This is interesting; and it raises some questions; assuming as your comment suggests; you have some professional or semi/pro expertise in the area of indebtedness other than experience in dealing with your own personal debt.
Is this true in every state?
Can these 3rd party debt collectors report to credit agencies; in effect double down, reporting the same debt that has already been reported?
How can one find out if the 3rd Party bought the debt or is hired to collect the debt?
A link that would answer these questions would be sufficient.
I have researched this subject in the past and never came across this; can you provide a link that specifically addresses this? It would be greatly appreciated.
I am not an attorney and I cannot practice law and this is not legal advice and you get what you pay for on the internet.
That said, I think there still might be one tiny sliver, one speck of a gap, somewhere in the law that actually, shockingly, allows people to discuss the law amongst themselves without going through an attorney. Therefore I hereby invoke that teensy-weensy crack of light to speak about this subject.
AFAIK, the topic of this is issue is called "debt verification," and while many states have consumer protection laws, this is also addressed at the federal level under the Fair Debt Collection Practices Act (FDCPA). Here's a NOLO link on the subject:
Debt Collection Defense: Requiring That the Collector Document the Debt
Basically it says that there's a difference between a "creditor" and "debt collector," and that people have the right to demand a debt collector "verify their debt," and if they can't, they can be sued for not being able to do so, I believe up to a thousand dollars an incident.
What people don't generally realize about the law is that 90% of it is done through definitions. For example, if you argue with the IRS, they don't refer to you as a "person" they refer to you add a "taxpayer." They do this to see if you object to it, because if you don't, then they can presume you accept what they know you believe is a mere label. But is not a mere label - is a term used only, under the law, by someone who agrees they owe a tax. So before you even get started complaining against them, you've technically agreed they're right - and they can and will use that "admission" against you in court!
Same with "creditor." You know what a creditor is in the law? The person you go into debt to. You know what the term "debt collector" is under the law? Not a creditor.
So do the math. If the debt collector is not the creditor, then you don't owe the debt to them - by definition.
And that conclusion is supported by asking why there is a federal law requiring debt collectors to be able to "verify" the debt? After all, isn't the debt verified the moment they can show you they bought it? Well apparently not, otherwise that's all that would be necessary, right?
What you're actually seeing is the "Debt Collector Extortion Protection Act." Because if any one of us tried to get someone to pay us money while claiming a false debt, that's what we'd be doing - extortion. So how do debt collectors get away with it, with demanding payments for debts they can't verify - ie, which they know are fake, and therefore extortionate? Simple - by having their own racket protection law that says if they get caught it is not extortion, but just makes them subject to a civil suit. And that's how the government "protects" people.
I'm not on a soap box here. I think this is very wrong, but it is all, in fact, perfectly legal. And a lot of material is available about it - IF you read very carefully. But that's how the game is done, by gambling that people don't read carefully and don't know how the law works, and simply won't recognize the truth when they see it. And it works - they don't.