Buying old debt is a multi billion dollar industry, putting millions of customers at risk for “Zombie Debt” collection efforts. When old debt is sold, the debt buyer typically only pays pennies on the dollar for these charged off accounts. These companies then engage in collection actions against consumers to try and get them to pay the full amount of the debt owed or as much as possible in the form of a settlement.
Consumer protection against these tactics comes from knowing your rights and knowing how to address collections.
Zombie debt comes in many forms. It can be debt that is old and has passed the statute of limitations for legal collection, debt that has been previously paid or settled, or a debt that is legitimately not owed. Zombie debt can be a result of bad information being provided to a debt purchaser by the seller, incomplete account information or just a general mistake due to the similarity of the account owner’s name and/or poor research on the part of the collector. Either way, it is important to know your rights whenever you are dealing with debt collectors and to be sure to make note of all conversations, payments and settlements with written documentation. Be sure you also retain these records indefinitely, so that you can prove the debt has already been paid or settled should it show up on your credit report in the future as a collection account.
What to Do When Settling Debt?
Get Everything In Writing. All correspondence needs to be in writing BEFORE you send any money, with no exceptions. When the terms have been met, you should also receive a final statement showing the debt is no longer owed. Maintain this paperwork to prove the debt has been paid, discharged or settled in a safe place, indefinitely.
Search for Your Account on The Global Debt Registry. This registry is a national database of debts and can be found at debtlookup.com. Not every company registers debts because the collector must pay to list the debt on the site. The database will maintain the status of debts indefinitely and can assist in proving a debt is no longer owed and protect you from future collections should you find your debt listed on this website.
Check Your Credit Report. Check your credit report 30 to 60 days after the debt has been satisfied. Verify the report has been updated and the debt is showing a zero balance. Keep a copy with other paperwork. If the account has not been updated, file a dispute with each of the three major credit reporting agencies and include documentation showing the debt has been satisfied.
What to Do If a Collection Agency Calls About Old Debt
Do not acknowledge or discuss payments until the debt is verified. The collection company is required by law to verify the debt with the full chain of title within 5 days of your request. You have 30 days to request verification and this should be done in writing via certified mail with return receipt.
Check the Global Debt Registry. The database is free for consumers and lists old debts and their status for companies that report their accounts to the site. There are also forms available that enable you to dispute the debt, request validation and obtain an account extinguishment report, which can prove the debt is no longer owed.
Regularly monitor your credit file to ensure the old debt is not listed. If an old debt shows up, dispute it by sending proof of payoff, settlement or discharge.
Always respond to legal documents regarding debt. One strategy unethical debt buyer’s use is lawsuits for expired debt. If this occurs, and you do not show up to court, a judgment can be placed against you making you legally obligated to pay the expired debt.
Settling, paying off or having debt discharged does not necessarily mean the end of collection efforts. To protect yourself, get all agreements in writing, keep relevant paperwork in a file you can locate, and monitor your credit at least annually.
The Global Debt Registry is a valuable tool helping consumers ward off unscrupulous collection companies from collecting on debt that is no longer owed.