Debt Buyer

Debt buyer summary:

Many debt collectors and collection agencies are actually debt buyers that purchase overdue debt for pennies on the dollar.
If you are contacted by a debt buyer, their status as a buyer could give you more flexibility to negotiate debt settlement.
Debt buyer collection agencies or companies are required to follow the rules of the Fair Debt Collection Practices Act (FDCPA), which protects the rights of debtors.

Debt Buyer Definition and Meaning

A debt buyer is a type of debt collector or collection agency that buys unpaid debts from other creditors with the intention to collect the money from the debtor. If you have unpaid debt that gets charged-off by the original creditor, your debt will likely get purchased by a debt buyer.

Owing money to a debt buyer doesn’t have to be scary—you still have rights, options, and opportunities to get out of debt. If you owe money to a debt buyer (instead of the original creditor), the debt buyer has to follow the rules of the Fair Debt Collection Practices Act (FDCPA). This law deals with how debt collectors can act and your rights if a debt collector is trying to collect from you.

Debt buyers are sometimes called debt collection agencies. If you owe an unpaid debt and you hear that it’s being “sent to collections,” this might mean that your debt is being sold to a debt buyer.

If your debt is sold to a collection agency, you will likely get contacted frequently about the debt. You could also be sued and taken to court for the unpaid debt. But at every step, it’s important to know your rights, communicate with the debt collectors, and look for ways to manage your unpaid debts.

Key Aspects of Debt Buyers

Not every debt collector is a debt buyer. Here are a few key aspects of debt buyers:

Purchase unpaid debts, usually for pennies on the dollar: If you stop making payments to creditors, your debt becomes delinquent (severely overdue). If you go 120 days or more without making a payment on a debt, your debt might be written off by the creditor and “sent to collections” by being purchased by a debt buyer. Debt buyers may purchase delinquent debt from creditors for as low as $4 to $7 per $100 of debt. For example, $10,000 of credit card debt might get sold to a debt buyer for only $400.
Take over collecting unpaid debts: After your debt is sold to a debt buyer, they typically have the right to collect on that debt. So while the original creditor will stop trying to contact you, the debt buyer will likely start.
Use debt collectors: Debt buyers may use in-house teams of debt collectors or hire third-party debt collection agencies to contact people and try to get them to pay overdue debt. Sometimes debt buyers and their teams are aggressive and use rude, hostile, or abusive methods. However, you don’t have to put up with bad treatment thanks to the FDCPA.
Must follow the rules of the FDCPA: Debt buyers and debt collectors must adhere to the rules laid out in the FDCPA for how and when you can be contacted. It also restricts violent or threatening contact. You also have the right to ask debt collectors to stop contacting you, but this is rarely a good idea as it could lead to escalation such as a lawsuit.
Might be happy to settle debt: Debt buyers typically get a deal on your debt, so they could be more willing to settle your debt for less than the full value of what you owe. For instance, say you owed $10,000 to a credit card company that was sold to a debt buyer for $700. Because the debt buyer only paid $700 for that debt, they could be willing to accept less than $10,000 and forgive the rest of the debt.

The idea of having your debt purchased by a debt buyer might seem intimidating, but it could work out in your favor. Debt buyers could be easier to deal with than your original creditor since they often have less money on the line. Don’t be afraid to talk with debt collectors and ask if they’re open to negotiating a debt settlement.

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Debt Buyer FAQs

How to get debt collectors to stop calling my family?

You might be shocked if a collection agency contacts your loved ones, but collection agencies are legally allowed to do this. The Fair Debt Collection Practices Act (FDCPA) allows debt collectors to contact people you know to find your address, phone number, or workplace. Collection agencies might track down your relatives or friends on social media or via sites that publish addresses and phone numbers.

There are limits on what a collection agency can say to your family. Unless a collection agency is contacting your spouse, your executor, guardian, administrator, or attorney (or your parents, if you're a minor), debt collectors can't disclose that they are calling about a debt. Debt collectors also can't disclose that they are working for a collection agency unless your relative or friend asks them who they work for.

Debt collectors can't ask your loved ones to pay your debt. They can't threaten to tell your family about the debt to shame you into paying it. And they can't continue to call your family once they have made contact. All of those tactics are illegal, and you can sue if a debt collector breaks the law.

What is the difference between an original creditor and a credit card debt buyer?

The original creditor is the individual or company you borrow money from, like your bank or credit card company. Original creditors typically try to contact you for several months once you start missing payments. If unsuccessful, they may take you to court, send your account to a collection agency, or sell your account at a discount to a debt buyer.

Debt buyers purchase past-due accounts and get to keep whatever they can collect from you.

Collection agencies can be hired to collect past due accounts for original creditors, or they may function as debt buyers.

How do you pay off debt in collections?

There are different strategies for dealing with debt in collections, and the right one depends on a few factors:

Do you owe the money?
How old is the debt?
Who owns the debt? The original creditor, a debt buyer, or a debt collector?

Assuming that you do owe the money and want to pay the collection, you may be able to settle the account for less than you owe. Or you may offer to pay more if the collector agrees to delete the collection from your credit history.

How to pay off debt in collections with a debt buyer? Note that debt buyers may have purchased your account for pennies on the dollar and be willing to settle for much less than your balance. Collection departments from your bank or credit card issuer may be much less likely to negotiate.

Understand that debt buyers often pay pennies on the dollar and are often willing to settle for a small percentage of the original amount due. Another factor is the age of the account and how soon the debt will become uncollectible—every state has a statute of limitations for debt, and once that period has passed, creditors cannot continue to pursue you for payment.

The toughest collectors to deal with are likely to be original creditors. If your bank’s collection department is calling, the chance of them agreeing to accept much less than the full amount is lower.