Key takeaways
- Debt buyers purchase old debts, often for a fraction of the balance, and then try to collect.
- When a debt is sold, the buyer, not the original creditor, usually owns it.
- Debt buyers that collect must generally follow the same federal rules as other collectors.
- Records can get lost when debts are sold, so always ask for proof.
- You may be able to settle with a debt buyer for less, but get it in writing.
You get a letter from a company you’ve never heard of, saying you owe it money for an old credit card or medical bill. It may be a debt buyer: a company that bought your debt from the original creditor or another buyer. Here’s how that works and what it means for you.
How debt buying works
According to the CFPB, debt buyers purchase debt, from the original creditor or from another debt buyer, usually for a fraction of the balance owed. They then try to collect, either themselves or through collection agencies or collection attorneys.
Creditors often sell debts that have been charged off, usually after months of missed payments. A debt can be sold more than once.
What it means for you
- The new owner can try to collect the full amount owed, plus any interest or fees allowed by law and your agreement.
- You should deal with the current owner or its collector, not the original creditor, once a debt has been sold.
- The same debt shouldn’t show a balance twice on your credit report. The original creditor’s account should show a zero balance once it’s sold.
Your rights with debt buyers
Debt buyers that collect debts must generally follow the federal Fair Debt Collection Practices Act and the CFPB’s rules. That means they must:
- Send you a validation notice with key details about the debt.
- Follow limits on when and how often they contact you.
- Not lie, threaten or harass you.
- Not sue or threaten to sue on a debt that’s past your state’s time limit.
Read your rights when a debt collector calls.
Why proof matters
When debts are bought and sold, records can be incomplete or wrong. The CFPB has taken action against large debt buyers for using deceptive tactics to collect debts that were inaccurate or unverified. So:
- Ask for the validation notice and check every detail. See how to ask a debt collector to prove a debt.
- Dispute in writing within the dispute period if anything is wrong.
- Check whether the debt is old. See time-barred debt and zombie debt.
Can you settle with a debt buyer?
Often, yes. Because debt buyers paid less than the full balance, some are open to settling for less. If you decide to settle:
- Make sure the debt is yours and the amount is right first.
- Get the agreement in writing before you pay.
- Make sure it says the debt will be considered settled in full.
- Remember that forgiven debt may be taxable.
See can you negotiate credit card debt yourself for step-by-step tips.
If you’re sued by a debt buyer
Respond by the deadline. Debt buyers must be able to show they own the debt and the amount is right. You may have defenses. See what to do if you’re sued for a debt.
The bottom line
A debt buyer is a company that bought your old debt and now wants to collect it. It has to follow the same collection rules as other collectors, and it has to be able to back up the debt. Ask for proof, check the details, and get any deal in writing.
Sources: CFPB: debt collection key terms · CFPB: action against the two largest debt buyers · FTC: debt collection FAQs