The sale of a debt is a legal action and does not generate any right to sue.
When the bank sells a debt (called an assignment of credits), the first thing the debt holder must do is find out who the new creditor is. Surely later you will ask yourself:
Why do banks sell their clients' debts?
What happens when the bank sells your debt?
Why are there companies that buy debts from banks?
We explain everything below:
The purchase and sale of debts.
The assignment of credits is a fairly widespread practice today. Financial institutions sell debts to other companies, which may be other banks, collection agencies or vulture funds.
Banks and financial institutions sell debt portfolios that they understand are difficult to collect at a price much lower than the value of the existing debt, getting liquidity and getting rid of the problem to try to collect those debts.
On the contrary, companies and entities that buy debts Yes, they are very interested in collecting debts because, in that way, They will be able to recover more money than they invested in the purchase of that debt portfolio. Thus, they save the bank a great setback in exchange for obtaining benefits when they collect from their debtors, through judicial means if necessary.
The collection of the debt remains in the hands of the new creditor, whose main goal will be to collect that debt, since That's what your business is about. Therefore, they may be very insistent and constantly demanding payment.
Generally, companies that buy debts develop strategies with which they put pressure on the debtor, trying to effectively force them to pay.
In principle, the new creditor must maintain the conditions of the original contract and does not have the power to add new commissions or tighten payment conditions.
The sale of debt in the Civil Code.
The debts that a person contracts with a financial institution generally come from a personal loan or a mortgage. In law, the transfer of debt from one entity to another is known as credit assignment.
Despite there is no specific regulation about this financial operation, In the Civil Code there are several articles that refer to this topic.. Some of them are the following:
- Article 1112: “All rights acquired by virtue of an obligation are transferable subject to the laws, unless otherwise agreed.”
- Article 1526: “The transfer of a credit, right or action will not take effect against a third party unless its date must be considered certain in accordance with articles 1218 and 1227. If it refers to a property, from the date of its registration in the Registry. ”
- Article 1527: “The debtor who, before becoming aware of the assignment, satisfies the creditor, will be free from the obligation.”
- Article 1528: “The sale or assignment of a credit includes that of all accessory rights, such as the bond, mortgage, pledge or privilege.”
The Civil Code includes the sale of debts in book IV, title III, chapter VII: “On the transfer of credits and other rights”, which refers to a broad group of actions and not specifically to the assignment of credits or sale of debts, but that covers these operations.
When the debt has been sold individually, the debtor can go to his right of withdrawal in the assignment of disputed credits, which will allow you to eliminate the debt by paying the amount that the buyer has paid for said debt (which is always less than the real amount of the debt). However, the Supreme Court has determined that this right It does not apply when the debts have been sold in packages and not individually.
If you need legal advice or more information on this matter, do not hesitate to contact us. contact us.
Related to this topic, you may also be interested in our blog article: Is Telephone Harassment by a Debt Collection Company Legal?