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There are some things attorneys must be aware of when they decide to purchase debt to litigate on or try to gather on in any way. All attorneys in all states must abide by the Fair Debt Collection Practices Act when they gather on any debt, contingency or purchased. There are additionally compliance requirements in each state including specific wording to be included on any dunning notices and in some instances you may be needed to be licensed and bonded in order to gather on any debts you purchase or that are placed with you on a contingency basis.

I spoke with Louise Epstein of Charge off Clearinghouse and she recommends that you become familiar with the statutes of limitations for debts that you may purchase. The statute of limitations for a delinquent debt is the instance limit for the creditor to file a lawsuit, once you purchase that debt you take on the role of the creditor. This period starts when the debtor becomes delinquent. The fact that the statute of limitations has expired on a debt will not necessarily prevent a lawsuit but the debtor can have the suit dismissed on that basis. The statute of limitations only covers lawsuits, so whether you are purchasing debt to litigate that would affect you.

While doing research for that scoop I contacted all 50 states to ask them about state specific laws relevant to attorney’s debt purchasing and collecting on those purchased debts. Many states have no provisions for that type of collection activity by attorneys but as that area becomes much more popular as it has in recent months, states may be forced to come up with compliance plans and rules to regulate that sector. While the economy continues to falter

more and more attorneys and collection agency owners are purchasing more debt than ever before, and it is becoming more and more available with a huge surplus as many debtors succumb to the recession and lose their jobs or become past due on bills. After contacting all 50 states and visiting their websites to look for that type of data only 23 states have gotten back to me as of the printing of that commentary. I have compiled all the knowledge they have shared with me along with the source of that knowledge to aid attorneys who purchase debt in their quest to gather and stay within the law. Many of the state offices I did speak with told me that there are no laws in their state specific to attorneys buying debt and next working that debt. Based on my research and that info I have created a Special Report relative to State specific laws relevant to an attorney purchasing debt and collecting on it which is available on my website.

The Wall Street Journal reported on the front page on February 5, 2008 that banks are tightening up their lending standards for businesses and consumers. The essay states that with poor loans piling up, some lenders are strained for capital. This can cause more banks to look into selling their poor debt than ever before. The signs show that more and more debt will be sold in the coming months, and many states are not ready with compliance requirements and laws pertaining to attorneys who purchase debt and soon after gather on it or outsource it to be collecting and what their rights are and what the laws are that they should be following.

Orginal post by Michelle Dunn