A debt buyer is a company, sometimes a collection agency, a private debt collection law firm, or a private investor, that purchases delinquent or charged-off debts from a creditor or lender for a percentage of the face value of the debt based on the potential collectibility of the accounts. The debt buyer can then collect on its own, utilize the services of a third-party collection agency, repackage and resell portions of the purchased portfolio, or use any combination of these options.
The Federal Trade Commission (FTC) administers the 1977 landmark federal Fair Debt Collection Practices Act (FDCPA), which established debt collection industry standards and depends on the industry self-regulating or "self-enforcing" the statute through "private action" as opposed to "government law enforcement".[1]: viii FDCPA protect consumers and ethical collectors.[1]: iii
From 1999 to 2009, the "advent and growth of debt buying", that is "the purchasing, collecting, and reselling of debts in default", was considered to be the "most significant change" in the debt collection business.[1]: iv According to Sacramento, California-based Debt Buyers Association (DBA), a debt buyers trade association, by 2008 there were "hundreds, and possibly thousands" of debt buyers.[2]: 7 The debt buying industry was highly concentrated according to The Nilson Report with only ten debt buyers "responsible for 81 percent of all of the credit card debt purchased in fiscal year 2007".[3][2]: 7
DBA, which was established in 1997 and is now known as Receivables Management Association (RMA), provides the self-regulation tool for debt buyers, the International Receivables Management Certification Program, which has been obligatory for all RMA members since February 29, 2016.[4]
In 2015, Encore Capital Group and subsidiaries form the largest debt buyer and collector in the United States[5] and Portfolio Recovery Associates was the second largest.
According to the Federal Reserve Bank of New York's May 2017 Quarterly Report on Household Debt and Credit, Americans owe $12.73 trillion in consumer debt to creditors—credit card companies, student loans, mortgages, and car dealers, among others.[6] These debts are usually paid off to creditors, but by 2017, unpaid debts were "increasingly likely to end up in the hands of professional debt collectors—companies whose business it is to collect debts that are owed to other companies".[7][8]: 8 According to the annual CFPB 2017 report, there were 130,000 people employed by 6,000 collection agencies in the "$13.7 billion dollar industry".[8]
FTC_report_2009 was invoked but never defined (see the help page).GAO_2009_Cackley was invoked but never defined (see the help page).The CMD's latest Quarterly Report on Household Debt and Credit reveals that total household debt achieved a new peak in the first quarter of 2017, rising by $149 billion to $12.73 trillion—$50 billion above the previous peak reached in the third quarter of 2008. Balances climbed in several areas: mortgages, 1.7 percent; auto loans, 0.9 percent; and student loans, 2.6 percent. Credit card balances fell 1.9 percent this quarter.