The Truth About The Collectors Who Are Calling You
Posted: Thursday, October 15, 2009
by Jim Anderson
Weddings That Last
When you get calls from a debt collector, they make it sound urgent that you find a way to pay the alleged debt now or they'll be forced into drastic action against you. They try to put the fear of God into you and say anything to get your heart racing. It is thought in the collection industry that this produces results. Somehow, the industry has been thoroughly infected with people who don't know any better and simply enjoy the power it gives them to bully debtors. They get away with it because debtors don't have the will or the resources to fight the abuse. If you are getting these kinds of calls from collectors, don't be a victim. Know your rights under the Fair Debt Collections Practices Act and file complaints with your local small claims court when they violate the law. Unfortunately, that is what we have to do to hold them accountable. If you properly document your case, you can easily win and be awarded a $1,000 judgment against them. You can use this to help settle the debt when you can come to an agreement. Usually, once you have the evidence, you don't need to actually file the complaint. Just call them up and let them know, they will usually ask you what you are willing to settle your account with them for. Don't forget it costs them legal fees to handle lawsuits, even with small claims courts. So you could potentially settle for pennies on the dollar.
The price that collectors pay for these portfolios ranges between two and twenty cents on the dollar. It depends on the quality of the account (likelihood to collect) and the supply of accounts against the demand to buy them. These days there are so many bad accounts that they are going between three and five cents on the dollar, on average. Realize, however, these are accounts that have already liquidated any collateral and have been through two or three collectors working for the lender on contract before they were "written off." The lender deemed them uncollectible.
So if you are a debtor with a third party collector calling you, they have likely invested about four cents on the dollar for your account. They have prioritized their portfolio and put the most likely to collect at the top of the list, and the least likely at the bottom. If you are getting a call, you are likely considered collectible for some reason. That means they see potential for you to come up with the money to at least settle the account.
With this knowledge, you can see why it would be totally reasonable for you to make an offer to settle for twenty cents on the dollar. They still make a significant profit, and you get some debt forgiveness. The vast majority of collectors play a dirty game of intimidation and deception, there are a few who are reasonable but they are rare. So don't feel guilty playing hardball. They will refuse your offer if they think you can come up with more. You have a good idea what their profit margin is, let them know, and have a backup plan as negotiation leverage (such as an FDCPA violation complaint). Use it to get them to agree to a settlement of twenty cents on the dollar or close to it.
If you are interested in more information about dealing with collectors and enforcing your debt collection rights see my website.
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Top-level comments on this article: (1 total)Amazing things we are learning from your articles, Jim. MarijoPlease log in to respond to this comment.Thanks for your encouragement!Please log in to respond to this comment.
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