Debt Laundering – What is it?
Ever have a debt collector repeatedly hassle you over a debt that you know was settled, or wasn’t yours in the first place? The reason why could be a loophole that allows debt collectors to approach people again and again over the same contested debts. By trying to collect again and again, collectors can waste your time, negatively affect your credit score and, sometimes, intimidate people into paying debts that they don’t owe.
The cycle of communicating with a debt collector starts all over once a different collection company is handling the account and is considered Debt Laundering. As a result, many people are harassed with the same debts over and over, even after going through all the motions with someone trying to collect the debt. The scenario can wind up playing out like this: Sally Consumer is contacted by a debt collector who says that she owes $400 on an old phone bill. As a savvy consumer, Sally demands proof that the debt is hers. The way the law is intended to work, the debt collector has to either provide proof or stop pursuing the debt. But, by cycling the debt through another collection agency, the process starts all over again.