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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

#161

Post by mariodiana »

derefr wrote: post #118
AdmiralAsshat wrote: post #79

Earlier quoted context omitted.

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 th…

> 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. What happens when you don't pay your S…

"Guaranteed" means the government -- ultimately -- guarantees the banks that they'll get their money. But what that really means is that the borrower of a student loan lacks almost all of the consumer protections that any other borrow has. The government will garnish any wages, social security or disability checks, or anything else they can get their hands on. And that goes on until the debt is paid or you die.

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

#162

Post by CMCDragonkai »

downandout wrote: post #103
blhack wrote: post #34

This is one of the most unbelievable articles I've ever read. If you didn't read it all the way through, do so over lunch or something; it's amazing. The idea of "millions of dollars" worth of debt being traded for around on thumb drives, and that all those thumb drives really contain are excel spreadsheets is mind boggling . Those people in those spreadsheets are real people , and they're being completely duhumanize…

>Also the fact that debt is being purchased for 1/12 of a penny is completely just...unbelievable. It seems that the particular deal you're referring to was a fraudulent transaction. It had been sold (at least) twice, and having paid $41K for $50M worth of debt, the agency lost money on it. It doesn't sound like legitimate deals are offered this cheaply. However, you are right that insanity runs rampant in the indust…

That's really smart. Do banks have some way of detecting if the buyer isn't associated with the debtor?

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

#163

Post by patio11 »

klipt wrote: post #143
kazinator wrote: post #98

Earlier quoted context omitted.

It's probably the same thing like gambling to those people. Or penny stock trading. The reasoning is probably like this: at 1/1200 rate, I can cheaply buy a whole crapload of debt. And based on the time-honored principle "if you throw enough shit at a wall, some of it will stick", if just a small percentage of those debts pays out, I will make a profit even if the rest are junk.

At that rate, why didn't the creditor try sell the debt to the debtor? Effectively saying "you pay me 1/1200th, then your debt is owed to yourself and you can call it quits."

This is a very common misunderstanding in this thread, so I will answer it here once. The portfolio is worth a penny on the dollar because it is a mix of quarter debts, dime debts, and "not even worth a 1/1000th of a penny" debts, and the mix is known to be skewed towards crap. If the mix were known to be largely collectible debts, it would have been priced near 30 cents or more. The portfolio has been worked and the easily collectible debts - working phone numbers, responsible debtors with capability to pay - has been collected already.

Even calling people to offer terms isn't profitable at 1/1200th of a $250 AT&T receivable and much of the portfolio is physically incapable of paying the two cents! The collector is hoping to get literally three in a hundred to pick up the phone and take an offer of $150, the bulk of which goes to labor to call them.

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

#164

Post by GeneralMayhem »

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…

>First, you get a horrible incentive to not repay debts

Isn't that what credit ratings are for? You'd be able to do this exactly once for any meaningful amount of money, and then your financial life would be otherwise over.

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

#165

Post by patio11 »

dllthomas wrote: post #154
patio11 wrote: post #147

This is actually something I think a startup could do a really good job at disrupting, but you'd have to have a very high tolerance for both a) schleps and b) dealing with poor peoples' problems. Billions of dollars are being thrown around at companies where the average level of technical sophistication is Excel spreadsheets and the prototypical competitor is a high-school graduate with an average of N weeks of exper…

I wonder if you could tie it to disrupting credit reporting.

That's an interesting angle. The troublesome part is that credit reporting is a two-sided B2B marketplace. You need to convince people to report debts to you AND convince lenders to make lending decisions based on your reports. On top of this, you have to have a B2C facing function for FDCPA and FCRA compliance, and they're very toothy rules to fall afoul of.

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

#166

Post by kaonashi »

blacksmith_tb wrote: post #76
kaonashi wrote: post #32

Earlier quoted context omitted.

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 profitab…

Well, that doesn't mean there can't be fraud involved. There often is, and that's when things tend to fail spectacularly.

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

#167

Post by bequanna »

mikeash wrote: post #145
xyzzyz wrote: post #133

Earlier quoted context omitted.

>A 10% rise in taxes? That's a heck of a lot of money. The majority of the rich won't buy into it, they'll fight it tooth and nail. But now they pay insurance anyway, aren't they?. With a single-payer system, their contribution would actually probably fall.

The US government already pays more per capita for health care than Canada, despite not covering anywhere close to everybody. If one could wave a magic wand and transmute the US to the Canadian system, US government health care expenditures would actually fall, and taxed could be lowered .

I certainly don't disagree with you.

The fact of the matter is: If a goal involves raising taxes on the rich (or corporations) in the US, it will be pretty difficult to achieve.

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

#168

Post by derefr »

sanderjd wrote: post #158
derefr wrote: post #118

Earlier quoted context omitted.

> 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. What happens when you don't pay your S…

I may be wrong, but my understanding is that (at least for the student loans I have), the owner of the debt is allowed to garnish my wages (and I have heard even social security payouts) after some amount of time in default. So I think your plan would only work for people who are willing to be unemployed indefinitely.

Sounds like a scary criteria to an entrepreneur ("you can never work!") but it might ultimately make sense for those who go to university, but end up marrying someone with a good job and becoming a lifetime dependent of them (in est, the classical homemaker.)

There are probably a few other less-common situations as well, where a person has no money of their own but access to plenty of the money of others, e.g. the "trust-fund baby."

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

#169

Post by downandout »

CMCDragonkai wrote: post #162
downandout wrote: post #103

Earlier quoted context omitted.

>Also the fact that debt is being purchased for 1/12 of a penny is completely just...unbelievable. It seems that the particular deal you're referring to was a fraudulent transaction. It had been sold (at least) twice, and having paid $41K for $50M worth of debt, the agency lost money on it. It doesn't sound like legitimate deals are offered this cheaply. However, you are right that insanity runs rampant in the indust…

That's really smart. Do banks have some way of detecting if the buyer isn't associated with the debtor?

I'm not sure that there would be any incentive to. Once they've decided to sell, a high bidder is a high bidder (though it's obviously frowned upon, otherwise he would have gone himself).

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

#170

Post by rdtsc »

res0nat0r wrote: post #13
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.

Then why would anyone pay their bills if they can buy their debt back for 1/10th of what they owe?

> Then why would anyone pay their bills if they can buy their debt back for 1/10th of what they owe?

For the same reason why they might not pay to start with. They don't pay and bank sells the debt to someone.

Or the don't pay and then choose to pay later a smaller amount.

Option 1 sounds not too far off option 2. It would be minus the hassle to fend of collection agencies.

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