March 08, 2017 Articles

Emerging Issues under the Fair Debt Collection Practices Act

Examining recent appellate and Supreme Court cases concerning consumer debt purchasers and debt collectors under the FDCPA.

By Christopher E. Roberts – March 8, 2017

Many consumers have credit cards, hospital bills, utility bills, and mortgages to pay. Unfortunately, some consumers have difficulty paying these bills. Sometimes consumer cannot pay bills because they are in financial straits. Sometimes consumers do not pay because they dispute the bills. Other times, consumers simply refuse to pay bills with no explanation. The inability of some consumers to pay these bills has created a large industry for purchased debt in the United States. According to the Federal Trade Commission, well over $50 billion of consumer debt is purchased annually.

What exactly is purchased debt? When a debt remains unpaid for a long period of time (i.e., in default), the company to whom the debt is originally owed writes off or charges off the debt as a bad debt. The company to whom the debt is originally owed is commonly referred to as the “original creditor.” The original creditor, not having been fully paid, then decides that it wants to get something rather than nothing out of the unpaid debt. To get something out of these unpaid debts, the original creditor often bundles hundreds or thousands of of dollars of unpaid debts and sells them for pennies on the dollar to certain companies. The companies who purchase these debts are often referred to as “debt buyers.” While debt buyers purchase the unpaid accounts for pennies on the dollar, they usually attempt to collect the entire amount of the debts. See Fed. Trade Comm’n, supra, at ii (noting that debt is purchased for an average of four cents on the dollar).

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