Q. A Collection Agency who is contacting me about a debt is telling me they were assigned to collect it and did not purchase it, not sold. Is there a difference between being assigned or sold? Should I care?

A. This question generally is asked because a consumer is unsure how to respond to a notice of collection or lawsuit. They may have heard you do one thing if a debt is sold to the collection agency and another if the debt has been purchased. In actuality, there is very little difference to the debtor whether a debt is sold or assigned. The collection agency, upon first contact, should send you a collection letter notifying you about the debt using specific language in the FDCPA. If you request debt validation, the collection agency only needs to send you a copy of your statement or a cancelled check.

However, if the debt is challenged in court, or if the collection agency sues for the debt, in order to show legal ownership or assignment, the level of proof is higher. When a debt is sold, or assigned, the new owner, or assignee, has an obligation to make you aware of certain things before he is entitled to payment. Both of the following are required to prove in court that the collection agency is the rightful owner or assignee:

1. Foremost is a notice that the account has in fact been sold. A letter or notice from the new owner (the collection agency) is not sufficient. The written notice needs to include some type of indication from the original creditor, or assignor, that all future payments are to be made to the assignee.
2. That notice also needs to have the signature of by the original creditor and indicating, with what I would call reasonable certainty, the specific account and the rights that were transferred.

Experience shows that these two things are rarely ever provided in court. For whatever reason, debt repurchasers ignore the important step or perfecting the documentation of the relationship of the collection agency to the original creditor. Credit Card companies purchase debts in large portfolios, and it isn’t economical to spend the time and effort perfecting every assignment incorporated in a debt portfolio. A collection agency ignores the lack of documentation would rather simply tell you that you are now supposed to pay them and tough if you don’t like it. Additionally, the original creditor wants to dump the debt without incurring the additional cost of authenticating every assignment. They have already taken a beating on the account and have no desire to invest more resources into it.

The fact that the collection agency neglects to perfect the assignment or sale is really a good thing for a debtor because it sets up perfectly for a defense to any lawsuit that comes around. For if the assignment has not been perfected, the debtor still has the legal right to pay the original creditor if he chooses to do so. It follows then, that the debtor also has the legal right not to pay the debt collector if he chooses not to.

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