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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

#121

Post by Terr_ »

NoMoreNicksLeft wrote: post #83
Terr_ wrote: post #57

Earlier quoted context omitted.

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…

Everything you've described sounds like an awesome idea to me. It leads to quick price discovery. It's economically efficient.

No, prices would NOT be discovered quickly, because the bank cannot proceed without getting a response from the debtor... or waiting long enough that they can legally treat it as rejected.

That probably means at least two or three snail-mail notifications and a month of waiting time... Defaulting debtors correlate heavily with people who cannot be contacted or will not respond.

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

#122

Post by wpietri »

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…

I think those are solvable problems.

There's already a big incentive not to repay debts. Some places give up without doing anything, some will offer to discount your debt even before sending it to collections. This might make the incentive a little worse, but the jerk would still get the negative credit report entry, which is presumably the bigger punishment than having to dodge some collector for a while.

Regarding the latter, I expect the stable solution is that the bank offers a package of 1000 items, the agency offers a price per dollar of debt, and 14 days later the agency receives the 880 accounts and pays on a per debt-dollar basis. It adds some risk, but debt collection agencies are experts at pricing risk.

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

#123

Post by BallinBige »

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…

PwC put together one of the more comprehensive reports regarding the 'value of collection agencies in the U.S.'

http://healpay.com/assets/2007_pwc_collection_industry_study...

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

#124

Post by prostoalex »

snuxoll wrote: post #116
prostoalex wrote: post #111

Earlier quoted context omitted.

Where does a dentist then raise money to buy a new XRay machine? Where do you find money if your top doctor wants a raise or threatens to leave for a competitor?

Profit != revenue.

Ok, but zero profit = zero flexibility on meeting unplanned expenses.

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

#125

Post by mrjaeger »

This seems like a problem that the bitcoin protocol could help to solve, at least the tracking part (aka no double selling of debtor lists, knowing who actually OWNS your debt). To try and retroactively do this is probably suicide but I could imagine where all new debt sold off is kept track of in a system like this and people can at least know they are paying to the correct collector.

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

#126

Post by caseydurfee »

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…

The game has been around as long as civilization has been around. The conventional view is that money came first, then debt, when actually it was the other way around. Rather than being a modern invention, debt and the management thereof was what led to the creation of money and accounting.

Debt: The First 5000 Years [1] is an excellent book I'd recommend if you're interested in the history. It's very well researched and a fascinating read (even if you don't agree with the author's politics.)

[1] https://www.librarything.com/work/9530527

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

#127

Post by prostoalex »

snuxoll wrote: post #114
prostoalex wrote: post #93

Earlier quoted context omitted.

Um, there are more not-for-profit hospitals than there are for-profit hospitals, which doesn't dramatically change the pricing equation. http://www.aha.org/research/rc/stat-studies/fast-facts.shtml One man's profit is another man's stash for bonuses and building a new wing of the hospital.

The hospitals aren't the problem, every hospital in the Boise, ID area is non-profit and frequently they work with those without coverage to significantly reduce or completely write off their medical expenses. It's the insurance system that is the problem, since I have insurance the hospitals won't give me a dime off my bill, and my costs are heavily inflated because those of us WITH insurance are subsidizing those w…

Just to clarify: a bunch of people pooling their resources together to negotiate a lower price are a problem, but provider charging high prices to those not able to negotiate a discount is not a problem?

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

#128

Post by nodetrend »

"Most negative information disappears from credit reports after seven years and, depending on state law, debts may be unrecoverable through a lawsuit after as little as three years"

So all I have to do to get out of my loans is live off the grid for 7 years? I wonder if this is the same for student loans.

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

#129

Post by derefr »

fred_durst wrote: post #69
Iftheshoefits wrote: post #20

Earlier quoted context omitted.

In addition to the credit issues the other commenters noted, there is the issue of taxes in the case of "chargeoffs." One will get an income statement from the credit issuer for the fraction of the debt they write off. Odds are if one is in the position of having debt collectors come after them they'll be unlikely to afford the taxes on the "income."

Exactly. Buying your debt off for a penny on the dollar is probably the stupidest thing you could do financially. You would be trading $10,000 in credit card debt, with a fair amount of legal protections, for $4,000 in IRS debt with very few legal protections.

If you purchased a liquid asset with the $10,000 (and your creditors never found out about it in time to sue you for it), couldn't you just reliquidate it at that point and use it to pay off the IRS debt, leaving you with pure profit (and a horrible credit score)?

Actually, wait, maybe not even that: given that you purchased the debt, you could legally mark it (as the creditor) as having been repaid and then petition (as the debtor) to have your credit score corrected, no? This is what the http://rollingjubilee.org people are doing, at least.

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

#130

Post by heyjonboy »

ams6110 wrote: post #26

I was called by a collector once. Old medical bill, the clinic had sent it to an old address and the mail forwarding had expired. Why they never called or tracked me down I don't know, but they eventually sold it to a collector who had no trouble finding my phone number. When they called I was confused at first, then remembered and realized it was legit, paid it, end of story. They were utterly professional and court…

The real story here is how little effort most healthcare providers put into debt collection.
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