Released: August 20, 2006

The debt is yours alone

Source: By Michelle Singletary, Washington Post (Free Registration)

Let me address the common misconception that all debt collectors own the debt they’re trying to collect.

Before I do that, however, I’d like to start with how my recent columns on debt collection began. I received a letter from an entrepreneur who had fallen on hard times but had recovered financially. She wanted to know if she should pay an old credit card debt in full. She owed $24,000, but a collection agency was offering to settle it for $14,000. Something didn’t sit right with her. She wanted to pay the entire debt to clear her conscience.

I said to go with her conscience. And she did. She paid the $24,000.

Many people wrote to me, stunned that I would recommend such a thing. They argued that the debt collector was a third party who bought the original debt as a business investment, and therefore the woman shouldn’t feel obligated to repay the full amount.

“Unfortunately, her creditor didn’t receive a penny of the settlement amount that [she] paid,” wrote Jerry Harold of Leesburg. “The debt collector bought the debt and collection rights at risk with the hope of collecting more than the discounted purchase price. When [she] paid the full balance, every penny went to the credit collector.”

Robert D. Brougham of Denver wrote, “The moral obligation of debt can certainly be a factor to the originator of the debt, but once that lender has decided to discount the debt for his own business reasons, your position simply results in a windfall for the discount purchaser.”

Read Full Article: The debt is yours alone