America's appetite for borrowing money bloats U.S. consumer debt to a record high almost every month. As of September 2006, the tab stood at $2 trillion and was spurting at an annual rate of 10 percent. Through good times and bad, spending tomorrow's dollars today never goes out of fashion.

But all that borrowing produces a lot of financial heartburn. Every year, banks, retailers and other consumer lenders write off more than $70 billion in uncollectible debt, mostly hopelessly overdue credit-card balances. From there, the debts are bundled for auction and purchased by companies that pay next to nothing for the opportunity to take one more shot at collecting from debtors.

 
It is through that process that about $9 billion in secondhand debt has landed in the offices of third party debt collectors.

If you see "charge off" on the account they are trying to collect on your credit report it is illegal for these debt collectors to collect one penny. The original creditor took the bad debt as a loss when they filed their income tax and got a credit benefit from the IRS. See: Bad Debt Expense and Allowance for Bad Debt

A decade ago, few creditors tried to collect on old accounts, figuring it wasn't worth the effort.

Today, however, collecting on old debts is a rapidly expanding industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar or less. Then, they use credit-scoring and other new technologies to identify which debtors are most likely to pay. The players in this "junk debt" market range from fly-by-night outfits to well-established companies funded by Wall Street investors.

 
It's a business that's exploded in recent years as collectors discover gold in old bills. Debt buyers are expected to snap up $110 billion in face value of delinquent debt this year, said Paul Legrady, director of research for Kaulkin Ginsberg, a company that advises the debt collection industry. That's twice what was purchased in 2000.