Debbie made a mistake when she was in college.

As a student in Fort Worth, Texas, she maxed out a Citibank credit card with a $300 limit and never paid the bill. Debbie said Citibank charged off the debt sometime between 1987 and 1989, and the liability has long since disappeared from her credit report.

Besides that, the statute of limitations -- the amount of time a creditor can sue over an old debt -- expired in the early 1990s. Both her old home state of Texas and her current state of California generally prohibit creditors from suing once a debt is more than four years old.

That’s why she was stunned when a collection agency called her last summer, demanding she pay the 17-year-old bill. The calls have continued off and on since then, along with monthly bills listing varying amounts that the collection agency wants her to pay.

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“The last time [they called], I told them the statute of limitations had run out on the debt and to stop harassing me,” Debbie said. “They said it hadn't. I finally had to hang up on the man.”

There’s money in old debt
A decade ago, most people who reneged on debts could rest easy after several years passed, since few creditors tried to collect on old bills, particularly for small amounts.

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. 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 barely existed 10 years ago. In the last three years, it’s been growing at a 30% annual rate, according to credit industry analyst Sean McVity of Keefe, Bruyette & Woods. Among the signs of the industry’s maturity:

• Four debt-buying companies have gone public in recent years, including Asset Acceptance of Warren, Mich., which had its $150 million IPO in February.
  
• Some buyers have attracted major funding from investment banks such as Bear Stearns and Goldman Sachs.
  
• Last year, more than $75 billion in old debts were sold.

• Debts that have recently been charged off: 6 to 7 cents on the dollar.
  
• Accounts that are slightly older and on which a collection agency or two has already taken a whack: 1.5 cents to 2 cents on the dollar.
  
• Years-old, out-of-statute debts: A penny or less.

• Suing or threatening to sue over debts even though the statute of limitations has long expired.
  
  
• Illegally “re-aging” debts on credit reports. The collectors tell credit bureaus that an old debt is, in fact, a new one. The goal: To extend the seven-year limit on reporting negative items and put more pressure on the consumer.
  
  
• Promising to delete a negative mark from the consumer’s credit report in exchange for a token payment. Not only does the collector fail to follow through, but the payment can revive the statute of limitations and lead to a lawsuit. Even if the collector does back off, the unpaid debt could be sold to another company that might renew collection activity.
  
  
• Bait-and-switch credit cards. Some credit card companies have offered borrowers low-rate credit cards and then tacked old, charged-off debts -- often purchased from other lenders -- onto the balance. The card issuers typically insist they disclosed that the old debts would come with the cards, Szwak said, but the borrowers say no such disclosure was made.
  
  
• Verbally abusing and harassing consumers. My readers have reported being cursed, berated and called repeatedly despite requests to stop -- all violations of federal laws.