Comments on: Can I sign my check with an obscene gesture?

Question: Can I sign my check with an obscene gesture?

517 — Wed, 14 Nov 2007 14:22:52 -0800

What kind of mark down do debt collection agencies get on bad private party debt when they buy it?

How much do they expect to collect on it? How much does the person selling the debt get?

By: Mr_Crazyhorse

Mr_Crazyhorse — Wed, 14 Nov 2007 14:34:30 -0800

they sell it for 5-15% of face value, usually towards the lower end of that.

most are uncollectible, the rest they'll get a few bucks, and a very few are fully collectible.

this information has ZERO to do with how much they expect. they EXPECT you to pay 100%. and they will do everything in their power to get you to pay 100% OR MORE including all their fees and costs.

By: Lame_username

Lame_username — Wed, 14 Nov 2007 14:40:22 -0800

Most purchasers of uncollected debt pay based on the credit rating of the debtor. This data is not generally widely published or publicly available. For an example, you can look at statistics published by community lender Prosper for unsecured loans that are three months or more in default. None of this debt is older than about two years old (the value of debt declines as it ages). Payment ranges vary from 30 cents on the dollar to 2.5 cents on the dollar.

By: klanawa

klanawa — Wed, 14 Nov 2007 14:41:17 -0800

an interesting follow-up would be (for example):

i had a credit card account account go to collections. i refused to pay the collector and paid the creditor. did the collector buy the debt and not recover anything on it? did the creditor get the repayment and the proceeds of the sale?

By: Octoparrot

Octoparrot — Wed, 14 Nov 2007 14:43:44 -0800

klanawa, I work occasionally with business accounts that have gone into default for a very large telecom company. If we make a mistake we will purchase the debt back from the collection agency and submit corrections to the credit bureaus. If we didn't make a mistake we tell them all payments must be made with the collection agency. If you were to try and pay us we'd send back your money.

I'm guessing this is the way most companies would handle their debt.

By: Octoparrot

Octoparrot — Wed, 14 Nov 2007 14:44:21 -0800

To clarify I work for the very large telecom company....

By: kanemano

kanemano — Wed, 14 Nov 2007 14:44:41 -0800

The collection lawyer I used to work for usually paid between .07c to .10c on the dollar for uncollectable debt. Collection rate would go up if he is able to secure a judgment against the debtor

By: klanawa

klanawa — Wed, 14 Nov 2007 14:55:37 -0800

interesting, octoparrot. thanks. i guess my creditor would rather have the full value of the debt than some pittance ;)

By: Octoparrot

Octoparrot — Wed, 14 Nov 2007 15:43:17 -0800

I think it is a matter of logistics for very large companies. It costs us more to deal with the individual account collections at that point than we'd collect if we continued to deal with them directly.

The circumstances I've dealt with were executive level escalations so they tend to get special handling.

By: mullacc

mullacc — Wed, 14 Nov 2007 16:47:56 -0800

Here's the business model I've seen for companies that purchase charged-off (as in written off by the company selling the debt) credit card accounts and consumer installment loans:

Purchase price: 6-12% of face value (let's use 8% for this example). So the buyer pays $8 for every $100 of face value debt.

% of accounts with enough info to pursue legal action: 40%

Collection rate of accounts w/ legal action: 30% of face

Collection rate of accounts w/o legal action: 15% of face

That comes to $21 collected for every $100 of face value acquired, or 2.6x purchase price.

That's the goal, anyway. These are the kind of statistics you'd see at a scale operator--so someone who has in-house attorneys and call centers.