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What Happens When Your Debt is Purchased?

images.jpgThe Federal Trade Commission (FTC) receives more complaints about debt collectors, including debt buyers, than about any other single industry.

The Problems with Debt Buying

What is debt buying? It occurs when companies purchase a creditor's debt and then tries to collect the amount owed. Debt purchasing can be a lucrative business, with companies known to purchase debt for just a few cents on the dollar.

For consumers, debt buying can become a nightmare. There are cases in which debt collectors seek to recover funds from the wrong consumer for an erroneous amount.

In 2009, the FTC studied the issue by obtaining information from nine of the largest debt buyers that together amassed 76.1% of all debt sold in 2008.

As part of the study, the FTC studied 5,000 portfolios containing nearly 90 million consumer accounts. Although the accounts were worth $143 billion, debt buying companies purchased the debt for $6.5 billion. Credit card debt accounted for 62% of the portfolios.

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