Debt Buyers: Why Purchasing Debt for Pennies on the Dollar Matters

[MUSIC] Hi there, Michael Bovee with
Consumer Recovery Network, and welcome to our
DebtBytes YouTube channel. Today I want to talk
about how debt buyers are different from
different debt collectors, or the most common types
of debt collectors. So, listen,
debt buyers are taking a risk. They’re investing perfectly
good money to buy up the legal right to collect on
debts that haven’t been paid. So, it’s risky, and the way that they make
profit is on the purchase. So, they have to buy these
bulk amount of unpaid debts at a good enough price, and then be able to collect on
enough of them to turn a profit. Sometimes doing
their collecting, their goal isn’t necessarily to
collect on the full balance. They already know
that settlements and negotiating a lower balance
payoff is built in. And that’s not always the case
with a common debt collector, or your bank who’s trying to get
you to pay the full balance from the very first effort to
try to turn your account around. Or, once you’re with an outside
third party debt collection agency that, say, works for your
credit card bank, their first demands could be, hey, give us
all the money, pay us in full. Whereas, a debt buyer
might start of with, your first interaction could be, hey,
we’re offering you a discount. Well, we’re willing
to accept less. They’re opener. So, just that alone is
a difference maker. There’s some attributes
to a debt buyer, and it will depend on the debt
buyer that can change, depending on what kind
of debt they bought. And or how old the debt
is when they buy it So, let me break that down. When, and I’m going to
stick to credit cards here. When your bank sells a bad debt,
one that hasn’t been paid, and usually they’re going to
do that no earlier than, say, six months of non-payment. So, after they charge it off for
accounting purposes, they’re going to bundle
it up and sell it off. If they sell that off, it’s worth more to a debt
buyer because it’s recent. And, the debt buyer
might try and work those a little
differently then say, debts that were sold a year
after payment stopped. Or 18 months, or 24 months,
or indefinitely. They’re going to have
a different attitude if they bought the debt after it hasn’t
been paid for, say, three years. Okay? Because the longer
a debt has gone unpaid, statistically they know the less
likely they’re going to be able to collect on the bulk
of that debt, or that they’re going to be able to
collect as much on each account. So, you tend to see
the purchase prices much lower. I’ve seen prices as high as
18 cents on the dollar for fresh charge off
debt years back, and I’ve seen accounts
get purchased for less than a penny on the dollar,
and those variables apply. How old it is and everything, who they buying
it from, types of debts. So, when a debt buyer is
just getting your account, you need to factor in sometimes,
not all the time, how old that debt is, into
how you target negotiating or resolving the account if
you are even trying to. Because a lot of folks
watching this video might be looking up information
about debt buyers because once appearing on your credit report. And you’re not even sure why,
or who they are. It’s possible, and actually highly likely that it’s
related to an account that went unpaid, you just don’t
recognize the name. It could’ve been an account
sold by a credit card bank, a repossession on
an auto loan that you turned in because you couldn’t
afford the car anymore. Medical debt actually
can be purchased. Debt collectors,
when they pick up accounts, sometimes won’t even appear
on your credit report. It’s the original creditor. So, sticking with the credit
card theme again, let’s say Capital One charges off
an account and places it with a third party collection agency,
Capital One still owns the debt. They’re just sending it out for
a collection agency to try and get you to pay through
calling you and writing to you,
versus when they sell it off, then Capital One is
still going to appear on your credit report as an unpaid
collection account charged off. But once they sell it, it’s going to have
a zero balance on it. So, the debt buyer may or
may not show up right away, but the debt collector
probably won’t. So, Capital One is reporting, the third party
collection agency isn’t. You may not see a collector show
up on your credit report if you can resolve the debt
with your original creditor. Then you’ll only have to
deal with one bad entry. Whereas, if you have
the bank’s bad entry, and a debt buyer picks it up and
puts it on your credit report, you’re now dealing
with two bad entries. And let me be clear here
about credit reporting. I’m a huge fan of trying
to negotiate the lowest possible payoff you
can to save money, but do not make your credit, or
how they’re going to update your credit report part
of your dialogue. The reason is that you’re tipping them
off that you have a goal. You shouldn’t because a debt
buyer, who’s on your credit report has a liability,
they have an obligation. They have to report, or update,
your credit report with current, accurate, up-to-date
information, and once you resolve to that, you settle it with them, they
have a requirement to do that. So, it’s going to show up as
resolved, or zero balance owed. And that’s often all you’re
going to be able to negotiate if you drop that into
the conversation anyway. So, I suggest skip it. There is no such pay for
delete, often with debt buyers, they’re not going to go there. Most of the large ones won’t
even entertain that thought. And keep that off
of the table and let it happen, because of the
fact that you resolved a debt, you settled it, because it will. And if it doesn’t, it’s real,
real easy to fix because of course you’re going
to get documentation. I always recommend that
you not pay a penny towards a collection account, unless you have everything
documented up front first. So, some of the other ways
that debt buyers differ is that they may not be collecting
their own debt, okay? Two large debt buyers in
the United States currently at the time in recording this video are Portfolio Recovery
Associates and Midland Funding. When those debt buyers are
involved in collecting from you, they’re usually using their
own internal resources. They have their own
collection floors. Actually, they have some in
country and out of country. Whereas say,
somebody like LVNV Funding, which is part of Resurgent or Sherman Acquisitions,
they purchase up debt and they send it out to outside
third-party debt collectors. So, it’s sometimes
name recognition is impossible, right? So, you see all NB Funding
on your credit report, but you’re hearing from Allied
Interstate trying to collect on the [INAUDIBLE], and you’re
like, well, who are these guys? And how are they connected to
these guys on my credit report? And who is [INAUDIBLE]
tied to over here? Having purchased my old Citibank
account or something like that. So, it is kind of a thing where
you have to follow the rabbit trail and
know some of the names. We cover a lot of the debt
buyers, the big ones, anyway, and dedicated videos
here on our YouTube channel. I cover most every significantly sized debt
collector and debt buyer. On the consumer website, so you can do a search there,
as well, and we have ongoing discussions. The comments are open here. We answer all of the comments
on our YouTube channel. So, if you’re dealing
with a debt buyer, and you’re not sure what your
next steps should be, what your targets should be
in negotiating with them, or you’re having trouble connecting
the dots with all of this stuff that happened on
your credit report. And that’s your focus and
your goal, but we can help you. We know who all
the major players are and how sometimes these things
connect to each other. So, post a little bit more about
your situation in the comments below, and I’ll be able
to answer that for you. I’m going to have more
videos coming up on the debt buying topic. I have one coming up I just
did one for Midland funding. The largest debt buyer
in the country, and I have another one coming up for
portfolio recovery. And I’ll start to target more
and more of the debt buyers in upcoming videos, so be sure and
subscribe and get those updates. Talk to you on the next video. [MUSIC]

24 comments on “Debt Buyers: Why Purchasing Debt for Pennies on the Dollar Matters”

  1. Gavin Palace says:

    Do you happen to know I C system?

  2. TheBossGOD 1 says:

    Do i need a credit card to buy debt

  3. CrimsonT1de says:

    How does the 'market for purchasing debt' work? Typical supply/demand?
    College sophomore here trying to learn.

  4. Soular says:

    how to start a business in that field?

  5. Atom Bomb says:

    I am a junior in high school doing a project and I'm just wondering if I could ask you a few questions about debt buying?

  6. Tom Sheff says:

    I have several questions: I am under the impression that once you buy debt, you are allowed to charge interest. Does the interest rate differ from state to state? I am not a lawyer, but I do know in th4e legal profession the interest varies from state to state. Also, after buying debt is it worth it to try to collect on the easy accounts by sending an introduction letter or would you give the entire portfolio over to the collection agency?

  7. Tammay Morton says:

    Looking to start a debt buying business. Thank you, this is good info. How do I start?

  8. Richard Dobson says:

    Is enhanced recovery debt buyer or debt collector

  9. Rena Brown says:

    how can I go about finding a good debt broker to purchase from

  10. Al May says:

    how do I become a debt buyer and can I buy my family and friends debts for pennies on the dollar and give them a major discount?

  11. Trihard 420 says:

    Do I have to be a U.S citizen to be involved or do certain states allow foreigners from E.U countries ?

  12. Anita Wienke says:

    How much could I expect Chase to reduce debt on (2) cc debts, 5K, 9K? Also, how much could I expect Arizona Federal Credit Union on (1) cc debt 20K? Also, how much could I expect with Hughes Fed Cred. Union on (1) cc debt 7.5K? Lastly, how much could I expect in reduction with Citi Card on 4K debt?

  13. qazzy says:

    do debt buyers buy debts or accounts or are they the same?

  14. Cameron Johnson says:

    Wonder how much capital do you need to get started in this business

  15. Justin Abate says:

    What a shitty feeling it is to harass people and sending them to jail because of contempt of court

  16. Andre Artillery says:

    is this still legal?

  17. GASTRO GAMING says:

    What if you buy your own debt

  18. Sal Livreri says:

    Great video. Is there a way to get started small? Maybe with up to 10,000 in capital? And in one state only? My state does not require a license.

  19. ennui blue says:

    I gotta ask, why is it desirable to settle debt for pennies on the dollar to a third party but not to the person who owes it. it's the same amount either way no? just the 'punishment' factor is the only real reason I can see

  20. Jupiter Eye says:

    Can you target a specific debt? Say, you know some company or a person being in debt and have successfully avoiding payments, and you think you can deal with it… can you search and buy that specific debt? Or will the be sold as a bulk or without any details?

  21. michael smith says:

    How can people purchase someone else's debt from a debt collector?

  22. Danny H says:

    Hi Michael — Do PRA, Midland, and Cavalry all utilize outside legal offices for lawsuits? Or do any of them have their own in-house legal departments instead?

  23. kisha Navarre says:

    is it difficult to start a business like this? Because I was looking into this a while about it was unable to find any information pertaining to it

  24. Danielle correia says:

    Hi I’m in ar and credit and collections I want to become debt buying business where do I start

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