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Inside the Dark, Lucrative World of Consumer Debt Collection

nytimes.com

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Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#71

Post by TheOtherHobbes »

a8da6b0c91d wrote: post #39
pavel_lishin wrote: post #23

Earlier quoted context omitted.

> The bank is not going to care about your $400 unpaid comcast bill when writing you a mortgage. [citation needed] Sure, a single unpaid bill won't hurt you, but that's because it won't hurt your credit score much. If your credit score is low enough, your bank may still give you a loan to buy a house, but will demand a lot more money up front and charge you a much higher interest rate. If you can buy a house for cash…

I am telling you that people with multiple bankruptcies are getting the same rates on mortgages. It just doesn't matter like you think it does if you have a solid income and the down payment. The credit score is this bizarre hollow threat that has middle class people terrified into submission in many situations where they shouldn't submit.

Until they try to get a phone contract, or a broadband contract, or even an electricity supply they can pay from a bank account.

I know people who have had problems with all of the above because of poor credit.

I agree that the credit industry relies on extortion. I also know for a fact that some debt collectors act as front men for 'legit' banks and credit card companies who use them to extort extra interest from written-off debt. So they get a double profit - a tax write-off, and some or all of the principal back, with interest.

The lenders should - and I guess do - run actuarial models which give them a good idea what current and future default rates are.

I know there's at least one credit card company in the UK that deliberately lends to people with poor credit - not because it's run by nice people, but because it knows it can maximise profit by taking defaulters to court and foreclosing on their houses.

It's a vile, despicable business run by failed human beings.

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#72

Post by dllthomas »

encoderer wrote: post #42
pavel_lishin wrote: post #31

Earlier quoted context omitted.

Sometimes the debt is bullshit, but it might be easier to buy it for a small percentage than to pay it off. We get letters for a medical debt that's factually wrong, but by the time we convince Debt Agency N that we don't actually owe it, they've sold it off to Debt Agency N+1 for 1/10th of what they claim we owe them (which is already 1/10th of what was originally 'owed'.) It would be well worth paying 1/100th of th…

I'll tell you, you're playing that game wrong. It's not your job to convince them of anything. The next time they sell, and you get the initial dunning letter, you should write back a simple letter with your name and address stating that you refute this debt, and demand that they validate the debt as they are required to do under § 809 of the FDCPA [15 USC 1692g]. The burden of proof is on them . You only have 30 day…

"don't ever give them ANY information they don't already own."

When I called the State Of Michigan treasury to pay a bill I'd hadn't known about (having not lived in the state for years), they forwarded me to a collection agency without telling me up front. I was confronted with "we have to ask you some questions for verification" and answered them until they asked something I knew they couldn't already know. I felt seriously taken advantage of, at all levels.

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#74

Post by TheOtherHobbes »

Terr_ wrote: post #57
nostromo wrote: post #10

I think that borrowers should have the right of first refusal when their debt is sold. For example, if you're about to sell $1.00 worth of my debt to someone for $0.10, first you must offer it to me at the same cost: $0.10.

That seems simple and fair at first, but I think it actually creates more problems than it solves. First, you get a horrible incentive to not repay debts: 1. A relatively innocent and good-natured Bank lends a jerk $1.00 2. The jerk refuses to pay it back, knowing the bank can't transfer it to someone who isn't a pushover without giving him a steeply-discounted offer first 3. In response all loan requirements and int…

But you're getting shady/manipulative actions already.

The only difference is that this approach would favour debtors, not lenders.

It's not as if banks don't expect exactly the benefits you're not allowing debtors when their own debts blow up.

If banks get bail-outs - and do they ever - why shouldn't ordinary people?

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#75

Post by dlhavema »

dbarlett wrote: post #9
yonran wrote: post #2

When the collectors call the debtors, can the debtor demand a paper trail to prove that the collector is the actual owner of the debt? Why should a debtor pay any amount of money to a random person who calls them and says they bought an old debt?

patio11's guide to doing exactly that: https://news.ycombinator.com/item?id=7135833

thanks, that was a good post to read, i also like the comments about the fact that you should really actually pay your debt when it is legitimate. I'm all for going after the unscrupulous collectors, but if you owe the debt.. pay it off...

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#76

Post by blacksmith_tb »

kaonashi wrote: post #32
enraged_camel wrote: post #6

I find it very scary that huge portions of our economy are basically houses of cards built upon more houses of cards. We're so desperate to generate circulation for money that we've invented an intricate set of rules where it's OK to pretend that you have money, as long as you promise to actually have it at some point in the future. And then of course another set of rules has to be invented to manage the risk of that…

That's the essence of loaning money; the central difference between medieval and modern economies.

But I would have thought the rationale was that lenders accepted some risk (that borrower would default) for a chance to realize some profit (when the borrower pays). What the NYT article sketches out is a system where debts are created seemingly without the intention that they be repaid; the only way I can wrap my head around it is that those losses are calculated, and that overall lending and selling on is profitable. But it does seem like turtles all the way down - real people used imaginary money to buy real things (or services from other real people), and then the imaginary money (mostly) disappeared. All that's solid melts to air.

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#77

Post by lmkg »

yonran wrote: post #2

When the collectors call the debtors, can the debtor demand a paper trail to prove that the collector is the actual owner of the debt? Why should a debtor pay any amount of money to a random person who calls them and says they bought an old debt?

On the ground, a large portion of (consumer) debt collection is based on pulling fast ones. The people in debt are not aware of their rights and protects, and the debt collectors deceive, sometimes stretching the truth and sometimes outright lying. Threatening with prison sentences and even posing as cops are mentioned in the linked article, even though one is a fiction and the other an outright felony.

So really, your question "why should a debtor pay...?" is always answered by "the collector convinces them to." Giving the consumer rights and protections is, at this point, insufficient. Their current rights and protections are not being exercised, due to ignorance. That's something that needs to be fixed.

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#78

Post by TheOtherHobbes »

qq66 wrote: post #17
enraged_camel wrote: post #6

I find it very scary that huge portions of our economy are basically houses of cards built upon more houses of cards. We're so desperate to generate circulation for money that we've invented an intricate set of rules where it's OK to pretend that you have money, as long as you promise to actually have it at some point in the future. And then of course another set of rules has to be invented to manage the risk of that…

Well, lending is a very important function in an economy. Without lending, you could never invest more capital than you had on hand... If you had a handmade widget that you were producing for $10, and could only sell for $5, but a million-dollar factory would let you produce 100,000 widgets a day for $2 each, lending is the only way to get into business. It's not the use of debt that's a problem, it's the misuse of d…

That's not actually how it works. Money is not a thing. Money is a decision and a means of social punishment/reward.

Lending is either an executive function based on (supposed) faith in the future, or it's gambling, or it's client patronage, or it's extortion.

There is no financial business model which does not reduce to these relationships.

In your example, the factory gets built if someone important decides it should be built. They charge 'interest' based on justifications assembled from some combination of gambling, extortion, or patronage.

It's an entirely imaginary and delusional system, and completely faith-based.

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#79

Post by AdmiralAsshat »

opendais wrote: post #35
AdmiralAsshat wrote: post #15

Advice from someone who works on debt collection software for a living: never, ever let a check bounce. Returned checks operate in a legal loophole that circumvents most of the consumer protection afforded to regular debt. Collection agencies can begin pursuing it immediately, can begin reporting it to the credit bureaus immediately, and the interest rate they're allowed to charge on it is ridiculous.

Do you think its financially viable to run an ethical debt collection agency?

You'd have to first define what constitutes "ethical" as distinct from "legal". If you're of the opinion that the very practice of collecting debt is scummy or unethical, then no. Assuming you will allow for at least SOME form of "ethical" debt collection, we'd have to narrow down what kinds. For instance, just off the top of my head, you've got: - Commercial Debt - Medical Debt - Student Loans - Bad Checks

Within that you conceivably have debts whose collection is perhaps ethical by nature but not ethical in practice. For instance, as I said earlier, collection on bad checks circumvent many normal collection laws, and you can thus have interest rates of 200% or higher. Another example would be Student Loans, which have their own set of ridiculous loopholes that allow the debt to persist past bankruptcy, past retirement, etc. As someone who was still in college myself only a few years ago, the idea of the financial burden imposed on me for the rest of my life simply for doing the thing that society practically strong-armed me into doing seems, to me, ridiculous; for that reason I am hesitant to call any form of Student Debt collection "ethical" simply because the laws which govern it are atrocious.

With that said, I have dealt with many agencies who at least tried to operate on an "ethical" model (usually they collected on medical debt), and they seemed polite and reasonable in their collection efforts. Remember, they're in the business to make money. Some agencies will go for the "Make the debtor's life as miserable as possible to make them pay up" tactic, which includes harassment, lawsuits, garnishments, etc. I deal with them frequently, and I think they're the scum of the Earth (primarily because they talk to me in what I imagine is the same tone as they talk to debtors). Others, however, will simply try to get what they can, and if they CAN'T--i.e. they realize that continuing to call a guy about a debt when he's already stated that he has no job and no savings would be like squeezing blood from a stone--they'll stop wasting their time and move on to an account that would be more profitable.

Much of the work done by agencies these days is not only getting people to pay, but finding out who is more LIKELY to pay so that the agency can focus its efforts accordingly. This analysis might include things like the line of business, their credit score, their location (they usually figure that areas with a higher average income are more likely to pay), etc.

To answer your question succinctly: probably. It would center primarily on whether the percentage of the portfolio that actually pays can sustain the percentage that you're willing to let go when pursuing them further would entail questionable tactics.

Re: Inside the Dark, Lucrative World of Consumer Debt Collection

#80

Post by vinceguidry »

cnp wrote: post #61
a8da6b0c91d wrote: post #28

Earlier quoted context omitted.

They pursue a judgement on sums up around thousands of dollars where the charges are clearly valid. There is no way that's going to happen on some piddly $400 amount that you have documented is substantially BS. What I'm talking about is people I've seen in recent threads freaked out about some comcast charge affecting their credit report. Don't waste a minute of your time dealing with them or the credit bureaus. Jus…

This is beyond idiotic. My credit score is HORRIBLE due to little things like this accumulating in my youth. Pay everything, always -- always pay -- always. It WILL come back to fuck you over just when you need those extra few points.

Not so idiotic. I ran up a modest amount of debt in my early twenties, never paid any of it. Fast forward ten years. Found a decent job, look to buy a car, come to find out my credit report is mostly empty. Most everything had dropped off. Capital One gave me a credit card, I've been building up credit and savings over the last year.

If you have the discipline to say, "no new debt," which isn't that hard to do after you've already fucked up your score, then you can hit thirty with a clean slate.

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