Can legal action be taken against me for a defaulted payday loan if the original lender sold it to another collection agency?

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Can legal action be taken against me for a defaulted payday loan if the original lender sold it to another collection agency?

A pay day loan lender has sold the original debt to a company that buys bad debts/accounts. The original lender says they have nothing to do with the account. A collection agency has purchased the account and is now threatening legal action and claiming checking account deposit fraud. Can this be legally done if the original creditor is completely out of the situation and the original creditor is not filing suit or threatening legal action? The purchasing agency was not actually defrauded in any way by me. We have never dealt with them in any lending situation. Loss of job caused me to default.

Asked on April 5, 2011 under Bankruptcy Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Unfortunately for you, it is perfectly legal for one party to sell a debt or obligation owed to it to another party, and when it does so, that second party--the one buying the debt--can enforce it as if it was the original lender. The fact that the original lender is not involved or did not take action against you has no legal effect whatsoever. You may assert against the buyer of the loan any defences you would have had against the lender.

Also, the fact that a loss of job caused you to default has no bearing on the matter--it doesn't matter if you couldn't pay, wouldn't pay, forgot to pay, etc. All that matters is the fact of the default.


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