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People are fond of the “ship debt to a debt buyer” narrative but I don’t think it makes as much sense as people assume. The debt buyers are presumably rational
by jncfhnb 3y ago
People are fond of the “ship debt to a debt buyer” narrative but I don’t think it makes as much sense as people assume. The debt buyers are presumably rational with their pricing. The failure of 2008 was the unanticipated correlation of the default risk of individual debtors. Which I think is less relevant for credit card debt. And presuming the prices are rational, making the debt riskier to sell off shouldn’t make a lot of sense.
Capturing fees in the short term but incurring defaults feels like it should be a net loss to the creditors. If it’s not I feel this deserves some regulation.
- jstarfish 3y ago> The debt buyers are presumably rational with their pricing. They have to be buying them for pennies on the dollar. Every time collectors harass me, they obviously want the full amount but if the previous lender couldn't collect it, they don't waste their time on the same approach. They always push for quick settlement as a fraction of the actual balance (25% or so? Been a while). Whatever they pay for the debt must be substantially less than n% of the balance.
- jncfhnb 3y agoSure. But the fraction ought to consider the probability of repayment is what I’m saying. You shouldn’t be able to consistently profit by making accounts larger and riskier and selling them for higher amounts.
- toomuchtodo 3y agoI agree. I would highly recommend you file a complaint with the CFPB on the matter.