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How to become a debt buyer

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Re: How to become a debt buyer

#61

Post by BobJS »

antisthenes wrote: post #57
BobJS wrote: post #41

Earlier quoted context omitted.

I can answer any specific questions anybody has but basically, I landed in the industry by chance and got good at automating the collection process. I never had the backbone to strong arm people so I played the numbers game. Technology was my advantage. Meanwhile, all of my peers were getting rich running unlicensed agencies and lying to debtors. I was getting sued constantly for following the rules. I'd win the laws…

How much does a typical collection agency buy medical debt for? Is it 0.5x, 0.25x, what typical range are you working with?

It depends on the age of the debt and how many agencies it's been through. Medical debt is also much harder to pursue legally if need be, plus everyone hates the guys who sue medical debtors. So I never worked with it.

But I'd guess that direct from the client would be 8%, 1 agency ~1 year old debt would probably cost 5%, 2 agency 2 year old debt probably about 2% and then down to 1% and 75bps after that.

A lot of times you don't turn a profit working zeros. You barely make your money back and then turn a profit reselling it. Small margins but easier to work. Happier employees.

Re: How to become a debt buyer

#62

Post by BobJS »

ohwellhere wrote: post #53
BobJS wrote: post #41

Earlier quoted context omitted.

I can answer any specific questions anybody has but basically, I landed in the industry by chance and got good at automating the collection process. I never had the backbone to strong arm people so I played the numbers game. Technology was my advantage. Meanwhile, all of my peers were getting rich running unlicensed agencies and lying to debtors. I was getting sued constantly for following the rules. I'd win the laws…

Comments below suggest buying debt to cancel it or resolve at cost (e.g. the massive discount). Q1: As an insider, how feasible is that strategy? Q2: As the collector do you report to credit bureaus that it's cleared? does it have a meaningful impact on debtors' credit?

I'm very skeptical about debt cancellation because if there was a way to make it into a business, it'd be a business. The people who talk about doing that all lose money as a charity, or they're sovereign citizens who think they found some tax loophole.

The credit bureau thing is funny because again, ethically you should but once you do you open yourself up to a LOT more liability. So most agencies won't unless it's an in-house agency for CapitalOne or something.

You as the consumer should always dispute everything on your credit report every so often.

Re: How to become a debt buyer

#63

Post by BobJS »

preston4tw wrote: post #43
BobJS wrote: post #29

I wrote this article years ago. I can't believe it's on HN today. As someone who spent almost a decade trying to run as ethical an agency as possible, I realized that there's no room for people who want to operate the right way. I could go on for days about all of the crazy stuff I saw while I was involved but leaving the debt industry was the best decision I ever made. Terrible industry, terrible people.

I thought it was an interesting read and it would be interesting to hear a summation of why you left the industry. It also made me consider the possibilities for a sort of vertically integrated debt collection company. Someone that's had a debt sent to collection is possibly a good candidate for financial literacy education, credit rehabilitation, debt consolidation and refinancing etc. Can debt collection serve as a…

I left because I fell in love with building software and I hated debt collections.

The financial literacy angle is interesting but there's an even arguably more predatory industry around credit repair. People tend to stop caring about their credit until there's a life event like wanting to buy a house. Then they only care until the score hits 640.

Arguably Credit Karma uses credit scores and credit literacy as the hook which is probably a loss-leader because they need to pay for the scores.

Re: How to become a debt buyer

#64

Post by BobJS »

omginternets wrote: post #54
cameronh90 wrote: post #34

Earlier quoted context omitted.

Is there anything inherently shitbag about collecting debts? As long as you’re professional, follow the regulations and treat the debtor fairly, I’m not sure what the problem is. The debtor presumably agreed to take on the debt and still owes the money until either it’s discharged or they’ve paid what they owe. There are obviously a load of shitbags in the debt collection industry, but the only way to change that is…

>Is there anything inherently shitbag about collecting debts? What's practically involved in collecting debt? I don't actually know.

Lots of sending out letters and making phone calls. I spent a lot of time and energy trying to automate the process but the industry refuses to modernize.

Re: How to become a debt buyer

#65

Post by bityard »

bityard wrote: post #58
tptacek wrote: post #12

This is currently, and for obvious reasons, trending towards a thread about how evil the debt collection industry is. That's a shame, because there's a lot of interesting stuff to learn from the mechanics of the debt collection business, and it's stuff you can put to use to protect yourself (and others) from its worst abuses. There are "is" arguments and there are "oughts". We probably all agree on the "oughts", at l…

Funny enough, I wrote about debt collection in an HN comment recently. The most important thing to remember is that if you defaulted on a debt AND that debt has already been sold to a third-party collector, then you actually have NO incentive to pay the debt collector. At that point, the debt has already been written off the creditors books, so not a dime of the payment goes back to them. Further, if the debt resulte…

Also: Everyone (including myself) has been talking about unsecured debt, but it may be worth mentioning secured debt as well. I once had an interest in buying real estate notes (mortgages, essentially). It turns out these are bought and sold for some percentage of face value all the time. The amount of the discount depends on the status of the mortgage payments, the balance of the loan, and the reason for the seller looking to unload it. When buying notes, there are multiple exit strategies but the most profitable one is often to work with the home owner to restructure payments in order to "rehabilitate" the loan. Meaning, the owner gets to stay in their house, possibly with a more favorable payment, and the investor gets to keep a performing note, or sell it to a more conservative investor.

Re: How to become a debt buyer

#66

Post by BobJS »

omginternets wrote: post #51
BobJS wrote: post #49

Earlier quoted context omitted.

It's a legitimate need, it's just a corrupted industry because of misaligned incentives. We need some form of debt collections otherwise credit couldn't exist. The problem is that regulations are absolutely inconsistent and don't incentivize people to operate ethically. It's a regulatory problem. An interesting fact is that a lot of agencies buy debt for about 1 cent on the dollar and liquidate around 2%. Collecting…

Sure, but what are some of these "interesting mechanics" you referred to in your earlier post?

Did I say that? I don't recall writing that. It's just credit markets really. Not all that interesting. Most people just don't think about them.

Re: How to become a debt buyer

#69

Post by lukev »

BobJS wrote: post #29

I wrote this article years ago. I can't believe it's on HN today. As someone who spent almost a decade trying to run as ethical an agency as possible, I realized that there's no room for people who want to operate the right way. I could go on for days about all of the crazy stuff I saw while I was involved but leaving the debt industry was the best decision I ever made. Terrible industry, terrible people.

This is a question I've always had about the debt industry...

How hard would it be for consumers (or through a proxy) to seek out and buy their own debt? You mention in another comment that medical debt (for example) could go for pennies on the dollar.

If I'm hundreds of thousands of dollars in medical debt (as many people are), it seems like this would be well worth the effort. Is it possible to locate a particular debt for purchase in this way?

A second question I've always wondered about: is it feasible to start a company dedicated to buying debt and forgiving it, and taking donations to cover the costs (possibly even turning a profit)? Given the ratios involved this feels way more effective then (e.g) the GoFundMe model of financing emergency costs.

Re: How to become a debt buyer

#70

Post by tlonny »

alexb_ wrote: post #31
pc86 wrote: post #25

Earlier quoted context omitted.

I certainly wouldn't call it noble, but neither are 95% of other professions. If you say you'll pay a debt, you should pay it. A necessary and IMO objectively good consequence of that is if you try to shirk that responsibility, someone somewhere is going to try to find you and try to collect. That doesn't by definition make anyone (including the person with delinquent debt) a bad person.

I would agree with you, except that people who sell debt at these crazy low rates are doing so because the person with delinquent debt is so destitute they've given up trying to collect. They sell to people who will go to every single length allowed by the law to harass people with absolutely nothing to their name until they squeeze the last bit of water from the stone of poverty. This debt doesn't come from people l…

Removing the ability to effectively service non-performing debt would simply drive up the cost of borrowing for people that need it. Debt collectors are a necessary evil...

> This debt doesn't come from people like you and me. They come from people who literally don't understand what debt is and have been fooled into a life of poverty. That's who's being targeted here.

Exactly - the problem isn't debt collectors, its predatory lending.

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