Founder, Mark Silverthorn
Your original creditor is the company that initially provided you with goods, services, or credit. In Canada it is becoming more common for original creditors to sell tens of thousands of unpaid accounts. These large portfolios of unpaid accounts are referred to as purchased debt. Firms that buy unpaid accounts are known as debt buyers.
There are two categories of debt buyers:
Collection agency: It is common for collection agencies to purchase debt. The primary revenue stream for collection agencies, however, is collecting accounts on behalf of others on a contingency basis. Some, but not all, collection agencies--as a secondary revenue stream--may purchase debt and collect these unpaid accounts.
Pure debt buyer: A pure debt buyer is a company that buys debts that were originally owing to some other creditor. A pure debt buyer might try to collect an unpaid account using its own in-house collection department. A pure debt buyer might also choose to assign an unpaid purchased debt to a collection agency for collection on a contingency basis. Finally, a pure debt buyer might also decide to sue a consumer in connection with an unpaid purchased account.
The crucial difference between a pure debt buyer and a collection agency is that a pure debt buyer will never collect accounts on behalf of others on a contingency basis.
It is common for debt buyers to purchase debt that has been delinquent for several years--and in many instances--the relevant provincial limitation period has expired. This provides the consumer with some opportunities. Firstly, the consumer might choose not to pay an outstanding account where the limitation period has expired. Secondly, the consumer might use the expiry of a limitation period as leverage negotiating a favourable settlement with a creditor.
In this YouTube video, Mark Silverthorn, Founder of Comprehensive Debt Solutions, explains the difference between a pure debt buyer and collection agencies, the latter which will sometimes buy debts.
Debt buyers often attempt to collect unpaid accounts where the relevant limitation period has expired