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Debt for sale

Samuel L. Jackson, Jennifer Garner and Alec Baldwin have become the faces of credit cards hyping premium awards and cashback cards. While the celebrity pitches are directed at customers who enjoy high credit ratings, others in the credit card business see opportunity with consumers who suffer with less than stellar FICO scores.

What consumers see as debt growing beyond their control, credit card companies view as a valuable asset generating significant revenues.

Credit card debt provides a continuing income stream because of significant interest rates charged by the lender. In the fourth quarter of 2016, American Express earned $1.4 billion in interest.

Risk factor determines the interest rate with subprime accounts higher than most because the potential for the lender possibly taking a loss over delinquencies or non-payment. Many lenders avoid taking the chance. However, others see higher interest rate as potential, highly lucrative investments.

Transactions involving the sale of billions in credit card balances for pennies on the dollar are increasing in their frequency. The most common being high-risk accounts and those already in delinquency.

Following the purchase of subprime or near-prime credit card accounts, lenders generate revenues by putting pressure on delinquent cardholders to resume payments. Another strategy is to offer balance-transfer credit cards that would consolidate all debts from other accounts while reducing interest rates.

Consumers are left in the dark when their debts are sold. Their first indication of change is when new owners or debt collectors contact them. Consumers are entitled to documented proof of the debt’s existence and “new home” under the 1997 Fair Debt Collection Practices.

When it comes to changes in credit account ownership without warning, consumers are often left wondering what truly is in their wallet.

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