Debt Collector Tactics When Collecting Old Debt

What do debt collectors consider when making the decision whether to pursue consumers for old debt? An article in Collections and Credit Risk, "New Ideas for Tracking Old (and New) Debts," addresses this question, and provides a little insight into the inner workings of debt collection companies.

The bottom line consideration in making the decision, to no one's surprise, is how much it will to cost to collect the debt. And one of the key factors that plays into the question of expense is information – how much will it cost to get the information the debt collector needs to find and go after the consumer?

A new approach being used by debt collectors is to try to determine and filter out at the earliest possible point debtors who: 1) are deceased; 2) have declared or filed for bankruptcy protection; 3) are in prison (aside from the obvious reason, prison may also suggest fraud, and the likelihood the debt will not be collectable); and 4) are litigious and have filed multiple lawsuits against debt collectors. Once these cases have been filtered out, collectors may then move forward to "skip-tracing," which is the practice of using expensive databases to obtain information about a consumer's present whereabouts.

As we all know, there are many free or inexpensive online resources for obtaining basic address and telephone number information. The biggest problem with many of these sources, the article observes, is that they are not necessarily current or accurate. For more current, accurate and more detailed information, such as asset data, specialized license data and employment information, debt collectors must pay a premium. In such cases, debt collectors will employ a cost benefit analysis – is the amount of the debt high enough, and the likelihood of collection strong enough, to justify the expense? Many debt collectors must conclude that the answer is "no," which likely explains why so many collectors file suit against consumers in counties in which they do not reside, a violation of New York State law, and a violation of the Fair Debt Collection Practices Act.[1]

Another resource for collectors to obtain information is through credit reporting agencies (CRAs), such as Experion, Transunion and Equifax. Under the Fair Credit Reporting Act, only companies that have a legally permissible purpose can buy consumer information from credit reporting agencies. Legitimate collection companies fall into this category. CRAs have the benefit of being able to track consumers via a single, consistent number (their Social Security Number), and through multiple sources that report to them throughout the consumer's life (credit card companies, personal loan sources, student loan lenders, mortgage lenders, home equity lenders, etc.). Information obtained from CRAs is most likely to be fresh.

The article also claims the US Postal Service tracks change of address forms that consumers file with the USPS through a database called NCOALink System. The article notes that the database may be of limited utility, since anyone who truly wishes to avoid debt is unlikely to notify the post office of a new address.

New technology has also allowed debt collectors to obtain information on consumers even when the information has been stale for many years. In the past, debt collectors had to keep checking on accounts to learn of any new activity by the alleged debtor that would help the collector determine where the alleged debtor currently resides. These days, according to this article, new technology can be programmed to constantly search for information on specific alleged debtors (where the amount of the debt justifies the cost), and updated information will be automatically sent to the collector.



[1] 15 U.S.C. 1692i Fair Debt Collection Practices Act. The exception to this is if the plaintiff has alleged that the basis for venue is that the consumer has been sued in the judicial district "in which such consumer signed the contract sued upon." 15 U.S.C. 1992i(a)(2)(A).

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