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Imagine working for a company that buys up poor people’s debt in order to sue them.

by WD-42 6y ago

linuxftw 6y ago
Is there good money in it? There's actually a good startup opportunity here. Many of these debt collectors are unethical. You could buy these bad debts for pennies on the dollar, settle them for a very modest margin, and help the poor people fix their credit without filing for bankruptcy.
- mmastrac 6y ago
  https://symend.com/ https://symend.com/ is doing something similar to this (no connection, but I met the local team a while back). I like the approach of "ethical debt collection from real humans with real backstories". They just raised a good chunk of change as well.
- adrianN 6y ago
  It seems like that strategy is difficult in an efficient market of unethical debt collectors, as intuitively they would be able collect a larger fraction of the debts than the friendly debt collector.
  - darkwizard42 6y ago
    I think this is the hardest part. You would have to pay the same price for the debt as the unethical collectors and then make less off of it than the unethical ones probably putting you in the red :/
- larrywright 6y ago
  Context: I worked for 16 years for a company that did, among other things, debt collection. It was a small but profitable part of their business. We’re talking relatively low dollar bills - cell phone, cable, power, etc - rather than student loans, medical, or credit card. There are different levels of debt collection. The first level is generally done by the guarantor. Someone falls behind on a bill, service is shut off, and the company tries to get the consumer to pay the bill. The next level is when a company sends the bill to an outside collection agency to attempt to collect on it. The collection agency will get some commission on that if they manage to collect. The debt is maybe 6-12 months old at this time. If the first agency fails, sometimes it will get sent to a second or third agency to see if they have more luck. At some point in time the company will decide that the debt is unlikely to be collected and they will write it off. It’s at this point that debt may get sold. The debt is likely years old at this point. The company that buys it will buy for pennies on the dollar (it’s like any market, sometimes it’s more, sometimes it’s less). They are then the owner of the debt and any money they collect they get to keep. They’re able to settle for much lower amounts. If you have a $1000 debt that was bought for $50, you can settle for $250 and still make a profit. The consumer is able to clear the debt from their credit report for a fraction of what they owed (though it still shows they paid it to a collection agency and that still hurts their credit, but not as much as an unpaid debt). Long answer to your question, but yes there can be good money in it, and there is probably an opportunity here to do some good.
rayiner 6y ago
Okay, I'm imagining it. So what? There is a debate to be had about what sorts of protections we want to provide to debtors. But that's separate and apart from the existence of companies that specialize in debt collection. The latter is simply an example of economic specialization. The problem everyone has getting their mind around debt collection is that they focus on the after-the-fact situation, instead of the whole picture. If companies cannot collect on debt, they will be less willing to extend credit. When you "help" one person who can't pay their debt, you're hurting several people in the future who won't be extended credit. Student loans are a good illustration of this. People clamor to make student loans dischargeable in bankruptcy--citing examples of people with hundreds of thousands of dollars in crippling debt. But the median American doesn't have any student debt, and the median debt for people who do is just $30,000. Now as a practical matter, student loan forgiveness would just impact taxpayers, since almost all student debt is owed to the federal government. But if it was a normal debt market, making student loans--which are offered without any security--dischargeable in bankruptcy would cause student loans to dry up for everyone, even the vast majority of people who take on modest, manageable debt.
- saystupidthings 6y ago
  You think the abundance of student loans is a good thing?
- Ensorceled 6y ago
  You say all of this as if extending credit to high risk borrowers, who can't financially afford to carry that debt, is a good thing.
- londons_explore 6y ago
  Hypothetically, what would the world look like if we made all debts dischargeable by bankruptcy, and bankrupcy a process so simple you could just text a number and be done in 15 minutes? A bankruptcy would simply automatically put all your assets up for a same-day auction. Any unlisted items would be auctioned as a lump, for anyone willing to research what you actually owned to play 'Storage Wars' with. Anyone could bid on those assets (including your friends buying your stuff to give back to you). All proceeds of auction would be claimable by anyone you owed a debt to in a fully automated manner. In such a world, any time you woke up in the morning and decided the auction value of your assets was below your debts, you could text the number, re-buy things you really cared about for probably cents on the dollar (nobody wants your dirty laundry), and carry on your day worry free.
oh_sigh 6y ago
What if you buy up the debt of rich people who can, but don't want to pay?
- inetknght 6y ago
  Rich people have unserviced debt? Wouldn't that make them poor people?
  - lsaferite 6y ago
    That would make them highly leveraged people. /s (kinda)
  - kyrieeschaton 6y ago
    Tons of nominally asset-rich people find themselves with negative cashflow and in a personal debt crunch, even with positive net worth (or plausibly positive, depending on what assumptions you make about values in an illiquid market). You're going to see a lot of this in the near future as the real estate market implodes.
swarnie_ 6y ago
Whatever pays the bills, imagine inflicting your own personal morality on others.

Imagine working for a company that buys up poor people’s debt in order to sue them.

by WD-42 6y ago

Imagine working for a company that buys up poor people’s debt in order to sue them.

Is there good money in it? There's actually a good startup opportunity here. Many of these debt collectors are unethical. You could buy these bad debts for pennies on the dollar, settle them for a very modest margin, and help the poor people fix their credit without filing for bankruptcy.

mmastrac 6y ago
https://symend.com/ https://symend.com/ is doing something similar to this (no connection, but I met the local team a while back). I like the approach of "ethical debt collection from real humans with real backstories". They just raised a good chunk of change as well.
adrianN 6y ago
It seems like that strategy is difficult in an efficient market of unethical debt collectors, as intuitively they would be able collect a larger fraction of the debts than the friendly debt collector.
- darkwizard42 6y ago
  I think this is the hardest part. You would have to pay the same price for the debt as the unethical collectors and then make less off of it than the unethical ones probably putting you in the red :/
larrywright 6y ago
Context: I worked for 16 years for a company that did, among other things, debt collection. It was a small but profitable part of their business. We’re talking relatively low dollar bills - cell phone, cable, power, etc - rather than student loans, medical, or credit card. There are different levels of debt collection. The first level is generally done by the guarantor. Someone falls behind on a bill, service is shut off, and the company tries to get the consumer to pay the bill. The next level is when a company sends the bill to an outside collection agency to attempt to collect on it. The collection agency will get some commission on that if they manage to collect. The debt is maybe 6-12 months old at this time. If the first agency fails, sometimes it will get sent to a second or third agency to see if they have more luck. At some point in time the company will decide that the debt is unlikely to be collected and they will write it off. It’s at this point that debt may get sold. The debt is likely years old at this point. The company that buys it will buy for pennies on the dollar (it’s like any market, sometimes it’s more, sometimes it’s less). They are then the owner of the debt and any money they collect they get to keep. They’re able to settle for much lower amounts. If you have a $1000 debt that was bought for $50, you can settle for $250 and still make a profit. The consumer is able to clear the debt from their credit report for a fraction of what they owed (though it still shows they paid it to a collection agency and that still hurts their credit, but not as much as an unpaid debt). Long answer to your question, but yes there can be good money in it, and there is probably an opportunity here to do some good.

rayiner 6y ago

Okay, I'm imagining it. So what? There is a debate to be had about what sorts of protections we want to provide to debtors. But that's separate and apart from the existence of companies that specialize in debt collection. The latter is simply an example of economic specialization. The problem everyone has getting their mind around debt collection is that they focus on the after-the-fact situation, instead of the whole picture. If companies cannot collect on debt, they will be less willing to extend credit. When you "help" one person who can't pay their debt, you're hurting several people in the future who won't be extended credit. Student loans are a good illustration of this. People clamor to make student loans dischargeable in bankruptcy--citing examples of people with hundreds of thousands of dollars in crippling debt. But the median American doesn't have any student debt, and the median debt for people who do is just $30,000. Now as a practical matter, student loan forgiveness would just impact taxpayers, since almost all student debt is owed to the federal government. But if it was a normal debt market, making student loans--which are offered without any security--dischargeable in bankruptcy would cause student loans to dry up for everyone, even the vast majority of people who take on modest, manageable debt.

saystupidthings 6y ago
You think the abundance of student loans is a good thing?
Ensorceled 6y ago
You say all of this as if extending credit to high risk borrowers, who can't financially afford to carry that debt, is a good thing.
londons_explore 6y ago
Hypothetically, what would the world look like if we made all debts dischargeable by bankruptcy, and bankrupcy a process so simple you could just text a number and be done in 15 minutes? A bankruptcy would simply automatically put all your assets up for a same-day auction. Any unlisted items would be auctioned as a lump, for anyone willing to research what you actually owned to play 'Storage Wars' with. Anyone could bid on those assets (including your friends buying your stuff to give back to you). All proceeds of auction would be claimable by anyone you owed a debt to in a fully automated manner. In such a world, any time you woke up in the morning and decided the auction value of your assets was below your debts, you could text the number, re-buy things you really cared about for probably cents on the dollar (nobody wants your dirty laundry), and carry on your day worry free.

oh_sigh 6y ago

What if you buy up the debt of rich people who can, but don't want to pay?

inetknght 6y ago
Rich people have unserviced debt? Wouldn't that make them poor people?
- lsaferite 6y ago
  That would make them highly leveraged people. /s (kinda)
- kyrieeschaton 6y ago
  Tons of nominally asset-rich people find themselves with negative cashflow and in a personal debt crunch, even with positive net worth (or plausibly positive, depending on what assumptions you make about values in an illiquid market). You're going to see a lot of this in the near future as the real estate market implodes.

swarnie_ 6y ago

Whatever pays the bills, imagine inflicting your own personal morality on others.