Consumer Alert and Fact Sheet on Collection Agencies and Junk Debt Buyers
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Consumer Alert and Fact Sheet on Collection Agencies and Junk Debt Buyers

San Diego, CA - Indebted consumers and also those consumers who were once indebted are the target of a new assault by Junk Debt Buyers! Junk Debt Buyers are collection agencies that purchase bad debt - they are working for themselves because they now "own" the debt.  "Contingency" collection agencies work as agents for another company to collect a debt.  A junk debt buyer may also be in the contingency collection business OR they may contract with a contingency agency.  Junk Debt Buyers are a multi-billion dollar industry and are responsible for a large number of debt collection and credit reporting violations of law.

Some Top Junk Debt Buyer Industry Players (Some of these companies may be owned in part by others):
Asset Acceptance (AAC)
Sherman Acquisitions/Sherman Financial Group/Alegis
NCO Group
Portfolio Recovery Assoc.
Asta Funding
Encore Capital Group (parent of Midland Credit Mgmt)
Allied National/Interstate
Risk Management Alternatives (RMA)
JBC & Associates
Arrow Fin. Svcs. (majority interest acquired by Sallie Mae 9/04)
RJM Acquisitions
CAMCO (Capital Acquisitions & Mgmt Co)
Cavalry Portfolio Services
Unifund Group
Phoenix Asset Acceptance
First Select Corporation (part of Providian)
Collins Financial Services
Oliphant Financial Corp.
OSI Portfolio Services

Following are the types of Fair Credit Reporting Act/Fair and Accurate Credit Transactions Act (FCRA/FACTA) and the Fair Debt Collections Practices Act (FDCPA) violations typically practiced by junk debt buyers.
1) Re-aging accounts to attempt to force settlement on "time barred" or out of statute accounts. The actual date that the debt becomes delinquent is supposed to be reported to credit reporting agencies under FCRA/FACTA within 90 days of the delinquency.

Re-aging is the practice of reporting a bad debt account as more recent than it really is. Re-aging causes the FICO score to drop dramatically since the scoring model interprets the re-age as a more recent default.
Junk Debt Buyers (JDB's) press for payment of some amount to bring the debt back under the statue of limitations after which they can sue you and have a chance of winning. It is important to note that state statute of limitations (SOL) for collections are different from FCRA/FACTA statues of limitations for reporting.

2) Misreporting the legal status (e.g., an open charge off that was actually discharged in bankruptcy) and also the misreporting the "open date" and "date of last activity" on an account. JDBs also purchase debts that are outside the statue of limitations for lawsuit, but not outside the statute of limitations for reporting, like to report this debt as a revolving account, which is illegal.

3) Various California Penal Code violations (e.g. consumers not being notified if their calls are being monitored or recorded) are also likely violations in almost all fifty states.

4) Multiple listings of the same debt: Junk debt buyers are often responsible for multiple reporting of the same debt as these change hands among buyers and sellers. Usually, these same debts are reported by the original creditor as well.

5) Collectors pretending to be lawyers. Springboard warns counselors and consumers alike that it does not improve a credit score to settle an old debt unless the item is completely deleted (not just reported as "paid in full") - it makes it worse since the delinquency/charge off will now be reported as more recent!

What to do if you are contacted by someone claiming to own one of your past debts:
- Don't assume you are wrong - assume instead that your rights are being violated
- Keep all letters, account statements, and court records (even from years ago)
- Do not provide the collection agency/JDB with updated personal information.
- Never acknowledge a debt with a collector or agree to any payment until the agency "validates" the debt (past billing statements are not considered proof).
- Don't accept credit card "offers" that come with an offer for settlement or request a payment in any other way
- Monitor your own credit report - call 877-322-8228 to get your free annual credit report (not available yet in some states). You may also go to but BEWARE of imposter websites that are "phishing" to steal your identity.
- Contact an attorney that specializes in lawsuits for FCRA/FACTA and FDCPA violations
Federal Trade Commission summary of consumer rights on Fair Debt Collection
What debts are covered?
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.
Who is a debt collector?
A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis.
How may a debt collector contact you?
A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.
Can you stop a debt collector from contacting you?
You can stop a debt collector from contacting you by writing a letter to the collector telling them to stop. Once the collector receives your letter, they may not contact you again except to say there will be no further contact or to notify you that the debt collector or the creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor.
May a debt collector contact anyone else about your debt?
If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people, but only to find out where you live, what your phone number is, and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.
What must the debt collector tell you about the debt?
Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money.
May a debt collector continue to contact you if you believe you do not owe money?
A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.
What types of debt collection Practices are prohibited?
Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact.
For example, debt collectors may not:
- use threats of violence or harm;
- publish a list of consumers who refuse to pay their debts (except to a credit bureau);
- use obscene or profane language; or
- repeatedly use the telephone to annoy someone.
False statements.
Debt collectors may not use any false or misleading statements when collecting a debt.
For example, debt collectors may not:
- falsely imply that they are attorneys or government representatives;
- falsely imply that you have committed a crime;
- falsely represent that they operate or work for a credit bureau;
- misrepresent the amount of your debt;
- indicate that papers being sent to you are legal forms when they are not; or
- indicate that papers being sent to you are not legal forms when they are.
Debt collectors also may not state that:
- you will be arrested if you do not pay your debt;
- they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or
- actions, such as a lawsuit, will be taken against you, when such action legally may not be taken, or when they do not intend to take such action.
Debt collectors may not:
- give false credit information about you to anyone, including a credit bureau;
- send you anything that looks like an official document from a court or government agency when it is not; or use a false name.
Unfair Practices. Debt collectors may not engage in unfair Practices when they try to collect a debt.
For example, collectors may not:
- collect any amount greater than your debt, unless your state law permits such a charge;
- deposit a post-dated check prematurely;
- use deception to make you accept collect calls or pay for telegrams;
- take or threaten to take your property unless this can be done legally; or
- contact you by postcard.

What control do you have over payment of debts?
If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe.
What can you do if you believe a debt collector violated the law?
You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1,000. Court costs and attorney's fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector's net worth, whichever is less.
Where can you report a debt collector for an alleged violation?
Report any problems you have with a debt collector to your state Attorney General's office and the Federal Trade Commission. Many states have their own debt collection laws, and your Attorney General's office can help you determine your rights.
Internet Forums and Resources:
Creditnet (here's where to learn how debt collectors think)


About the ICFE:

The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation).  The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely. 
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The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (  CASDRAP disbanded in 2010, shortly after the web site project was completed.  In 2011 the ICFE assumed the single sponsorship of the ( web site and is now responsible for its content and operation.

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