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Fair Debt Collection: 1.3.4.1 Generally

Debt buyers are companies that purchase debts from original creditors, intermediaries, or other debt buyers. Debts are purchased for pennies on the dollar. The debt buyer may either try to collect the debts themselves, place them for collection with debt collectors, or sell the debts to other debt buyers.

In 2019, the CFPB estimated that there were 330 debt buyers in the United States, noting that many debt buyers also collect consumer debts owed to other owners.211

Fair Debt Collection: 1.3.4.3 Average Price of Debt

Debt buyers purchase debt for pennies on the dollar, but the exact amount depends on a variety of factors such as the type of debt, the age of the debt, the number of times that it was previously placed for collection, and the amount of debt for sale in the market at that time.

Fair Debt Collection: 1.3.4.4 Age of Purchased Debt

The most comprehensive data available about the age of debts being collected by debt buyers comes from a 2013 FTC study of the debt-buying practices of some of the nation’s largest debt buyers.240 This study found that nearly twenty-five percent of debt acquired from the original creditor, and more than sixty percent of debt purchased from other debt buyers, was over three years old at the time of purchase.241 More than thirty percent of the debt purchased from other debt buyers was over six yea

Fair Debt Collection: 1.3.4.5 Identifying Some of the Largest Debt Buyers

Using data from the Nilson Report, the FTC compiled a chart of the ten largest companies purchasing credit card debt from credit card issuers from 2005 to 2011.246 In 2011, Sherman Financial Group, L.L.C. (subsidiaries include LVNV Funding, L.L.C. and Resurgent Capital Services, L.P.) ranked first, Encore Capital Group, Inc. (subsidiaries include Midland Funding, L.L.C.

Fair Debt Collection: 1.3.5.1 First-Party Collection

Some creditors, like credit card issuers, hire “first-party” collectors, which the CFPB defines as “outside collectors who work under the name and direction of the creditor when collecting on delinquent debt.”253 One collection industry analyst reports that, “[t]he primary difference between first- and third-party collections is the stage at which the service occurs; first-party work occurs earlier in the receivable’s life cycle, typically when a delinquent account is under 90 days past due and has not yet been charg

Fair Debt Collection: 1.3.5.2.1 Introduction

Third-party debt collection agencies are hired to collect accounts that are owned by original creditors or debt buyers. They are “third-party” collectors because they collect in their own name for debts that are owned by other entities.

Fair Debt Collection: 1.5.1 Collection Management System

Many collectors use sophisticated software to “maintain [ ] account-level information about debts in collection, make [ ] the information available to individual collectors, and track [ ] account activity such as calls made, the outcome of discussions with consumers, and payments made.”508 In a 2021 TransUnion survey of debt collection agencies, 79% reported using collection management software and 34% reported using compliance software.

Fair Debt Collection: 1.5.2 Websites and Portals

Many collectors maintain their own websites, which may need to be copied or downloaded (using software created for that purpose) in order to preserve the information for evidentiary purposes, since web pages change frequently at some sites. Older versions of a web page are often available on www.archive.org.

Fair Debt Collection: 1.5.5 Collection Analytics

Debt buyers and debt collectors regularly gather data about consumers and also about their own internal collection practices. Increasingly, they use analytics software to evaluate this data and make decisions based on their evaluation.

Fair Debt Collection: 15.1.1 Overview

The oldest legal approach to debt collection abuse is an action in tort. There are distinct advantages and disadvantages to a tort approach to remedying abusive debt collection conduct. One major advantage in most states is the availability of punitive or exemplary damages for tortious conduct that is malicious or reckless.1 Another major advantage is that tort claims are available against creditors and their agents who may not be subject to the Fair Debt Collection Practices Act (FDCPA) or some states’ consumer protection statutes.

Fair Debt Collection: 15.1.2.1 FDCPA and State Debt Collection Statutes Do Not Preempt Tort Claims

The Fair Debt Collection Practices Act contains broad non-preemption language, stating that the Act does not “annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any state with respect to debt collection, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency.”13 This language makes it clear that the FDCPA is intended only to set minimum standards; states are free to provide greater protec

Fair Debt Collection: 15.2.6 Recovery of Emotional Distress Damages for Other Collection Torts

Emotional distress damages may also be available for other debt-related causes of action.162 Courts are more likely to find emotional distress damages available if the cause of action sounds in tort rather than in contract163 and if the defendant’s actions were intentional.164 The standard of proof to recover emotional distress damages for other torts may be less stringent than for a claim of intentional or negligent infliction of emotional distres

Fair Debt Collection: 15.3.3 Holding Up to False Light

The essence of the tort of placing a person in a false light is the false attribution to the debtor of an undesirable or negative character.207 This tort is recognized in most jurisdictions,208 but there are some exceptions.209 While similar to defamation,210 false light claims may avoid several requirements of defamation actions, such as pleading special damages.

Fair Debt Collection: 15.4.1 Overview

Two closely related torts that may occur in the debt collection context are tortious interference with a contract and tortious interference with prospective economic relations. Because the law is protective of existing contracts, the former cause of action is better developed and easier to prove.

Fair Debt Collection: 15.4.2 Tortious Interference with a Contract

A claim of tortious interference with a contract may arise in the debt collection context where a creditor prevents a debtor from benefiting from a contract with a third party.246 For example, the collector’s contacts with the debtor’s employer may cause the debtor to lose a job. As another example, a mortgage lender or servicer may commit this tort if it interferes with a property owner’s contract with a tenant.247

Fair Debt Collection: 15.4.3 Tortious Interference with Prospective Economic Relations

The elements of tortious interference with prospective economic relations have been stated as: (1) a reasonable expectation of entering into a relationship; (2) defendant’s knowledge of that expectancy; (3) intentional265 and unjustified interference by defendant that caused a termination of that expectancy; and (4) damage to plaintiff as a result of defendant’s conduct.266 A claim may arise if the creditor’s or collector’s wrongful acts interfere with the consumer’s ability to obtain other cred

Fair Debt Collection: 15.5.2 Defamation Per Se and Defamation Per Quod

Professor Dodds classifies defamation as a dignitary tort, one that “involve[s] legally cognizable invasions of rights that stand independent of both physical and economic harms, that is, invasions of human dignity in the sense of human worth.”283 In its traditional form, proof of damages was not an element of the tort: