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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

#211

Post by rlucas »

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…

There are other mechanisms for price discovery here that can avoid some of the downsides you describe. It needn't be a offer/counter-offer process where both sides see the numbers.

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

#212

Post by osamet67 »

patio11 wrote: post #163
klipt wrote: post #143

Earlier quoted context omitted.

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 th…

This. People don't understand the (bad) economics of current debt collection efforts.

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

#213

Post by osamet67 »

sanderjd wrote: post #153
kazinator wrote: post #95

Earlier quoted context omitted.

You are totally right! +1. The article had me at "stolen". If you owe a bit of money, some of the dipshits that call you may actually have misappropriated the collection account and are not connected to the original debtor in any way, who did not receive and will not receive a red cent. This passing of the buck helps to explain why numerous agencies may be involved: people get calls from various toms, dicks and harry…

This reminds me a lot of when the department of education sold my student loans to a couple private firms. Out of the blue, I just received a couple emails from a couple companies I've never heard of asking me to give them all my information (including my SSN) in order to create an account. I deleted them immediately, assuming there was a new phishing scheme in vogue, and didn't realize what had happened until I chec…

Something's missing here - who actually paid the loan?

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

#214

Post by osamet67 »

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?

Absolutely possible - just need to have the right mindset and tools. As someone who started a startup that's reinventing how debt collection gets done, I see a lot of old-school collectors who'd never be able to break the mold because their financial incentives aren't aligned. They don't have the technology, thus do not have the efficiency and margin, to operate ethically. They have to make money off of fees and interest so they end up focusing on people who can pay, making their lives harder, and having them end up in worse financial standing than if they chose not to pay.

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

#215

Post by osamet67 »

opendais wrote: post #106
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…

I'm aware they are in it to make money and I don't mind them operating with reasonable margins. It just sounds like hundreds of them are willing to use the "make the debtor's life as miserable as possible" tactic. I was mainly thinking of a cost plus model of debt repayment when I said "ethical". Trying to squeeze every last penny out of people who are [mostly] decent folks who just fucked up is the main part that bo…

I think that happens because they are focused on one thing: trying to get money from people who don't have it. But what happens if they help people create money that will pay for the debt? That's one of the things we're trying to do.

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

#216

Post by osamet67 »

FireBeyond wrote: post #196
wpietri wrote: post #119

Earlier quoted context omitted.

Does anybody know more about this? I've seen ads for places like that and they set off my scam-o-meter, but I've never dug in to see how he scam worked.

You pay them a big fee, upfront (they know you have debt repayment issues, they're sure as hell not going to risk not getting -their- money), they contact your creditors with a form letter saying that they are authorized to act on your behalf and any communications should be through them (this is the biggest relief most people find, the phone calls, letters, all stop). But then you get burned, because they settle all…

True. Actually, the majority of consumers that go through debt settlement end up bankrupt anyway. Some blame the fees, but I don't have data to substantiate that.

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

#217

Post by osamet67 »

jbigelow76 wrote: post #107
opendais wrote: post #62

Earlier quoted context omitted.

Doesn't use the shady, illegal tactics + settles for less than the dollar value of the debt. For instance, they buy it for $.05 and settles for whatever the debtor can reasonably pay that covers costs plus a reasonable margin, like 100%. So they buy it at $.05 and let the debtor pay it off for $.10 + the collector's cost. I'd guess that is something like 25-50% of the value of face value of the debt.

You idea of doesn't sound tenable. The "ethical" agency would need an extremely high conversion rate. Something probably in the 75% neighborhood, to cover operating expenses, the 25% that doesn't convert and then a little left over for profit. Judging by the value of write off debt (pennies on the dollar) the implicit conversion rate of collecting is probably closer to what you might see on a Facebook advertising cam…

What assumptions are you making regarding operating costs?

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

#218

Post by osamet67 »

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…

That's exactly why we started working on this problem.

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

#219

Post by peteretep »

einrealist wrote: post #207
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…

This should be regulated. If debt can be bought for 1/12 of the actual debt, that debt should be cut to that 1/12 as well!

Why?

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

#220

Post by ncarroll »

danboarder wrote: post #209
CMCDragonkai wrote: post #162

Earlier quoted context omitted.

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

Your observation reminds me of the http://rollingjubilee.org project that buys up consumer debt for pennies on the dollar and then simply cancels it.

I hadn't heard of this project before. Thanks for the link and the heads up.
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