Friday, December 12, 2008

Consumer debt is increasing in unprecedented numbers. In September, outstanding consumer debt in America reached $2.59 trillion. That's an increase of $6.9 billion since August.

The debt collection industry is benefiting from this economic crisis and becoming a booming business. Credit card companies, banks, and other lenders are continuously turning to the debt collection industry to collect outstanding debts, and some of the debt may be old. The change in bankruptcy laws in 2005 has made it difficult to discard old debt, so the old debt is resurfacing (also known as zombie debt - see our blog dated July 10.)

Debt collectors are using more advanced ways to collect debts. There are companies that help debt collectors determine which accounts are recoverable using computer models with a scoring system. They can tell the debt collector the probability of re-payment and the approximate amount of the payment.

The collection process usually begins with phone calls after a payment is 90 days late. The debt collector can also use internet searches and skip tracing to find the debtor. Skip tracing is where the debt collector uses credit reports, loan applications, etc. to find the debtor's friends, family, neighbors or even employers in order to contact the debtor.

Debt collectors may work with you to settle the debt, by collecting a lump sum or lowering your monthly payments. Not all debt collectors follow the law. Last year, the Better Business Bureau and Federal Trade Commission received almost 100,000 complaints against bad debt collectors. If you are being harassed by a debt collector, contact us.