DennisBeaverDecember 28, 2018 • By Dennis Beaver

Chances are that you have never heard of the terms Zombie Debt, or Zombie Debt Collectors. Neither had former United States Marine, Charles Lay, until, the first week of October, 2018, receiving this phone call:

‘Superior Court calling and we want to verify if you are going to be making your court hearing tomorrow at 8:00 AM.’

“What are you talking about?” he asked. “The voice replied, ‘Here is the case number, call (800) 855-722-5011 and give it to them.’” Next, Lay phoned, reached “Armstead Legal,” and was told, “You better be home tomorrow. We are going to serve you. You are stealing from Navy Federal Credit Union!”

Lay at one time had a checking account with Navy Federal, “Which was closed over ten years ago. “None of my bank statements or credit reports ever showed anything past due.”

He asked for proof of what they were claiming. “You have lost all your rights to proof we will see you in court, and by the way this is being recorded!” was yelled at him. “But I never gave you permission to record me! ‘It doesn’t matter!’ the guy screamed.

We’ll tell you all about these zombies in a moment, but first a question.

What happens when a debt is written off or charged off?

When a company is unable to collect a debt and “writes it off,” or “charges it off,” what does this mean? Does it just disappear, allowing the person who didn’t pay off the hook, the merchant (or bank) taking the loss?

We asked that question to several of our clients, and most thought that when a debt is written or charged off, that’s the end of it. But that’s not the way it works, as we learned from Sacramento, California-based Jan Stieger, Executive Director of the Receivables Management Association International. As she explained:

“Written off is an accounting term used for tax purposes and has no impact on the underlying contractual obligation owed the creditor – nothing to do with a debt being owed or not. For example, in the banking industry, by the time an account is 180 days old and several unsuccessful collection attempts have been made, federal law requires that it is ‘charged-off,’ and cannot be shown as an asset of the institution.

“In 47 states, it still is owed–even if beyond the statute of limitations–and suit can be filed, which is a fact that many people are unaware of. If sued, the debtor can win by raising the statute as a defense.”

So, if the debts don’t just go away, what does happen to them?

The debt buying industry keeps the cost of credit lower for us all

Stieger explained that her industry buys this debt that has been written off and works on “collecting so-called uncollectible debt, which plays a significant role in reducing the cost of credit to consumers.”

And it makes sense. If your losses are reduced, then the cost of doing business is also reduced, making your service or product available to the consumer at a lower price.

She was quick to acknowledge the very real problems that some illegitimate debt buyers cause innocent consumers, and explained how people like Charles Lay are targeted.

“Zombie debt is old debt, generally passed the statute of limitations that has not had collection attempts made on it for a very long time. When collection attempts restart– sometimes many years later–it’s considered ‘resurrected.’

“Zombie debt collectors often violate the Federal Fair Debt Collection Practices Act by using use abusive and offensive language leading frightened consumers to pay, just to get the collector to leave them alone.

“But there is a professional and ethical manner to collect legitimate defaulted accounts. The industry, represented by RMAI, holds members to high standards via our Certification Program.”

What we learned about Armstead Legal

Neither Stieger nor our private investigator could find Armstead Legal as a real entity. When their phone number was Googled, post after post from people all over the country appeared who also had also received similar threatening calls concerning bills they did not owe, some not even in their name, all of which were old–very old–and beyond the statute of limitations.

On October 8th and 9th, 2018, trying to find out if there was any basis for their claim that Mr. Lay owed Navy Federal Credit Union $1100, I spoke with some of the world’s nastiest, truly horrible people who answer that phone number.

As they claimed to be recording all calls, I did as well and then, when writing this story, listened to those recordings. It required a double dose of blood pressure meds. I was speaking with pure evil.


Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.



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