How to Defeat Credit Corp and other Debt Buyers

Table of Contents

Have you received a letter of demand or court documents from Credit Corp, Baycorp, or someone else you’ve never heard of?
Your debt may have been sold to a debt buyer. This guide explains what debt buyers are, why they exist and how to beat them (or at least get a nice discount).

What are Debt Buyers?

The right to collect a debt is something which can be bought and sold. When a debt is bought, it is ‘assigned’ to whoever buys it. Debt buyers purchase debt (usually at a substantial discount) with the view to enforce the full value of the debt and make a profit.

Debt buyers typically buy a range of outstanding debts, including unpaid:

  • Credit cards
  • Personal loans
  • Car loans
  • Utilities (telephone, water, electricity or gas)
  • Payday loans
  • Government charges
  • General accounts receivables
  • and more

The right to collect a debt is something which can be bought and sold. When a debt is bought, it is ‘assigned’ to whoever buys it. Debt buyers purchase debt (usually at a substantial discount) with the view to enforce the full value of the debt and make a profit.

Example of how Debt buying works

Bank is owed $20k by a customer who can’t pay

Debt buyer pays $5k to the bank to assign the $20k debt to them

The debt buyer sues the customers for the full $20k + interest and legal fees

If the debt buyer recovers the full amount it makes a $15k+ profit

Debt purchasing is a calculated gamble, with huge profits to be made.

Debt buyers are also known as debt purchasers. These phrases can be used interchangeably.

Why do Debt Buyers Exist?

Profit

Debt buyers primarily exist to make a profit.

Credit Corp states that it is “the largest and longest-established debt purchaser in Australia”, and as of 2019 Credit Corp was one of the top 200 largest companies listed on the ASX (so, a very large company). 

Although there are other debt buyers that exist, Credit Corp dominates the debt purchasing sector.

Baycorp previously dominated in some sectors of the debt purchasing market, but the acquisition of Baycorp by Credit Corp in 2019 has cemented Credit Corp’s lead in the debt purchasing sector.

If your debt has been assigned, there is a good chance it was assigned to Credit Corp, or a company that Credit Corp owns.

Reputation

Credit Corp and other debt buyers are not primarily consumer facing, meaning, the main clients of debt buyers are banks and other creditors, not consumers.

A Big Bank cannot afford the negative publicity of ending up on a current affairs-type program because, for example, they made a single mother with a family of 5 homeless after she spent all of her money on her toddler’s cancer treatment instead of her mortgage.

Although a debt buyer also does not want to unfairly target those in exceptional circumstances, these types of stories may not harm a debt buyer as much as they would the reputation of a bank.

Debt buyers do try to maintain some level of fairness and their reputation because banks do not want to be seen as dealing with companies engaging in unfair or unconscionable practices, but mistakes can happen and people can be targeted.

Taxation Purposes

There is another big reason why debt buyers exist, and that is for tax purposes.

Let’s say you owe $20,000 on a credit card debt to a Big Bank.

It may be beneficial for the bank to ‘write-off’ the debt for tax purposes, receive a tax refund, and sell your debt at a discount to a debt buyer.

Efficiency

There may be other reasons for a bank to sell a debt, including the efficiency of debt recovery processes that specialist debt buyers have.

If a bank has hundreds or thousands of people who owe it money, it can become unprofitable for the bank to allocate time and resources to collecting those debts. Instead, they sell them to a debt-buying company and get paid for those debts (even if it is at a reduced rate).

How Exactly does Debt Buying Work?

In Queensland, section 199 of the Property Law Act 1974 provides that things can be assigned to a third party. This includes debts.

Typically, debt buyers like Credit Corp will enter into an ‘Assignment Deed’ with a bank or other creditor to purchase certain outstanding debts (usually debts that are well-overdue).

Assignment Deeds are considered by the debt buyers as highly confidential documents because they include commercial information, including, what the debt purchaser paid to buy your debt.

Part of the Assignment Deed usually contains a schedule of the assigned debts (usually hundreds, if not thousands of debts) which are usually generated in excel.

These lists of debts have only a few key details, usually including the person’s name, address, date of agreement, original debt, balance owed, interest and little else.

The debt buyer will send a notice to the last known address of the person who owes that debt stating that the debt has been assigned and is now owed to the debt buyer.

Consider for example:

  1. You obtain a credit card;
  2. You rack up $20,000 in debt on the credit card and lose your job and can’t pay it back;
  3. The bank is unable to come to a suitable arrangement with you or can’t find you;
  4. After 180 days the bank decides to sell your debt to a debt buyer for $6,000;
  5. The bank can do this by ‘assigning’ the debt to the debt purchaser, but the debt purchaser must send correspondence to your last known address (which may never reach you) that the debt has been assigned to a debt buyer;
  6. If done correctly, you now owe $20,000 to the debt buyer, not to the bank;
  7. The debt buyer demands that you pay back $20,000 within 7 days or enter into a payment arrangement;
  8. You can’t pay the debt buyer, think it’s a scam, or can’t reach a suitable agreement, so the debt buyer sues you for $20,000 plus interest (at the credit card rate) and legal fees;
  9. You can’t afford to defend the matter so the debt buyer wins, obtains an enforcement order to sell your house, garnish your wages or bankrupts you to recover the full $20,000.

The bank is happy because they get a tax write-off and recover some of the money immediately, and the debt buyer is happy because they make a massive profit.

The only person who loses out on this deal is you.

Debt Purchasers use the Court as a Debt Recovery Factory

It isn’t that difficult to draft a simple Claim in Court, especially if no one is going to defend it.

Most of the time debt-buyers have a template that they only need to fill in 10 to 15 different things to complete a Claim against a person, which can be filed within a matter of hours.

A debt recovery paralegal or junior lawyer might be able to complete and file dozens of the same type of claim every day. These types of Claims are low-effort, and generally low-quality.

It’s incredible that Statement of Claims of such poor quality can be allowed, but people don’t get a lawyer and do nothing about it. A ‘head-in-the-sand’ approach has literally allowed debt buying companies to recover hundreds of millions of dollars in debt that may have been successfully defended or substantially reduced.

Each Claim and Statement of Claim is different, and some might be a little longer at 15-20 paragraphs, but the example below is about the quality we’ve come to expect from debt buyers at about 10 paragraphs long.

That’s right. Paragraphs, not pages.

Example Statement of Claim

The following is an example of what not to do for a statement of claim.

Magistrates Court of Queensland

Registry: Brisbane

Plaintiff:    Debt Buyer Name 123 Pty Ltd

Defendant:   [insert your name]

Statement of Claim This claim in this proceeding is made in reliance of the following facts:
  1. The Plaintiff is a company capable of suing.
  2. The Defendant is an individual capable of being sued.
  3. On or around [insert date of the agreement] the Defendant entered into a Personal Loan Agreement (‘the Agreement’) with the Plaintiff.
  4. The relevant terms of the Agreement were:
    1. [insert bank] would lend [insert amount] to the Defendant
    2. The Defendant would repay the [insert amount] in full plus interest at [insert interest rate]
  5. The Defendant failed, refused or neglected to repay the amount in full plus interest, and as at [insert date of the Claim] the Defendant owed [insert amount owed] (‘the Debt’).
  6. On [insert date of Assignment Deed] the [insert bank] assigned all its rights, title and interest in the Debt to the Plaintiff (‘the Assignment’).
  7. On [insert date letter sent] the Plaintiff provided notice of the Assignment by way of letter sent by the Plaintiff to the last known address of the Defendant.
  8. On [insert date of demand] the Plaintiff demanded payment of [insert amount owed].
  9. On [insert date of the Claim] the Defendant had failed, refused or neglected to pay the Debt.
  10. The Plaintiff claims the following relief:
    1. The sum of [insert amount owed] for monies due and owing pursuant to the Agreement;
    2. Interest pursuant to the Agreement at the rate of [insert interest rate] to the date of judgment; and
    3. Legal costs.

And your life has just been turned upside down because:

  1. You’ve been sued;
  2. You probably won’t defend it;
  3. The debt buyer will get default judgment;
  4. Your credit score will be impacted because of the judgment; and

The debt buyer will try to recover payment, including by bankrupting you, seizing or selling your property or garnishing your wages.

In almost every case you should Defend the Claim

Debt buyers want you to do nothing.

Debt buyers expect you to do nothing.

Almost no one defends debts from debt buyers. This is for a range of reasons.

If you are sued, it is almost never your best option to do nothing, but this is exactly what the debt-buyer wants.

We will explain this more below, but so few people defend debts that usually:

  1. The debt buyers have their lawyers produce thousands of Claims at such a low cost that they are almost always defective, but just good enough to win if they aren’t defended;
  2. Debt buyers almost never have any documents or evidence to back up their claim when they file their Claim and Statement of Claim; and
  3. Debt buyers would not have a business if everyone (whether you owed the money or not) defended their claims.

Remember, the debt buyers don’t pay $20,000 for a $20,000 debt. They might pay $5,000 or even less for a $20,000 debt.

The legal fees to recover a $20,000 claim that is defended could be up to or even higher than $15,000.

If you were a debt buying company what option would you prefer?

  1. Spend $15,000 fighting a $20,000 claim: Profit: maybe $5,000
  2. Spend $15,000 to purchase another $60,000 in debt: Profit: maybe $50,000

The answer is obvious.

The debt buying company (a for-profit company) wants to maximise their investment.

Now, even if a debt buyer negotiates a $20,000 debt with you for $5,500 in fortnightly instalments with no interest over 7 years (i.e. $30.22 a fortnight), the debt buyer can:

  1. Pay their lawyers;
  2. Pay off the amount they bought the debt for; and
  3. Go after people that don’t defend matters.

It isn’t economical or commercial for debt buyers to fight matters. Lawsuits are expensive and debt buyers want to make a profit.

Debt buyers want to avoid disputed debts at almost any cost.

Defending debts is often far less expensive than trying to recover debts. At Gibbs Wright Litigation Lawyers, we enjoy beating debt-buyers and negotiating down their debts to cents on the dollar so much that we bend over backwards to help people save money.

We’ve saved some of our clients more than 10 times our fees in discounted debts.

We’ve never failed to get a settlement offer that is cents-on-the-dollar against a debt buyer.

Debt buyers have basically no financial reason to spend their money fighting a Court case – they want to sue pushovers who they can bankrupt, sell their house, or garnish their wages.

Whilst every matter is different, every matter involving a debt buyer should be defended or, at the very least, negotiated.

If you don’t defend a claim from a debt buyer, they will obtain and enforce a judgment, including by:

  • Issuing a bankruptcy notice (to individuals)
  • Issuing a statutory demand (to companies)
  • Seizing and selling a person’s house or other assets
  • Having the bank transfer money from the person’s bank account
  • Having the person’s employer redirect part of the person’s wages

A debt buyer will also ask the Court to pay for their legal fees and interest. These amounts alone can sometimes double the amount of a debt.

If you’ve already got a judgment awarded against you and did not file a defence or show up to Court, see our dedicated Setting Aside a Default Judgment page.

How to Defeat Credit Corp (and other Debt Buyers)

Is the Debt Statute Barred?

A claim can only be brought within a limited time. The Limitations of Actions Act 1974 provides a defence to a claim that if six-years has passed (usually calculated from the date of the agreement, or the date of your last payment, whatever is more recent).

There are some exceptions to this, and it is important to know that this is only a defence. Since most people don’t defend these types of claims, it is still possible for a debt buyer to sue you for an old debt.

You have the obligation to raise the defence of a limitation period. We can determine if the debt is too old and whether you have a complete defence to it.

You need to issue a Rule ‘222’ Demand

If the debt is potentially valid, the next step is usually issuing a Rule 222 Demand pursuant to the Queensland Court Rules.

This requires a party to produce documents mentioned in a Claim or Statement of Claim.

How can this help?

Lawyers that sue on the debt buyer’s behalf almost never have the relevant documents before suing.

Remember, most of the time the debt buyer is given the date of the agreement and the loan amount, and they usually know what type of debt they are buying.

So they know your name, know the date or approximate date you entered the agreement, and what you owe.

If you were defending the example Statement of Claim above, issuing a ‘Rule 222’ demand would require:

  1. The “Personal Loan Agreement”;
  2. The “Notice of Assignment”; and
  3. The “Letter of Demand”.

So why is it important to get these documents?

It is not enough to simply allege a debt; it must be proved. And the evidence to support a debt comes in the form of standard loan documents. If those documents do not exist, or if the debt-buyer doesn’t have them, then their Claim is in serious trouble.

If the bank can’t find the document, and the debt is small enough, the debt buyer may agree to dismiss the case and walk away.

Even if the documents do exist, there are still ways to defend a debt.

Is the Debt Statute Barred?

The right to collect a debt is something which can be bought and sold. When a debt is bought, it is ‘assigned’ to whoever buys it. Debt buyers purchase debt (usually at a substantial discount) with the view to enforce the full value of the debt and make a profit.

Debt buyers typically buy a range of outstanding debts, including unpaid:

Obtaining Further and Better Particulars

It is important to ask for a copy of the Deed of Assignment. Debt buyers never want people to see these documents (sometimes the debt buyer’s lawyers are not even allowed to have these documents).

This is because Deeds of Assignment show the amount the debt buyer has paid for your debt. This is a well-guarded secret because companies like Credit Corp invest tens of millions of dollars in perfecting their algorithms to maximise their profit from you.

We have helped a past client save over $40,000 simply by preparing an application for disclosure of the Assignment Deed.

So in the above example Statement of Claim it says:

“On [insert date of Assignment Deed] the [insert bank] assigned all its rights, title and interest in the Debt to the Plaintiff (‘the Assignment’).”

As a defendant in a Court proceeding, you are entitled to ask for further and better particulars (i.e., more information) as to how the bank assigned all its rights, title and interest in the Debt to the Plaintiff.

The answer has to be “though an assignment deed”.

As soon as the debt buyer’s lawyers mention an assignment deed, you can demand that document under a new Rule 222 Demand (which they won’t want to comply with) giving you a strategic advantage in settlement negotiations.

File a Defence

Having further and better particulars and some of the documents will help with drafting and filing a defence (if you haven’t already settled the debt by this point).

The point of taking on debt buyers like Credit Corp is not to go to trial. It’s about either convincing them to walk away with nothing, or walk away with basically nothing.

Demand the Assignment Deed

In response to a Rule 222 Demand we have had debt buyers lawyers say everything from ‘no’, all the way through to emailing us and saying “Our client is happy for you to come to our office and view this [redacted] spreadsheet but has advised that no copies are allowed to leave our office”. These types of responses are evasive, and unacceptable.

Now, that last email was from a Queensland law firm, for a debt being pursued in a Queensland Court, which by law must follow the relevant Queensland court rules.

The assignment deed was in possession of the debt buyer and was directly relevant to an allegation in issue.

Read that paragraph again “no copies are allowed to leave our office” and now look at the disclosure rules for documents in Queensland:

Rule 211 Duty of disclosure:

  • A party to a proceeding has a duty to disclose to each other party each document-
  • in the possession or under the control of the first party; and
  • directly relevant to an allegation in issue in the pleadings.

And Rule 214 states: “[by] delivering to the party copies of the documents…”.

Debt buyers absolutely do not want to comply with this rule. They will bend over backwards to avoid showing you the Assignment Deed.

This is when you go in for the kill. You offer cents on the dollar to settle the matter.

You might even ask for a 7-year payment plan with no interest. Best of all, Credit Corp normally accepts.

Talk to us about taking on your Debt Buyer

Gibbs Wright Litigation Lawyers defends people against debt buyers on a no-win no-fee basis.

Don’t let a debt buyer such as Credit Corp take you for a ride. Take them for a ride instead.

Our lawyers are experienced at dealing with debt buyers and will work to obtain the best outcome for you. Call us today for a free consultation with one of our Brisbane lawyers.

The content of this publication is intended as general commentary only and may not be suitable or applicable to your personal circumstances. It is not intended to replace independent legal advice. You can contact us at our Brisbane Office for a free consultation on a range of litigation matters on (07) 3088 6364.
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