One day over the summer, my husband picked up his mail and found a letter from a collections agency demanding a payment for a $145 past due bill. He was perplexed, since he’s fanatical about keeping current on all of his bills and didn’t remember owing anyone $145. Then he looked closely at the letter and saw that it was sent on behalf of LVNV Funding. My husband didn’t recognize LVNV Funding as a company he’d done business with before, so he consulted the Internet to see what kind of business LVNV Funding is. Before too long, he got a clue as to what was happening. LVNV Funding is a “junk debt buyer” and they were trying to get him back on the hook for mistakes he had made in his past.
Junk debt is basically debt that has gone past its statute of limitations, was charged off in a bankrupcty, or has otherwise been settled. There was a time when most creditors didn’t bother to try to collect on junk debt because they figured it wasn’t worth the effort. But then someone got the bright idea that money could be made from old, out of statute debts and people who were once in bad credit hell and were trying not to go back. Junk debt buyers learned that they could get enough people recovering from having bad credit to pay up and voila, a hot new industry was born.
LVNV Funding is owned by a larger company that buys “junk debt” portfolios for pennies on the dollar. These outfits then try to collect on old debts that have already been settled. They send letters, make phone calls, and otherwise try to scare people into making even one payment. Just one payment is enough to re-age old debts so that they can legally be collected. And again, these debts are purchased for just pennies on the dollar. If the junk debt buyer gets even one small payment, that’s often enough to recoup their losses and make a handsome profit.
Back in 1997, my husband and his ex wife went through a Chapter 7 bankruptcy. Since that time, he’s worked hard to restore his credit. Nine years after his money problems, he’s almost in the clear. Now, it seems that junk debt buyers like LVNV Funding are coming out of the woodwork. So far, no one has tried to make him pay an old debt that he had otherwise settled. Instead, he’s gotten demands for bogus debts that he doesn’t owe from companies with which he has never done business. My husband has never done business with MCI, yet they are supposedly the ones looking to be paid. The junk debt buyers are hoping he’ll be cowed into paying as a means of preserving his newly restored credit rating. But luckily, my husband knows that paying those junk debts is the last thing he should do.
My husband did his homework when he started getting bogus demands for money he didn’t owe. Although it was tempting for him to call the collections agency whenever he got letters from them, he refrained from actually doing so. That was a smart move. Calling the collections agency would open him up to negotiation and/or acknowledging that he actually owed the money. Instead, he chose to write letters to the agencies, making it clear that he knew his rights under the Fair Credit Reporting Act and the Fair Debt Collection Practices Act . He asked the agencies to prove that he owed the debts and that they were the original creditor. He gave them 30 days to come up with the proof. My husband wrote in his letter that if the agency was unable to provide proof that he legitimately owed the debt, he would consider the matter closed. He also made it clear that he would be watching his credit report closely and if any bogus charges showed up, he would be suing the agencies in small claims court. He sent the letter to the agencies via certified, registered mail.
Unfortunately, those junk debt buyers can be very tenacious. A few months ago, my husband asked a collections agency for validation when he found a negative entry on his credit report for a bogus debt of $450. The agency couldn’t validate the debt, so it supposedly removed the record from his credit report. He took another look at the letter he got from the first collections agency and found that the client on that debt was also owned by LVNV Funding, which also apparently owns a lot of collections agencies.
If you get a collections letter for a bogus debt, do not automatically pay it. Junk debt buyers are looking for people who will pay. If you pay them once to make them go away, they figure you’ll pay again and they’ll come back for more money. It’s best to send a strongly worded letter demanding proof that you owe the debt. Make it very clear in your letter that you are not acknowledging that you owe them money; you just want proof that the debt is legitimate. Also make it clear that you know your rights under the Fair Credit Reporting Act and the Fair Debt Collection Practices Act. Do not call the agency. If you call the collections agency, they will have access to your phone number and you better believe they’ll use it to harrass you! Also, when you talk on the phone, you’re more likely to get emotional and that will make things worse. You might find yourself admitting that you owe the junk debt buyers money, even if you don’t. Or, you might get angry, especially if the junk debt buyers resort to threats or profanity to try to get you to pay. Send a firm but businesslike letter, and make sure you make them sign for it. That way, the collections agency can’t say that they never received any communication from you.
Junk debt buyers prey on people who are uneducated about their rights under the law. Don’t be a victim.
What happens next?
In my husband’s case, the collections agencies have removed the bogus debts from his credit report and we haven’t heard from them since. Although companies like LVNV certainly have enough money to go to court over bogus debts, they are in the business of making money. Going to court over a bogus debt would cost them more money than they would gain if they actually succeeded in getting my husband to pay them. LVNV has not been able to provide proof that my husband owes them anything and my husband made it very clear that he would sue them if they didn’t prove that he owed them and negatively marked his credit. Evidently, they took him at his word… at least for now.
The best way to avoid having to deal with junk debt buyers is to avoid having bad credit. I know that it’s not always possible to avoid bad credit hell. A person can end up in dire financial straits simply through a bad turn of events. But it’s best to try to keep your credit clean by paying your bills on time and in full, or working with your creditors if you’re unable to stay current on your bills. Try not to let anyone put a negative entry in your credit file if you can help it. If you do end up having bad credit, make sure you know your rights under the Fair Credit Reporting Act and keep a close eye on the companies with which you do business.
It’s too bad that junk debt buyers are allowed to exist. As long as they do exist, however, you can take measures to protect yourself against their tactics to squeeze you for money you don’t owe. You can start by visiting the Web sites I’ve listed in the resources section. They are excellent places to go for education about protecting yourself against junk debt buyers.
