People with credit scores that prevent anyone but their mom from lending them money are suddenly receiving offers that allow them to have a credit card — on the condition that they pay back part of an old debt that they are no longer legally obligated to pay.
These deals are the result of joint ventures forgeed between debt collectors and banks, wherein people with debt that had expired under the statute of limitations are offered credit cards, but only if they pay a portion of that debt.
In just nine months, one company involved in these offers claims to have gotten their hands on $15 million in debt that had been considered dead and buried.
According to the Wall Street Journal, though these sorts of credit cards have been around for about a decade, a growing number of banks are suddenly eager to jump on this bandwagon because the new credit card customers have rock-bottom credit scores, which means they pay more fees and have sky-high interest rates. And if they fail to pay, the debt collector agrees to foot the bill to the bank.
Meanwhile, the debt collectors make a big profit on the resurrected debt, which they purchase for pennies on the dollar.
But for those who receive these offers, they may be stepping into a whole new debt mine field. Because once that dead debt is zapped back to life by their agreeing to pay even a small portion of it, they are once again obligated to pay it. Thus, if they fall into their old ways of spending too much and not paying their bills, the debt collectors could be banging down their door for debts old and new.
Bringing Expired Debt Back to Life [Wall Street Journal/Yahoo]