Do you know what a “zombie debt” is? Well, let’s say you have a debt, and it doesn’t get fully paid. It started out as $1565.39 years and years ago, and you paid it down some, but only until you lost your job and had unexpected medical expenses. The collection agency gave up years ago, as did the lawyers the debt was given to for legal action. The last time you heard of this debt was about five years ago, when the state statute of limitations cut off the creditor’s right to sue. The balance was $645.22.
Then you get a notice from Farnsworth and Puddlejump, a firm that specializes in “zombie debts,” debts that are legally dead, but can be brought back to life, but only if you take the “bait” that F&P sends you. The letter tells you that you can “clean up your credit” by making one payment of $200 on this old debt; it does not tell you that by doing so, you will revive the entire debt, plus the various costs that F&P will add on as administrative fees and penalties.
Legally, they are not required to tell you that they bought the $645 debt for chump change, maybe $40 or so, and that if you do nothing, your credit rating will not change for the better or the worse, and you will not owe a thing. But why would they tell you that if one in ten recipients of letters like these will take the bait and make the payment that will bring the dead debt back to life?
According to the Washington Post,
“The efforts to collect on old debts often focus on getting consumers to reset the statute of limitations through a variety of means, including sending them credit cards that let them pay off their old debts or by allowing them to make a small payment to halt debt collection calls. The efforts have contributed to the flood of debt-collection lawsuits clogging courts across the country, consumer advocates say. In New York City, the number of debt-collection lawsuits surpassed 100,000 last year, compared with 47,000 in 2016, according to data from the New Economy Project, an advocacy group.”
Why should a business of debt collecting be fully truthful with those who didn’t pay their full indebtedness in the first place? The usual “truths” apply: if they don’t trick the consumer, someone else will, and, besides, it’s “perfectly legal.”
Big firms with big debts (like Forever 21) have good lawyers and can go to bankruptcy court to shed their debts; typical consumer debtors aren’t lawyered up, and are at risk from vultures who pick over the dead carcasses of consumer debt and make them come alive again.
The Clearpoint Blog has a set of recommendations for consumers that can be found at:
https://www.clearpoint.org/blog/3-ways-to-fight-off-zombie-debt-and-debt-collection-agencies/