Just when you thought it was safe… here comes zombie debt!
A client recently called me in a panic. He said he was just called by an attorney from a debt collection agency and told they would file a lawsuit against him in 30 days if he didn’t pay $3,000 he owed on an old credit card. However, they were willing to negotiate a deal if he could make the full payment by the end of the week. How nice of them.
They had quite a history. They said that if I didn’t pay off the debt, it would be transferred to the original creditor who would file a lawsuit. And that my friend would be subject to more interest and penalties and attorney fees and that his wages could be garnished. Scary.
“What should I do?!?!?! Can they really garnish my wages?!?!?! How much should I settle for?!?!?! Would you trade this for me?!?!?!” he said.
I told him to take a breather and asked him a few questions. I was able to discern that the last payment he made was in July 2006. That’s a pretty old debt. Sounds like zombie debt to me.
Who are zombie debt collectors?
It is important to know who these companies are and how they operate. Zombie debt collectors (also known as debt scavengers or junk debt collectors) typically buy very old debt for pennies on the dollar from original creditors who have long since paid off this debt. So any money they raise is worth it to them. By many definitions, the statute of limitations (ie, the time within which a lawsuit MUST be filed) has already expired. If the statute of limitations has expired, debt collectors have no legal right to any money from the consumer. Therefore, it is called zombie debt because it is a “dead” debt that these debt scavengers bring back to life. Unfortunately, zombie debt collection is big business because many consumers don’t know their rights and want to protect their credit.
How do zombie debt collectors try to collect?
Having purchased this debt, these companies attempt to collect as much money as they can by selecting consumers who they believe are likely to pay them any amount of money. So how do they do it? First they scare you. They will make you believe they are attorneys even if they are not, threatening to file a lawsuit, ruin your credit, seize your assets, garnish your wages, and put a lien on your home. Then they will act like they are doing you a favor by accepting much less than they relieve you owe, make harassing phone calls, give you short deadlines to pressure you into a settlement before you can consult an attorney or do any research and they will lie. Sound dirty? Is.
The desire to solve the problem and avoid further headaches is so strong that many consumers end up paying off debt even after learning it is zombie debt. Just the threat of a lawsuit or wage garnishment is enough to force consumers to pay hundreds or even thousands of dollars to pay off debt and protect their credit. This is what these debt scavengers rely on.
What do you do if you get a call from a zombie debt collector?
First of all, don’t panic! Take the time to do some research and understand your rights. Read on for tips and guidelines to follow when dealing with these “debt seekers.”
Do not assume they are who they say they are and do not verify ANY information!
Who are these people? How do you know this is legit? Have you done business with them? How do you know it’s not a scam? How is that not the result of identity theft? Ask them who they are and their contact information. And talk to them like you have no idea who they are or what they’re talking about. They will try to get you to verify the information. Do not give them any information and do not verify anything! And I mean EVERYTHING! Remember, you have no idea who they are and they are calling about a debt you know you owe longer. (See the “Don’t Admit Debt!” section below.) Just get some information from them, hang up, and then do some research first. They will try to use any information you give them against you. Warn other family members or roommates not to give them any information.
Don’t assume you owe this debt (or that they can prove it).
Just because a zombie debt collector is calling you doesn’t mean you owe the debt. Don’t believe for a second that the original bank or debt collector has all the paperwork and evidence together. In addition to prescription, the debt could have been canceled in bankruptcy or settled by agreement with the bank.
Remember the Robo-Signing scandal in which bank employees signed affidavits without verifying any of the information contained in them? Financial institutions, including zombie debt collectors, can be careless and may never verify the information they have. After all, their goal is to get you to pay them anything and they have no intention of filing a lawsuit. They count on consumers not knowing their rights and expecting no one to call them out.
Can they prove that they bought this debt? They need to show that you legally owe this debt, that they legally purchased this debt, and that the debt was legally transferred to them. They would need to prove this in court if they sued, unless you ignore it and they get a default judgment against you.
Don’t assume they have the right person.
Most of the time, debt collectors don’t have up-to-date contact information. They have whatever information is in the account from years ago. They will then try to locate the right person. As you can guess, they often don’t have the right person and are just fishing. So even if you had a credit card from the bank they’re asking about, it doesn’t mean they have the right person. This is another reason not to talk to them or give them any information.
Determine if the state of limitations has expired.
I called the debt collector again on behalf of my friend and they tried to tell me that the statute of limitations runs from the date of the last activity on the account, which was when the original creditor charged the debt. Statutes of limitation are laws that establish the time within which a legal action must be brought, after which no legal action may be brought regardless of whether a cause of action existed. In other words, if you do not file a lawsuit within the time set by the statute of limitations, the court will not allow you to bring an action.
First of all, this doesn’t make any sense, because the creditor would control the statute of limitations by waiting to pay off the debt. Can you imagine a creditor filing a lawsuit 40 years later because they still hadn’t decided to pay off the debt? In California, the statute of limitations begins to run on the date of default, which is the date the consumer should have made a payment, but did not. This alerts the creditor that he must take steps to collect the debt. The statute of limitations is two years if there is no written agreement between you and your creditor. If there is a written agreement, the statute of limitations is four years. If the creditor obtained a judgment against you in court, the statute of limitations is 10 years, but can be renewed. Statutes of limitation vary widely from state to state, so you should consult your state’s laws to determine the time limits applicable to your situation.
Even though it is a violation of the Fair Debt Collection Practices Act to file a lawsuit after the statute of limitations has expired, the sleaziest companies file lawsuits anyway in the hope that the consumer will not respond to the claim. sue and the collection agency ends up obtaining a default judgment against the consumer. This will turn previously bad debt into highly collectible debt. It is also important to note that although the statute of limitations prevents debt collectors from filing a lawsuit, they are still allowed to try to collect the debt. However, many of their tactics violate a law called the Fair Debt Collection Practices Act.
If you have determined that the statute of limitations has expired, then this is clearly zombie debt. If you have determined that the statute of limitations has not expired, then this article is not for you. In either case, you may wish to contact an attorney for further consultation and legal advice. Many attorneys offer a free consultation, so take advantage of that. Look for an attorney who practices consumer rights, consumer debt, debt collection, debt relief, the Fair Debt Collection Practices Act, or even bankruptcy in your area.
Do not make any payments of any kind!
A favorite trick of debt scavengers is to harass you into agreeing to a payment plan and immediately making a “good faith” payment of $10 or some other small amount. They will try to get your bank account number and routing information. This is a mistake! Do not make any payment no matter how small the amount or what they promise you. Don’t negotiate. Don’t make any deals. You do not agree to a payment plan. I think you get the idea.
Doing this will revive the debt, which is called an acknowledgment or reaffirmation of the debt. Even admitting that you owe the debt could be used against you. It can often be difficult for most people to say “no.” Most people don’t want to be “bums.” Therefore, it is important to remember that you are not being dead because you do not owe this debt.
So I called these debt scavengers. They were very nice on the phone. I asked them for specific information about the debt they were calling about. Without admitting anything, I asked about the last transactions and dates of transactions on the account that relieve my client of what he owes. Not surprisingly, the statute of limitations had expired. I informed them that it is a violation of the Fair Debt Collection Practices Act to sue or even threaten to sue after the statute of limitations has expired.
He said the statute of limitations runs from the date of the last activity on the account and that was when the debt was sold to the debt collection agency. They have nerves!
I asked them to send me a letter verifying this debt and indicating when the statute of limitations ends. She said “sure” and wrote down my address and phone number. We haven’t heard from her since, and probably never will.
If they think charging you is more trouble than it’s worth, they’ll move on to the next poor victim who doesn’t know their rights.
final thought
I have heard banks talk about a moral obligation to pay off debt. Maybe for the original creditor (and that’s a strong maybe), but certainly not for the junk debt buyer. If the original creditor or debt collection agency owed you money, but the statute of limitations had expired, do you think they would pay you? It’s not about morality, it’s about the law.
As consumers, the best thing you can do is know your rights. Please feel free to share this article with your family and friends so they can protect themselves and eventually put these zombie debt collectors out of business.