What are debt buyers and what do they have to prove about ownership when they sue me?

What are debt buyers and what do they have to prove about ownership when they sue me?

A picture of a man looking at a question mark with the words "What are debt buyers and what do they have to prove about ownership when they sue me?"We talk a lot about “debt buyers” in our posts.

Since we discuss debt buyers so frequently, I wanted to give you a definition and some examples to help you understand what a debt buyer is. 

What are debt buyers?

A debt buyer is somebody who claims to buy debt.

These are companies like Midland Funding, Midland Credit Management, Portfolio Recovery, and LVNV

There are many more of these companies, but these are some of the bigger names that we see frequently. 

These companies will buy up these huge portfolios of accounts. 

They’ll buy $100,000,000 worth of defaulted credit card debt for 5 or 10 cents on the dollar. 

And now they claim to own those debts. 

What do these debt buyers do?

Sometimes they will collect on these debts themselves. 

For example, Portfolio Recovery will write to you, call you, and sue you. 

Sometimes they will farm out the collection work to separate companies and then they’ll sue in their own name against you. 

All of these guys are debt buyers and they’re all considered debt collectors under the Fair Debt Collection Practices Act (FDCPA)

The debt buyers will want to argue about that. They’ll say, “Oh no, we’re debt buyers. We’re not considered debt collectors.”

The reality is that the vast majority of court opinions recognize debt buyers as debt collectors under the FDCPA. 

Why do I say that they claim to buy this debt?

When it comes time for court, when the debt buyers sue you, they must prove that they actually own this debt

It makes logical sense that they would need to do this. 

You never had a credit card with Portfolio Recovery or Midland funding.

Now this company you’ve never heard of is coming to you out of the blue saying that you didn’t pay your credit card so now you have to pay them. 

They say that they bought the debt. 

We have been doing this for well over a decade, and all the debt buyers that sue in Alabama know our response – “Prove it.”

You would think that if they bought the debt, it would be pretty easy to prove. 

If someone asked me to prove that I own the house that I am living in, it would be easy for me to prove. 

I would just show them the deed. 

If they wanted proof that I owned my car, I would show them the title. 

This is not some huge, challenging effort that we’re asking them to go through. 

They just need to provide proof that they own the debt. 

They say they bought this little Synchrony Bank or Capital One debt. 

Now they need to prove it. 

Usually, they struggle to do this.

It could be that they are unable to prove it because they literally don’t have the proof, or they do have the proof and they’re just unwilling to prove it. 

Whatever their reason is, it doesn’t matter. This is a big problem for them after the case is over.

It’s a problem for them with credit reporting and all sorts of other consequences from doing these bogus lawsuits. 

Why can’t they or won’t they prove that they own the debt?

The ultimate proof is the purchase agreement. 

It’s called different things, but basically, it is the contract where they bought millions of dollars worth of debts from Synchrony Bank. 

The contract will say that Synchrony bank has sold these debts to Portfolio Recovery. 

So why don’t they just bring the contract?

Usually, in that contract, there will be conditions. 

Synchrony will say “We make no representations that any of the documents we are giving you, any of the information we are giving you, is accurate.”

Why would the original creditor say this?

Imagine you are Synchrony or another original creditor. 

You’re selling $100,000,000 of debt for 5 cents on the dollar. 

If you’re taking that big of a hit, are you really going to put on the contract a sworn statement that every part of the information is accurate and you’ll back it up 100%?

Would you state that you are willing to be a witness to testify to the accuracy of every piece of information being sold? 

They would be selling the debt with the most fantastic warranty ever if this was the case. 

Think about this in terms of a car. 

You’ve got a $20,000 car. 

You’ve bought a $20,000 car and you’re selling it to someone else for $1,000, 5 cents on the dollar. 

Are you really going to give you this fantastic warranty about great transmissions, tires, etc.?

No. What are you going to do?

Well, almost all used cars, unless they are very, very new used cars, are sold “as is.”

That’s what these original creditors do. These debts are being sold “as is.”

Why would they want to put themselves on the line by swearing this information is correct when they are only making pennies on the dollar for these debts?

If they were going to make promises like that, they would want significantly more money to be paid. 

These conditions are the reason why debt buyers don’t want to introduce the purchase agreement into evidence. 

The debt buyers come to court and say to the judge, “Look, I’ve got all these documents and statements from the original creditor and they’re absolutely accurate because they are from the original creditor.”

Well, if the original creditor has stated in the contract that they make no representations that any of the information is accurate because the debts were bought “as is,” it’s hard for the debt buyer to make this argument. 

The debt buyer can’t claim that this is “the absolute gospel truth” when the contract says that it is not. 

What should you do if you are dealing with debt buyers?

Remember that they are subject to the FDCPA, assuming this is a consumer debt. 

They claim to own the debt, but they need to actually prove this if they are going to sue you.

So, when they sue you, one defense you may have is, do they actually own the debt?

You may have other defenses available to you, such as the Statute of Limitations, or have already paid off the debt, or other defenses. 

There are all sorts of defenses you may have.

But that’s a big one – they need to prove that they actually own the debt.

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Thanks and have a great day!


John Watts




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