The debt collection industry has been on an increasing growth pattern for several years. In the past, junk debt buyers could easily raise money to start up a business. However, the current mortgage meltdown may be affecting their ability to do so.
To gain a better understanding of debt buyers and their debt collection tactics, we talked with Bud Hibbs, a debt collection consumer advocate and consultant for over 25 years who has written several books, is approved to teach CLE (Continuing Legal Education) courses through the State Bar of Texas and has appeared in numerous radio and television programs, including The Oprah Winfrey Show in a recent interview. Here's what he told us:
Well, there were up until the mortgage meltdown. It's the proverbial Catch-22, though. Like the mortgage portfolios that they were buying, there was a day when a lot of companies said, 'Wait a minute, we're not buying these anymore. They're not what you're stating that they are. They're not the quality that you said they were.'
We also have a similar problem in the credit card industry. A lot of companies trade over the counter on Wall Street and what happens - let's go back to the Citibank account - if a company wants to go in and buy a portfolio for say, $50 or $100 million, they could approach Wall Street to raise the money and they could offer Wall Street, sometimes double, even triple what government rates were for treasury bonds, for example. They would get the money. They were able to collect the debt and once they paid off the lender, the Wall Street firm that loaned them the money, anything beyond that point was very, very profitable.
Hibbs says that the problem with debt collection in America today is very, very widespread and that debt collectors who are more egregious and more threatening are going to make a lot more money than the ones who aren't. If you are being harassed by a debt collector, contact an attorney whose practice focuses on issues relating to the Fair Debt Collection Practices Act (FDCPA) to discuss your situation. Consultations are free, without obligation and are strictly confidential.