits

Peter A. Holland of Maryland has written Defending Junk-Debt-Buyer Lawsuits, 46 Clearinghouse Review No. 1-2 (May/June 2012). Here is the abstract:

Junk debt buyer lawsuits have overwhelmed the courts all across the United States. These lawsuits wreak havoc on consumers and their families. Often overlooked is the fact that judgments against consumers which are based on junk debt are part of a zero sum game, where every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources. Thus, the legitimate creditor to whom money is owed is materially harmed by the junk debt buyer who extracts money based on an illegitimate claim, or who causes someone to declare bankruptcy. Providing representation to this otherwise unrepresented population will not only help individual consumers. It could improve the entire U.S. economy, by preserving precious resources to pay what is legitimately owed, and avoiding paying for what is not. This article surveys the landscape of the junk debt buyer industry and provides advice for consumer advocates engaged in the battle against unscrupulous junk debt buyers.

Comments

[Dhafer]

Just received a call from a collector who says they purchased a debt from Wells Fargo. In doing my research it appears that this company is a junk debt buyer. The original creditor told us the loan had been written off. (an unsecured business line of credit originated by Wachovia, shut down by Wells Fargo). Original terms where interest only and Wells changed the terms to interest plus principal tripling the payments. This line was used for cash flow purposes in a construction company that is no longer in business mainly because of cash flow issues and the current state of the industry. As I started my research on this company and the third party that is representing them, I found that they are technically a "junk debt" buyer. As a business owner we where required to guarantee the debt personally. But this is also on a line that was issued by a business banker who is now in jail for embezzlement and issuing bad loans, etc.

I came across this post and find this extremely interesting as something doesn't sound right to me. I'm in a gray area but the statement above is "or who causes someone to declare bankruptcy" would be our case. If we could have paid the creditor in the first place, we would have. It was the creditor who told the business that they have changed the terms of the loan because "this was a Wachovia product that Wells Fargo does not offer". They demanded double payments and then shut the line down giving us no access to cash flow whatsoever. Now I'm being told that the debt was sold to a debt purchaser. Got the call yesterday and was asked to take a loan out on personal real estate property and informed that this debt would be reported to the credit bureaus (not that it would make a difference in our case because our credit is already ruined due to the situation described above.

Could you elaborate more on your statement above "Often overlooked is the fact that judgments against consumers which are based on junk debt are part of a zero sum game, where every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources. Thus, the legitimate creditor to whom money is owed is materially harmed by the junk debt buyer who extracts money based on an illegitimate claim, or who causes someone to declare bankruptcy." Honestly, I'm not even sure what questions to ask. I sense this is only going to get worse for many small business owners and again force more out of business and more families into bankruptcy down the road, which will continue to criple our economy for all.

[Terri]

Also, at the time I received the lawsuit I had been making $50 payments for 3 months to the original creditor. the junk debt people never tried to collect, they just filed suit.

[Terri]

i just wondered how the court justifys the junk debt buyer to buy for pennys on the dollar and seek full amount, which seems to me is unjust enrichment to begin with, plus court cost and ongoing interest, after the credit card co has written it off. The reason I stopped paying on the card to begin with is because they pushed up the interest rate to 29% and I had to decide if I was going to just keep giving them money for the rest of my life or pay to have a place to live. Now I am being gouged by someone I never had a contract with or got a penny from to begin with.