Can Debt Collectors Sell Your Debt to Another Company?
Discover how debt changes hands, what data is shared, and the crucial steps to protect your financial standing and rights.
When individuals fall behind on financial obligations, they often encounter debt collection efforts. The buying and selling of debts among companies is a common aspect of this process, and understanding it is important for anyone navigating debt collection.
The Practice of Selling Debt
The sale of debt is a common and lawful practice within the financial industry. Original creditors, such as banks or credit card companies, often sell delinquent accounts to other entities. This occurs when an account becomes non-performing, meaning the original creditor has been unsuccessful in collecting payments for several months. Selling debt allows the original creditor to recover some capital, reduce administrative burdens, and focus on core business operations.
Debt buyers, including specialized firms or collection agencies, acquire these debts, sometimes for a fraction of the outstanding balance. Their objective is to collect the full amount from the debtor, generating a profit. This practice applies to various types of consumer debt, including credit cards, personal loans, and medical bills.
Information Transferred When Debt is Sold
When a debt is sold, specific information about the debt and the debtor is transferred to the new owner. This includes personal identifying details, such as the debtor’s name, address, and Social Security number. Account-specific information, like the original creditor’s name, the full amount owed, and the debt’s payment history, are also part of the transfer. Any unresolved disputes or fraud claims related to the debt are conveyed.
Debtors are notified of the debt sale by mail from the new debt owner, often as a “validation notice” or “debt validation letter.”
Debtor Rights When Debt is Sold
Consumers have specific legal rights and protections when their debt is sold, primarily under federal laws such as the Fair Debt Collection Practices Act (FDCPA). This act applies to third-party debt collectors and debt buyers, regulating their conduct and prohibiting abusive, deceptive, or unfair practices. The FDCPA covers most consumer debts, including credit card debt, car loans, and medical bills.
One right is the ability to request validation of the debt. Within five days of initial contact, a debt collector must send a written notice containing details about the debt, including the amount, the name of the creditor, and a statement that the debt is presumed valid unless disputed within 30 days. Debtors have the right to dispute the debt in writing within this 30-day period. If disputed, the debt collector must cease collection activities until they provide verification.
The FDCPA also establishes rules regarding how and when debt collectors can communicate with debtors. Collectors generally cannot contact individuals before 8:00 a.m. or after 9:00 p.m. local time, unless permission is granted. Debtors also have the right to request that a debt collector stop contacting them, which must be done in writing. Upon receiving such a written request, the collector can only communicate to confirm they will cease contact or to notify the debtor of specific legal actions.
Steps to Take After Debt is Sold
After a debt has been sold, verifying the debt with the new debt owner is important. Send a debt validation letter to the new debt collector. This letter should request key information, such as the original creditor’s name, the exact amount owed, proof that the debt belongs to you, and documentation confirming the debt collector’s authorization to collect.
All communications with the new debt owner should be in writing. This practice helps create a clear record of all interactions. Keeping detailed records of all correspondence, including dates, names, and content, is important for future reference or if disputes arise.
If the debt is not valid or accurate, formally disputing it is the next step. A written dispute sent within 30 days of receiving the validation notice requires the debt collector to provide verification before continuing collection efforts. This dispute should clearly state the reasons the debt is being challenged, such as inaccuracies in the amount or questions about ownership. Avoid acknowledging or making payments on a debt before it has been fully verified and you are certain it is yours.