Secondhand Debt
Something most people do
not realise is that most debt which is being chased by the large debt
collectors no longer belongs to the original creditor. The collection agency has
actually purchased what is know as non performing debt for a small
percentage of its actual cost. They then attempt to add costs and collect on the full amount. This is generally
credit cards, phone accounts and unsecured personal loans. An example might be- John owes
$5000 on a credit card he cannot afford due to loss of his job. The issuer has
attempted to collect from John but has realised he cannot
afford to pay.
The cost of legal action and
debt collectors will simply add more to an account they know John cannot pay so
they write the debt off. Enter the lucrative world of the secondhand debt
industry. These debts are usually put up for
"auction" and sold to the highest bidder. The $5000 debt is probably
purchased for under $1000. Enter the credit agreement John signed which stated
something like in event of this account being in default of our terms we
reserve the right to collect using any means available (within the
law of course) and also recover all associated costs- or something to that
effect. See you thought all that legal mumbo jumbo was just there to fill in
the pages. Any protection under the privacy act would also be lost when you
signed that dreaded privacy form.
I hear you all screaming how
can this be legal- I entered a contract with the credit providor why the hell
should my debt now be with somebody i have never
heard of. Much to my disgust it is according to a prehistoric property law click here if
you feel the need to read it but it makes bugger all sense to me.
The bottom line is that it is
legal and is a huge business which seems to be increasing all the time. The
assignment of the debt to the new "owner" includes all contracts and
the right to charge pretty well whatever they like in charges. The $5000 debt
has now become $15000. This particular law needs to be tested in court to see
if it holds up- BUT who when in financial distress is gonna be able to
fin the huge fees to test it.
Now a little bit of legal stuff
just to confuse things a bit more.
According to the law there is
no time period the creditors need
to wait before selling the debt- as soon as you are conducting the account
outside the agreed terms they are free to sell it.
For the assignment or transfer
of the debt to comply with the law in all States and Territories in Australia it must satisfy 4 elements.
1. The assignment must be
absolute ie. the entire debt including all rights and contracts must be
transfered and replaced under the receiving parties control.
2. The assignment must be in
writing and signed by the assignor- there is no requirement for the debtor to
be shown this document-which is like a bill of sale I
guess- only a notice of assignment as descibed in 4 below
3. The intention of the
parties to the assignment within the written document that it is an absolute
assignment between the parties
4. Written notice to be given
to the debtor- there is no time requirement for this notice as long as it is
served BEFORE any attempts are made to enforce the debt.
I have not after speaking to
hundreds of debtors since setting up this site come across one single person
including myself who has been notified of the assignment of a debt verbally let
alone in writing.
It may be prudent at this
stage to highlight the fact that debt becomes statute barred after 6 years in
most Australian States and Territories ie. A debt can no
longer be enforced or default listed after 6 years from the last time you made
a payment or verified in writing that the debt was yours.
So when the debt collector
calls about a debt you have forgotten about
for whatever reason- or maybe you thought it had been sorted by an ex partner
or whatever. Make sure you ask if the debt is still with the original creditor or if it has been sold. Request the
relevant paperwork to verify the assignment and insist on getting a copy
of the original contract showing the debt is actually yours and also a current
complete statement showing the balance and any additional charges. You are now
in control. If the collection
agency fails to comply simply CONTACT ME and I
will point you in the direction of the correct action to take.
This is my view of the current
very confusing law in relation to debt assignment in our fair country. If you
have an opinion or something to add please let me know
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