Definition
A zombie debt collector is a collection agency that buys old consumer debt accounts and resumes attempts to collect the debt.
Analysis
Most of the debt accounts purchased by this new breed of debt collector are extremely old, often more than 5 years old. In many cases, the statute of limitations has already expired, leaving little chance for any legal action to force repayment. Many of these debts are essentially dead, yet still pursued, which is why they are referred to as zombie debts.
Despite those odds, zombie debt collection is quite profitable. Zombie debt collectors typically will buy a portfolio of old consumer bad debt accounts, often for less than 1% of the face value. If you pay up on a $300 old phone bill, they might pocket more than $295.
This new trend in debt collection is made possible by advances in technology. Automatic smart dialers can keep collection agents talking to debtors. Lower telecommunications costs allow for companies to exploit English-speaking low wage earners overseas to fill collection agent positions.
Advances in data collection also help zombie debt collectors track down debtors that may have moved and changed phone numbers multiple times. Skip tracers supply zombie debt collectors with newer contact information.
Zombie debt collectors know that a person’s financial status may have changed substantially over many years. Many of these debtors have moved on and have increased their income. They may even by planning a major purchase on credit, such as a new home.
One practice that has been carried over from traditional debt collection activities is the frequent use of threats and other coercive techniques to pressure these people into paying debts that they may not even have a legal requirement to pay. Violations of the Fair Debt Collection Practices Act are extremely common and widespread.
The most common threat is to report the debt to credit bureaus. A debt which has aged beyond 7 ½ years from the date of last activity (7 years from the charge-off date) may not be placed on a credit report. Such threats are false and illegal.
Another common violation is harassment of the wrong people. Sometimes information provided by skip tracers is inaccurate. Aggressive debt collectors often refuse to believe a person who claims they do not owe the debt.
