It’s easy to rack up significant credit card debt. Many of us use credit cards for everyday shopping, or to pay for expensive items over an extended period. Some of us also have to rely on credit during tough times, whether due to unemployment, medical emergencies, or to cover unexpected expenses. Once the bills come due however, it can be hard to keep up with minimum monthly payments, not to mention penalties and interest.
If you are overwhelmed by credit card debt and have stopped making payments, or you have failed to work out a payment plan with your card issuer, you might think they will just write it off as a loss and the story will be over. But that’s not the case.
Many card issuers sell their bad debt to {db}. Once you start hearing from them, or their collection arm Midland Credit Management, your simple past-due situation can quickly turn into a debt collection nightmare.
What is {db}?
{db} is a subsidiary of San Diego’s Encore Capital Group. {db} buys bad debt from credit card issuers who are unable to collect past-due balances in a reasonable amount of time. They also operate Midland Credit Management, which is the company that actually contacts consumers and attempts to collect the debt.
Why do credit card issuers sell their past-due accounts?
High rates of credit card default are resulting in significant losses for most card issuers. If a company has a large amount of consumer debt outstanding, and the cost of collecting it is high, they have an alternative option. Instead of spending their own money chasing down individual past-due accounts, they can make millions selling off cardholder debt in bulk.
Each year card issuers package thousands of past-due accounts together for sale to {db} and other debt collectors, and credit card debt is most likely to be sold that way.
How much does {db} pay for my debt?
On average, {db} pays credit card issuers 3 to 9 cents on the dollar for the right to collect past-due debts. They pay the least in cases where the debt is old, or has been resold several times. Across the industry, debt collectors might pay up to 15 cents on the dollar.
Will {db} try to collect the whole debt, or just what they paid for it?
{db} will pursue you for the entire past-due balance you owe. That’s how they make money. Buying debts for pennies on the dollar allows them to earn a healthy profit when they can collect the full amount you originally owed the card issuer.
They can also add fees to existing debts, along with interest penalties of 25 percent or higher, which allows them to make even more money. Some consumers end up paying twice the original amount they owed or more, and even court costs if {db} wins a lawsuit against them.
If I pay {db}, what percentage will go to my credit card issuer?
Zero. None of the funds you pay to {db} will be sent to your credit card issuer. Once {db} buys the debt, that’s the end of their financial relationship with the credit card issuer. Every dime you pay to {db} to resolve the debt is theirs to keep.
Once {db} buys my debt, what do they actually get? Do they have my account statements or other information about me?
In most cases, all {db} buys is basic information about you and your debt – the amount you owe, the addresses and contact numbers you’ve given your card issuer, and the right to collect your debt. They don’t purchase any of the paperwork associated with your account, such as contracts, agreements, statements, or other records related to your purchases or payment history.
If {db} files a lawsuit against you, their agreement with most card issuers does allow them access to your full account information if they need it. However, any further records requested must be purchased separately, so they don’t automatically do so. These decisions are made case-by-case, and are often based on the amount they stand to collect vs. the cost to obtain the records.
What can I expect if {db} contacts me?
{db} is among the most aggressive debt collection companies in the nation. They start by smothering consumers with collection calls. Then they move on to high-pressure demands for payment and scare tactics if you don’t comply. They are also known to sue, even while consumers are making payments on their debt.
{db}’s parent company Encore Capital Group has been investigated by numerous states and the federal government for illegal debt collection practices, so don’t be surprised if they don’t play by the rules in their interactions with you. Make sure to document any harassing phone calls or intimidating correspondence you receive from them.
What should I do if {db} files a lawsuit?
Filing suit is one of {db}’s most effective strategies. They essentially play the odds, knowing that that people in debt are less likely to hire a lawyer or challenge financial claims in court, and more likely to ignore a lawsuit altogether. They usually win because the consumers they sue don’t respond to the summons, don’t submit paperwork requested, or simply don’t show up for their court date.
{db} believes you won’t hold them accountable for their aggressive collection actions. So that’s exactly what you have to do. Respond to the summons quickly, submit any paperwork required by the court, and challenge {db} to prove its case against you, providing legitimate documentation for every dime it says you owe.
Do I need an attorney to fight a {db} lawsuit, or can I represent myself?
Consumers sued over financial debts have the right to an attorney, but the vast majority of those sued by {db} do not hire one. The fact that {db} wins most of the cases they file demonstrates why representing yourself isn’t always the best idea.
If you know your legal rights and can educate yourself about the court processes involved, you may be fine. To effectively fight a {db} lawsuit however, you must make them prove the following things in court:
The amount of the original debt in question is accurate
The debt actually belongs to you, and you are responsible for paying it
The statute of limitations for collecting the debt has not expired
The statute of limitations for filing a debt lawsuit has not expired
{db} actually owns the debt, and the right to collect it
Any fees or interest penalties added to the debt are reasonable and justified
If you have questions about how to do this, or doubts about whether you can, at least consult an attorney before moving forward on your own.
The J. Gannon Helstowski Law Firm has deep knowledge about {db} and its legal practices, and a long track record of helping consumers defend {db} lawsuits. We can help you hold this corporate debt collection giant accountable for its actions.
Don’t let {db} win. Contact us for a free consultation.