Zombie debt creeps onward in Idaho courts

BOISE, Idaho (AP) — Douglas Ackley thought he was making good on his debts. Then he got sucked into what became a two-year battle in state and federal courts.

At 32, the Boise State University student and Boise VA Medical Center employee had gotten in over his head. He owed $12,000 on four credit cards. So he cut a deal with a Maryland debt-consolidation firm: The firm would settle with the credit-card companies, and he would make payments for three or four years, emerging debt-free.

"I found out after the fact that they hadn't settled with anybody," Ackley said. Instead, his debt had been sold off to a debt buyer.

So Ackley became one of the fraction of Idahoans who decide to fight lawsuits brought by debt buyers — lawsuits that are part of a "system for resolving consumer debt collection disputes (that) is broken," according to the Federal Trade Commission.

Debt buyers are companies that make their money from ancient bills. They pay pennies on the dollar for a chance to collect on debt that original creditors have given up on. Such debt gets sold in giant packages worth thousands to millions of dollars.

Court records, interviews and complaints to state regulators paint a picture of a thriving debt-buyer industry that files thousands of lawsuits each year and is rarely challenged by debtors.

Credit-card debt and the recession have fed the growth of Idaho's debt-purchasing business over the past decade. Five debt buyers were licensed to work in Idaho in 2008. By 2009, there were 44. Last week, there were 99.

They buy uncollected debts from retailers, utilities, telecom companies and credit-card companies that would rather settle for pocket change than nothing at all.

Nationwide, three of the largest buyers bought more than $77 billion of old, hard-to-collect accounts between 1996 and 2006, paying $1.8 billion, according to DBA International, the debt buyers' association.

Three major debt buyers that collect in Idaho — Midland Funding, a subsidiary of Encore Capital Group of California; Asset Acceptance Capital Corp. of Michigan; and Portfolio Recovery Associates of Virginia — filed hundreds of lawsuits in Ada County last year.

The companies routinely sue debtors for the balance due plus interest plus attorneys' fees.

Midland Funding got $1.52 million, Asset Acceptance got more than $300,000, and Portfolio got $1.14 million in legal judgments just in Ada County in the past year, according to a review of court records by the Idaho Statesman.