The latest debt collector scheme

The latest scheme debt collectors have devised involves the offer of a credit card that will pay off your debt. Here's how it works in theory:

A debtor owes First Bank $10,000. First Bank can’t collect and sells it to a debt buyer for pennies on the dollar. The debt buyer then offers the debtor a credit card for $8,000 at a very high interest rate (which is often unknown to the debtor and in violation of banking disclosure laws) and tells him that he can transfer $8,000 of the debt onto the card, “resolve” the debt and save $2,000 in the process.

Sounds good, right? Wrong. In many cases, the debt buyer wouldn't ever be able to prove that the debtor owed the debt. In fact, debt buyers generally don't buy all of the information associated with the debt. They buy only what they need (generally, your name, contact information, the original creditor's name and how much you may have owed) and then do everything they can to collect that debt from you – including harassing and threatening you and your family at home and work.

A prime example

We were able to obtain the following example of such a credit card offer from consumer advocate Bud Hibbs*. The offer, from Resurgent Capital Services, L.P., explains that the debtor owes a debt to LVNV Funding (the debt buyer, although the original creditor was Citibank) in the amount of $11, 863.98 and attempts to entice the debtor into thinking that he will be able to reduce the amount of that debt by $6,863.98 if he simply transfers $5,000 of the debt to the credit card.