"What you are highlighting is a significant abuse in the industry," acknowledges William Weinstein, a former chief executive of B-Line and a pioneer in the debt-buying business.
Speaking generally and not about his
former company, he
confirms that some lenders and debt buyers simply hound consumers to pay debts that have been canceled, while others refrain from informing consumer credit bureaus when debts are eliminated.
"The failure to accurately update credit reporting has allowed unscrupulous activity to prosper," says Weinstein
last year after it was purchased by Lone Star
for an undisclosed sum, a departure marked by now-settled litigation between Weinstein
B-Line's current president, Rui Pinto-Cardoso, says the firm doesn't engage in the practices Weinstein describes.
B-Line's former CEO, Weinstein, who started the company in 1997, takes credit for helping build the market for Chapter 7 debt.
Even debt initially designated as discharged can bring legitimate returns, he
In some cases, bankruptcy courts discover that Chapter 7 debtors have additional assets, which are then divided among creditors.
Other Chapter 7 cases are moved to Chapter 13 or dismissed altogether, making debts potentially collectible.
In a tiny fraction of cases, people repay discharged debts out of a sense of moral duty.
Increased competition recently in the bankruptcy-paper market has driven up the price of discharged debt—from 1/20th of a cent on the dollar to 3/20ths, or higher—and that has helped spur more aggressive collection tactics, Weinstein
hasn't participated in any improper conduct.