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November 14, 2007 2:22 PM Subscribe
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?
How much do they expect to collect on it? How much does the person selling the debt get?
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.
posted by Lame_username at 2:40 PM on November 14, 2007
posted by Lame_username at 2:40 PM on November 14, 2007
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?
posted by klanawa at 2:41 PM on November 14, 2007
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?
posted by klanawa at 2:41 PM on November 14, 2007
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.
posted by Octoparrot at 2:43 PM on November 14, 2007
I'm guessing this is the way most companies would handle their debt.
posted by Octoparrot at 2:43 PM on November 14, 2007
To clarify I work for the very large telecom company....
posted by Octoparrot at 2:44 PM on November 14, 2007
posted by Octoparrot at 2:44 PM on November 14, 2007
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
posted by kanemano at 2:44 PM on November 14, 2007
posted by kanemano at 2:44 PM on November 14, 2007
interesting, octoparrot. thanks. i guess my creditor would rather have the full value of the debt than some pittance ;)
posted by klanawa at 2:55 PM on November 14, 2007
posted by klanawa at 2:55 PM on November 14, 2007
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.
posted by Octoparrot at 3:43 PM on November 14, 2007
The circumstances I've dealt with were executive level escalations so they tend to get special handling.
posted by Octoparrot at 3:43 PM on November 14, 2007
Best answer: 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.
posted by mullacc at 4:47 PM on November 14, 2007
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.
posted by mullacc at 4:47 PM on November 14, 2007
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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.
posted by Mr_Crazyhorse at 2:34 PM on November 14, 2007