Credit Card Debt Collection(bitsaboutmoney.com) |
Credit Card Debt Collection(bitsaboutmoney.com) |
This article was really interesting in the context of my $150 cable modem. I wrote the collection agencies a letter with a paper trail (as he suggests) informing them about how to contact me, and my dispute of the debt. The debt magically disappeared. This article really illustrates what happened behind the scenes, which was a pretty cool full circle.
As someone with a high credit score, it makes sense why they bothered to contact me. When I wrote the letter, informing them I understood the law and required paper correspondence , I clearly became “not profitable” to them - regardless of the debts legitimacy. Surprisingly powerful insight about how it works behind the scenes. When reading the article, I couldn’t help but think that you could almost intentionally avoid paying debts if you had a lawyer willing to help you fight the system. The economics of the debt collection system seems like it’s not worth fighting anything.
Facing $10K of CC debt following a mental and work breakdown, I subsequently endured years of quasi-legal harassment. Each illegal demand and unfair treatment had to be painstakingly fought against - weeks, months and years sitting at the computer composing lengthy rebuttals, and appeals to government regulators.
Only to have the bank blatantly perform the same illegal tactics again-and-again, with virtual impunity - their semi-automated wordsmiths will simply trot out a few pages equating your repayment shortcomings with the fairness of their actions, retract their infringing action, and the music will restart...
The dollar amount of the debts increases too, since debt collection firms can attach their costs at highly inflated rates.
I would assume that ~75% of debtors will earn some on-the-books wages at some point in the future or own a house. Therefore, this stage of the process seems insanely profitable.
Banks do not want to be in the news because they put someone on the street because of $100 or $500 or $1000 - the reputation cost is just too high.
Further, most banks will not sell debt under a certain amount., they plan for the losses, adjust for it in lending rates and just write off the debt as a loss.
You will see this in their annual statements as provision for credit loss (the planned losses) and net credit losses (actual losses). The amount for large banks is in the hundreds of millions and it is taken as part of the cost of being in the lending business.
There is, of course, some every fluctuating number based on the type of lending and amount, at which debt is pursued with vigor.
>labor frequently costs more than than underlying debt does, even when one is paying four cents on the dollar and hiring collectors straight out of high school
Liens can be challenged too, but there's a presumption of validity that increases with age, and property sales are hard to do without clearing liens, and challenging a lien seems difficult and time consuming, so it is ignored until a sale is needed with some urgency, chances are the lien will be paid rather than challenged.
I don't have any specific thoughts about wage garnisment, but the % of people that don't get on-the-books wages in the general population may be significantly different from the % in the population that has become the target of debt collection.
Anyway, how many of the debts can be turned into a lien or a garnisment is a question too. You've got to turn the line in the csv into someone you can plausibly sue; and you've got to have upfront capital for the court costs (which probably you can add to the lien, but maybe not?).
From the perspective of someone who's dealt with finance and exports most of their life, CSV files of this nature are more of a gentleman's agreement between engineers (who all died years ago) than a statement of fact. I don't know how you'd convince a judge that your csv file is error-free when the transaction process itself is full of clawbacks due to all the buggy data and creaky code.
But I'd guess the legal cost is pretty minimal when you can have 1 in house lawyer do 1000 identical cases a day standing in front of a judge. Very soon the judge is going to just say "send over your CSV file of all the cases with identical facts".
Until a couple people challenge the court case and the 1000-case lawyer looks like a crook. Remember that the CSV doesn’t actually include the required information to fight a case in court, just enough to win a default judgment. The penalty for illegal debt collection is severe and they’re a lawyer standing in front of a judge, they can’t exactly hide from the law here.
In practice, you'll have created a billion-dollar SaaS corporation and helped write legislation. The fundamental issue is that data quality and handling practices mean this information will always be "truthy". At a base level your input comes from an office clerk who's medium-engaged in the process and who's asked for quantity over quality.
The entire financial network (imho, from my perspective, etc etc) is "best effort" and mutual agreements. Nobody involved wants to cast a string to a legal agreement.