Question: What is the difference between assignment of debt and purchase of debt? If debt was purchased what are some possible ways to defend?
Answer: Assignment of Debt. In terms of debt collection an assignment of debt is the transfer of debt along with all the rights and obligations associated with the debt, from an original creditor to a third party. The third party can be a debt collector.
Generally, when a debt is assigned the debtor must be notified in order that he or she will know who and where to make payments. This is to avoid the debtor making payments to the original creditor which may not be properly credited to an account that has been assigned to a third party. This could cause a debtor to unintentionally default on a debt.
Purchase of Debt. Debt purchasers such as a collection agency or a debt collection law firm purchases delinquent or charged-off debt for pennies on the dollar and then attempts to recover the full amount of the debt. Debt buyers may attempt collection themselves or hire an outside collection agency for collection. Debt purchasers may even resell the debt to a different debt buyer.
What this means in Debt Collection Lawsuits. (Disclaimer: I am not an attorney and suggest you seek proper legal advice.) Debt buyers, debt collectors and debt collection laws firms are permitted to attempt debt collection. There is no law, at least that I know of, that would prohibit a debt collector from pursuing payment for unpaid debts.
However, when a debt collector files a lawsuit, consumers can request debt collectors prove they actually have a right to the money owed. This is where the courts seem to make a difference between assignment of debt and debt purchasers.
As stated above, when an original creditor assigns a debt to a third party, they transfer the debt along with all the rights and obligations associated with the debt to the third party. In this scenario the third party can legally sue for an unpaid debt as part of the collection process. When debts are purchased there is no actual assignment of debt. Even though debt buyers state they were assigned the debt, in most cases this is simply not true.
Debt buyers purchase debt in bulk. For example, let’s say Chase sells their delinquent accounts to a debt buyer. The debt buyer will receive a “Bill of Sale” from Chase for a total number of accounts that have been purchased. The accounts are sold in bulk and there is no mention of specific account holders in the actual “Bill of Sale.”
If a debt buyer presents the “Bill of Sale” as some kind of proof they own the debt, this can be successfully challenged as it contains no specific account information about the debtor.
Additionally, under a true assignment of debt, the original creditor must notify the account holder their account is now being handled by a third party. A letter from a debt collector does not constitute notice of assignment as the account holder had a signed agreement with the original creditor, not with an unknown third party debt purchaser.
When challenged in court, debt purchasers are rarely able to prove they have a legal right to collect the debt because they only have a “Bill of Sale” and not an assignment of debt from the original creditor. The best of luck to you.