“Zombie Debt” Comes Back To Haunt Consumers
An article from Newsday.com addresses the issue of “zombie debt” or debts that are older than 7 years, purchased by a collection agency, who than proceeds to attempt to collect this long out of date debt from a consumer. Important information from this article advises a consumer of his/her rights and details one consumers battle to sue the offending debt collector, NCO Collections.
The consumer does have protection: Six years after a debt goes into default, the collector can no longer sue to collect. And after seven years, the debt can’t be shown on a consumer’s credit report.
But efforts to collect old debt are legal, as long as the collector doesn’t threaten to sue or report the debt to a credit agency. Consumers who have repaired their credit may feel they need to pay the old debt to avoid a credit blemish.
Debt disputed
When NCO contacted the debtor, she said, she didn’t recognize the credit-card account number. But she knew her rights – and sent NCO a letter disputing the debt.
Experts say account numbers and even bank names on old debt can change over time.
NCO sent a letter to the consumer, stating she had agreed to pay and that the company would accept $5,655 principal as payment in full, with interest waived. She then sent NCO a cease and desist letter.
Such a demand of partial payment is common, experts say, because if payment is made, collectors assert that the statute of limitations has started ticking again, allowing the agency to threaten a lawsuit.
But lawyers say the law is unclear on whether making a payment can revive old debt.
Brian Callahan, vice president of financial reporting for NCO, said he couldn’t discuss this situation. He also wouldn’t comment on whether NCO obtains documentation. “I’m not at liberty to discuss what is involved in our purchasing process,” he said.
Callahan did say that about two-thirds of NCO’s revenue comes from collecting on behalf of clients. Collecting on debt that NCO has purchased represents a portion of the remainder, but he declined to say how much.
Collecting debt has been a billion-dollar business for NCO, the country’s largest debt-collection agency. In the first nine months of last year, the company posted $936 million in revenue, according to a recent filing with the Securities and Exchange Commission. (NCO is not a public company but does file with the SEC because it has incurred debt that is publicly traded.)
In 2004, NCO agreed to pay $1.5 million to settle charges it violated the Fair Credit Reporting Act. The company falsely reported dates of delinquency to credit agencies, the Federal Trade Commission charged, allowing debt to appear on credit reports more than seven years after the actual default.
Separately, attorneys general inNew York and Texas subpoenaed the company regarding its debt-collection practices in August 2006 and April 2007, respectively, according to an SEC filing in November.
NCO’s filing said the company believed it complied with the law in those states.
How to cope with zombie debt.
Here are some tips and information from consumer advocates and government agencies regarding old debt:
Request documents verifying the debt.
If you don’t owe the debt, send a certified letter disputing the debt within 30 days and demand that the collector stop contacting you.
If the debt is more than six years old, the collector cannot sue or threaten to sue you.
If the debt is more than 7 years old, the collector cannot report it to a credit agency or threaten to do so.
If you had filed for bankruptcy after the debt was due, tell the collector.
If you don’t owe the money or the debt was included in a bankruptcy, tell the collector not to sell the debt.
Never give a collector the ability to debit your bank account because you may have difficulty stopping the debits.”
NewsDay.com -Richard J. Dalton
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