New free tool may help you deal with debt collectors

Consumers hounded by shady collection agencies can get some high-tech help from Debt Lookup, a free, online service I viewed today at Finovate Fall, the financial technology conference held each year in New York. Debt Lookup, developed by a company called Global Debt Registry, allows consumers to find their debt online and determine who really owns it, and whether the company hounding them to pay up really has the right to collect. (And if it doesn’t, the Consumer Financial Protection Bureau has advice on how to respond.)

Consumer debt—including car loans, mortgages, student loans and, increasingly, medical debt—is often sold by the original lender to other financial institutions and debt-collection companies. Sometimes the debt switches hands multiple times. That can make it difficult, if not impossible, for debtors to find out who’s holding the loan, and who can legitimately collect it. Same story for debt that’s supposedly been dispelled or paid off; as consumers have discovered with so-called “zombie debt,” it can come back to haunt them.

You’d think that such lenders would keep track of those loans and transactions, much as they do with mortgages. But they don’t because they're not required to, notes Charlie Moore, Global Debt Registry’s chief operating officer. “When I joined this company about eight months ago, I found it remarkable, given the size of the market, that there is no title or registration required for this type of debt,” he said.

Global Debt Registry has created Debt Lookup, a registry that effectively creates a title for the debt, much like the title for your car. Lenders participate voluntarily. Consumers can access Debt Lookup for free to find out who currently owns the title to their debt. If it isn’t registered, they’ll either get notification that the registration is pending, or a landing page with a form letter provided by the CFPB, to respond to the company that claims to be the creditor.

Those resources, says Moore, might be sufficient ammunition against collections companies, which often get default judgments in court against debtors who don’t show up to dispute the claims. “If you can show that they don’t own the debt, often the cases will fall apart,” he asserts.

I can’t confirm that, but I will say the tool sounds promising. At the least, it costs nothing for the consumer to try. (Global Debt Registry makes money by charging fees to the original creditors.)

Currently Global Debt Registry has some $1 billion of debt registered, representing a tiny fraction of the $3 trillion in outstanding consumer debt. The company is working to sign up many more lenders to participate. It should get a boost from a recent guidelines promulgated by the Office of the Comptroller of the Currency requiring lenders that sell debt to keep track of it.

—Tobie Stanger

Copyright © 2005-2014 Consumers Union of U.S., Inc. No reproduction, in whole or in part, without written permission. Consumer Reports has no relationship with any advertisers on this site.