Zombie Debt – The Debt that Keeps On Giving

As the Courts are well aware, from the multitude of collection cases which they see filed each and every week, debt buying is a fast-growing business of which this court plays a critical part in the debt buyer’s business model. According to an industry group, the Debt Buyers Association: “The face value of all such debt sold in 1993 was $1.3 billion. By 1997, that number had grown to $15 billion and sales reached approximately $25 billion in 2000.” By 2007 the amount had risen to $110 billion per year. (Eileen Ambrose, “Zombie Debt; Debt Can Come Back to Haunt You Years Later,” The Baltimore Sun, May 6, 2007 pg. 1C.)

In 2011, the midst of the greatest financial crisis since the Great Depression, 14.6 percent of the U.S. population has lost their jobs and the unemployment rate remains at a staggering 9.6 percent. While there is some indication of economic recovery, at least one industry-debt collection, has not only survived, but has continued to thrive through recession. From 1990 to 2007, employment in the third-party debt collection industry has more than doubled. In 2007, the debt industry posted annual revenue of $557.9 billion.

By 2009, outstanding consumer loans exceeded $2.5 trillion, of which debt from credit cards and other revolving credit debt was nearly $1 trillion at its peak, with subprime credit cards constituting more than a quarter of the credit card market. In short, loans that were initially easy to obtain eventually became impossible to pay back.
Buying debt became a lucrative industry very quickly, ranking among the fastest-growing sectors of all financial services over the past decade. By 2005, debt buyers were purchasing more than $110 billion in debt annually, with charged-off credit card debt accounting for 91% of this amount. The net income at four major debt buying firms increased by more than 700% from 2001 to 2006." By the debt buyer industry's own estimate, sales of charged-off consumer debt will have exceeded $86 billion by 2010.


Collaborative Writing by Rex C. Anderson, Esquire and Contributing Research/Writing by Kellye S. Smith



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