5 ms·

Sure, but on the other hand, let's say you run a small business. At some point you have customers who don't pay. What do you do? Write it off as a total loss? 1

by eli 12y ago

Sure, but on the other hand, let's say you run a small business. At some point you have customers who don't pay. What do you do? Write it off as a total loss? 1/12 is better than nothing.

yogo 12y ago
You can just sell it off on a site like judgmentmarketplace.com. sometimes trying to collect could end up costing you more.
shkkmo 12y ago
It's not 1/12th of the debt, it's 1/1200th of the debt.
- eli 12y ago
  OK, I agree that part is a little ridiculous but only in the "why bother" sense.
  - kazinator 12y ago
    It's probably the same thing like gambling to those people. Or penny stock trading. The reasoning is probably like this: at 1/1200 rate, I can cheaply buy a whole crapload of debt. And based on the time-honored principle "if you throw enough shit at a wall, some of it will stick", if just a small percentage of those debts pays out, I will make a profit even if the rest are junk.
    - klipt 12y ago
      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."
      - patio11 12y ago
        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 the easily collectible debts - working phone numbers, responsible debtors with capability to pay - has been collected already. Even calling people to offer terms isn't profitable at 1/1200th of a $250 AT&T receivable and much of the portfolio is physically incapable of paying the two cents! The collector is hoping to get literally three in a hundred to pick up the phone and take an offer of $150, the bulk of which goes to labor to call them.
        osamet67 12y ago
        This. People don't understand the (bad) economics of current debt collection efforts.
    - rahimnathwani 12y ago
      It's not gambling if the law of large numbers is on your side. It's more like running a casino, where the loss on a single transaction could be high, but overall you're almost certain to make money.
- kazinator 12y ago
  If someone sells you debt at 1/1200, that simply means they believe the debt is very bad and unlikely to collect. Even at that price, you could be a total sucker, since perhaps you will not collect a penny.
- pesenti 12y ago
  It's actually 12 basis points... that is 0.12%.
fred_durst 12y ago
I feel like I would be safe saying 99%(if not all) of this paper is not small business paper. These are the debts that are sold off in large parcels by banks and credit card companies. Small businesses typically use flat fee collection agencies and rarely charge of the debt like this. Part of the reason is because to a small business charging off $10K in debt is going make them a couple hundred bucks at most. There is no "little guy" getting stiffed by bad debtors in this story.
- BallinBige 12y ago
  Whats interesting is that most small collection agencies are getting squeezed out, due to the high cost of regulation.
coldtea 12y ago
This is not about small businesses. It's about suit and tied scum, like the banking and insurance business. They buy and lobby politicians to deregulate their sectors like crazy, they give away credit cards and loans like candy, they use all the "black" tricks to inflate debt and tie people to their monthly installments forever. And when those fail, here come the collection agencies, including paid scum using borderline illegal methods. Of course if those companies fail themselves, they have some trillion dollar public money bailouts to expect. About people that should "know better". Sure. Doesn't always happen, and people are not all perfectly rational, highly disclipined game-theoritic individuals. It's easy to preach "personal responsibility" from an ivory tower (and who knows what kind of privileged upbringing or lucky break), but it doesn't make those people less victims. It's like a woman victim of domestic abuse ― she should know better and leave the guy, but that doesn't make him any less of a prick.
justifier 12y ago
on interest accruing that penalises payments that fail to meet a time deadline or a premium amount a company can very quickly make the money back that they lent out while still having the individual held under crippling debt, if i use a credit card foolishly and put myself into 2500$ debt, and over time receive a number of fees due to my late payments, my 2500$ debt can rise to 5000$ effortlessly, at this point if i pay the bank 4000$, they made 1500$ off me already, then they decide to sell the remaining 1000$ for 1/12 its worth the original lender has been given 4083$ for an original 2500$ loan, and now the credit adjuster or whoever bought the debt could make 917$ by collecting the 1000$ i'd like to see statistics on how much an original debt was, how much has been paid into it, and how much it sold for then we can discuss potential for 'total loss' i wonder if you went to the lender and offered to pay your debt back at 1/12 its cost if they would sell the rights to your own debt to you?

by eli 12y ago

Sure, but on the other hand, let's say you run a small business. At some point you have customers who don't pay. What do you do? Write it off as a total loss? 1/12 is better than nothing.

yogo 12y ago

You can just sell it off on a site like judgmentmarketplace.com. sometimes trying to collect could end up costing you more.

shkkmo 12y ago

It's not 1/12th of the debt, it's 1/1200th of the debt.

eli 12y ago
OK, I agree that part is a little ridiculous but only in the "why bother" sense.
- kazinator 12y ago
  It's probably the same thing like gambling to those people. Or penny stock trading. The reasoning is probably like this: at 1/1200 rate, I can cheaply buy a whole crapload of debt. And based on the time-honored principle "if you throw enough shit at a wall, some of it will stick", if just a small percentage of those debts pays out, I will make a profit even if the rest are junk.
  - klipt 12y ago
    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."
    - patio11 12y ago
      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 the easily collectible debts - working phone numbers, responsible debtors with capability to pay - has been collected already. Even calling people to offer terms isn't profitable at 1/1200th of a $250 AT&T receivable and much of the portfolio is physically incapable of paying the two cents! The collector is hoping to get literally three in a hundred to pick up the phone and take an offer of $150, the bulk of which goes to labor to call them.
      - osamet67 12y ago
        This. People don't understand the (bad) economics of current debt collection efforts.
  - rahimnathwani 12y ago
    It's not gambling if the law of large numbers is on your side. It's more like running a casino, where the loss on a single transaction could be high, but overall you're almost certain to make money.
kazinator 12y ago
If someone sells you debt at 1/1200, that simply means they believe the debt is very bad and unlikely to collect. Even at that price, you could be a total sucker, since perhaps you will not collect a penny.
pesenti 12y ago
It's actually 12 basis points... that is 0.12%.

fred_durst 12y ago

I feel like I would be safe saying 99%(if not all) of this paper is not small business paper. These are the debts that are sold off in large parcels by banks and credit card companies. Small businesses typically use flat fee collection agencies and rarely charge of the debt like this. Part of the reason is because to a small business charging off $10K in debt is going make them a couple hundred bucks at most. There is no "little guy" getting stiffed by bad debtors in this story.

BallinBige 12y ago
Whats interesting is that most small collection agencies are getting squeezed out, due to the high cost of regulation.

coldtea 12y ago

This is not about small businesses. It's about suit and tied scum, like the banking and insurance business. They buy and lobby politicians to deregulate their sectors like crazy, they give away credit cards and loans like candy, they use all the "black" tricks to inflate debt and tie people to their monthly installments forever. And when those fail, here come the collection agencies, including paid scum using borderline illegal methods. Of course if those companies fail themselves, they have some trillion dollar public money bailouts to expect. About people that should "know better". Sure. Doesn't always happen, and people are not all perfectly rational, highly disclipined game-theoritic individuals. It's easy to preach "personal responsibility" from an ivory tower (and who knows what kind of privileged upbringing or lucky break), but it doesn't make those people less victims. It's like a woman victim of domestic abuse ― she should know better and leave the guy, but that doesn't make him any less of a prick.

justifier 12y ago

on interest accruing that penalises payments that fail to meet a time deadline or a premium amount a company can very quickly make the money back that they lent out while still having the individual held under crippling debt, if i use a credit card foolishly and put myself into 2500$ debt, and over time receive a number of fees due to my late payments, my 2500$ debt can rise to 5000$ effortlessly, at this point if i pay the bank 4000$, they made 1500$ off me already, then they decide to sell the remaining 1000$ for 1/12 its worth the original lender has been given 4083$ for an original 2500$ loan, and now the credit adjuster or whoever bought the debt could make 917$ by collecting the 1000$ i'd like to see statistics on how much an original debt was, how much has been paid into it, and how much it sold for then we can discuss potential for 'total loss' i wonder if you went to the lender and offered to pay your debt back at 1/12 its cost if they would sell the rights to your own debt to you?