I reckon it is less than 10% of the debts value paid. More like between 5 to 10%.

Remember the Banks create these debt obligations out of thin air. It is not as if they only lend out of savers money they hold. The Banks hold onto the non performing debts for a relevant period, because no doubt they have to do so, as they have requirements to meet. E.g accounting/regulatory standards and any Insurance. The debts then disappear through DCA's who buy them via some offshore arrangement.

When you read that a Debt Buyer has bought £500 million of X Banks debts, it is probably through an account held in the Channel Islsnds, with a foreign investor behind the Debt Buyer. Given that there is an estimated $10 to $40 trillion US Dollars held in tax havens, with a fair amount of this being from unknown sources, there is quite a lot of money to be risked in buying debts. If they lose a bit, it might well be less than they earned through escaping paying tax.

Hi unclebulgaria,

When I first got into financial difficulties, due to ill health, I remember someone told me to go through the credit card accounts to see how much money I had actually borrowed purchasing goods, etc. (Up until that point of ill health I had kept the balance of the card as close to zero as I could). Then calculate how much money I had paid over the period of the Credit Card.

So, SAR off to the bank and eventually I got the info. £3,819.84 goods/services bought. £5,082.11 repaid by me over that period of time. The rest was usury interest rates (talk about Wonga); penalty charges and other charges even the bank couldn't explain. Total still remaining to pay (according to bank) £10,745.38 So, the total bill for borrowing £3,819.84 came to £15,827.49. Of course that is mainly due to compound interest and charges.

Of course when I first became ill I thought (and was assured by Drs) that this would only be temporary. Alas, it wasn't to be, but I thought I only needed to borrow money until I got better. Up until that point I was an exemplary, careful borrower. So it is very easy to slip into a spiral of debt without being reckless.

imo, there's no prob with legit debt 'avoidance'. just like tax avoidance isn't illegal (even 'royalty' do tax avoidance apparently).

before banks etc have a go at debtors re, they should look further at themselves (deliberate misselling, Libor, money mkt/rate fixing, tax avoidance, dirty laundry, bailouts, debt sales, dca's, etc. all proven. and that's prob just the surface as has been posted)

but, alas, they pull the strings, on behalf of their governors.

royalty dont do tax avoidance becasue they dont have to pay any but do so voluntarily. investing abroad is not tax avoidance per se, it is just investing abroad. If you buy shares in many companies you are doing the same, banks do it and so on.

everone avoids tax, you use your persoanl allowance given to you by HMRC dont you? It is not compulsory to take it, likewise ISA allowances, expemptions for capital gains tax when selling your house, inheriting your grannys clock etc. No one forces people to accept these tax avoiding allowances. You can also register for VAT so you pay it on things that dont normally attract VAT but why on earth would you?

A bit more on the Cabot float in todays Times business section, In the penultimate paragraph I'm sure it should read that Cabot estimate their equity at 5x what other traders think, as was in the Times a few days ago.

Not going as well for them as expected.

cabot float.pdf

royalty dont do tax avoidance becasue they dont have to pay any but do so voluntarily. investing abroad is not tax avoidance per se, it is just investing abroad. If you buy shares in many companies you are doing the same, banks do it and so on.

everone avoids tax, you use your persoanl allowance given to you by HMRC dont you? It is not compulsory to take it, likewise ISA allowances, expemptions for capital gains tax when selling your house, inheriting your grannys clock etc. No one forces people to accept these tax avoiding allowances. You can also register for VAT so you pay it on things that dont normally attract VAT but why on earth would you?

quite. 'tax avoidance isn't illegal'!

i don't see what your point is to me, if that's what it was meant to be.

re my bit about 'royalty' in brackets, it was just that; a bit of 'theoritical' rhetoric with 'apparently'. (maybe i shld've put 'may' do'...)

one for eg

http://uk.businessinsider.com/paradise-papers-explainer-queen-exempt-tax-2017-11

just heard this from someone else.

cabot withdraw.pdf

Encore Capital Group which owns the subsidiary Cabot says this about itself today!!

Encore Capital Group is an international specialty finance company that provides debt recovery solutions and other related services for consumers across a broad range of financial assets. Through its subsidiaries around the globe, Encore purchases portfolios of consumer receivables from major banks and credit unions.

Encore partners with individuals as they repay their debt obligations, helping them on the road to financial recovery and ultimately improving their economic well-being.

Really, ... improving their economic well-being...... So, that's what the threatograms are for, improving their economic well-being.

So Cabot not trying to float after all.

Seems to me that investors have found out that there might be risk they don't want to take.

The debt business is more suited to private equity, where they invest ln companies that buy debts that have a chance of recovering enough to be profitable. A person buying shares would want to know exactly what quality of debts a company has on its accounts and what debts it will purchase. It is not the same as buying shares in say a supermarket or oil company, where a lot of information about them would already be public knowledge.

In todays Times with their analysis:-

Britain’s biggest debt collector has pulled its plans for a London flotation, blaming poor and volatile market conditions amid claims it was overvalued.

 

In what would have been one of the market’s biggest listings of the year, Cabot Credit Management had hoped to complete the pricing of its shares this week. Yesterday it said that moving forward with the initial public offering “would not be in the best interest of the company or its shareholders”.

 

Cabot buys debt owed by consumers who, for example, cannot pay their mobile or credit card bills from banks at a discount and then seeks to collect the outstanding payments. It had intended to raise £195 million through the flotation, which its private equity owners had hoped would value the company at about £1 billion.

 

 

However, market sources said that it had become clear within the last 24 to 48 hours that Cabot would not be able to sell the shares, with only about 40-50 per cent of the book covered by orders at the lower end of the £830 million and £981 million pricing range.

 

The Times understands that a number of institutions had declined to buy any shares or had sought to buy a smaller quantity, spooked by concerns about the health of the UK consumer market and wider market volatility.

 

One trader said: “Everyone we went to see at the moment is telling us ‘I don’t like buying UK consumer stuff right now’. I don’t like the headlines [on consumer debt] and we own a bunch of Arrow Global right now anyway.”

 

Shares in Arrow Global, the closest listed peer to Cabot, have fallen 14 per cent over five sessions of trading and one fund manager warned this week of a “lack of momentum”. Those who believed that the £830 million bottom end of Cabot’s range “looked OK” were “surprised by how badly Arrow is doing”, the source said.

 

The cost of credit protection for Lowell, another unlisted debt collector, has risen 30 per cent in the past two days as concerns about the long-term health of the sector has risen.

 

The Times reported earlier this week that questions were being raised about Cabot’s estimated £1 billion value. Critics claimed that Cabot’s costs of securing its “estimated remaining collections” from defaulted consumers could be much higher than it anticipated meaning its collections could be much lower in the coming years.

 

Hedge funds, including some which are already shorting the shares of Arrow Global and Intrum Justitia, a European listed debt collector, suggested that Cabot’s equity could be worth only as much as £200 million.

 

Ken Stannard, chief executive of Cabot, said: “The high level of engagement and interest that we received from a wide array of investors was very encouraging but the timing has been unfortunate with respect to IPO market conditions.”

 

Cabot is owned by JC Flowers, the US private equity firm, and Encore Capital Group, a debt management and recovery business that is quoted on Nasdaq and whose shares fell 10 per cent in early trading on the news.

 

Ashish Masih, Encore’s president and chief executive, indicated last night that Cabot may still be listed in future.

 

Analysis

 

Debt collectors put on notice as Cabot float sinks

 

It would appear as if, for now, London’s stock market is only big enough for one debt collector — and it isn’t Cabot Credit Management (Deirdre Hipwell and Callum Jones write). The plans of Britain’s largest collector to float were dashed after a combination of market turbulence, concerns over the proposed valuation and the volatility of Arrow Global, the only London-listed peer, hit demand for its shares.

 

Cabot’s failed £1 billion float also comes amid a period of uncertainty where Arqiva, the mobile mast company, had to pull its float recently and Bakkavor, the food group, only succeeded in listing after dropping the asking price to 180p a share, from an earlier guidance of 195p to 235p.

 

One equity capital markets expert said Cabot had clearly been hit by “a bit of volatility, plus downward pressure on valuations, and this is a sector which also struggles on the ethical side too [with some investors] — I would say it was a combination of all three factors”.

 

Cabot, which is owned by JC Flowers and Encore Capital Group, has indicated that it could look to list again but its failed float and declining sentiment about debt collectors could raise wider questions about the long-term health of the sector.

 

Specialist investors have been warning of a bubble in the market for the debts of poorer borrowers, pointing out that in the past five years €14 billion has been raised through the European public debt markets to finance the purchase of non-performing loans. Critics say that if it becomes harder, and more expensive, for debt collectors to collect loans then servicing and refinancing their own debt piles could become extremely difficult. This could be even more pronounced if collectors’ access to Europe’s high yield debt market is restricted or cut off.

 

One hedge fund investor said: “Recent figures showed that 50 per cent of UK adults could not absorb an increase in costs of £100 a week, [indicating] that if there is a slowdown from Brexit it could become very hard to collect.”

 

Cabot has a debt pile of £1.1 billion but no debt that matures before 2020. Another market source said: “If Cabot can’t IPO, far more indebted debt collectors will become zombies for their private equity owners.”

Re: last sentence - We are now going to be chased by zombies!

How about "The Walking Debt Collectors". I think I'll sell the idea to Netfilx.

Another article doing the rounds today:

Two million Brits struggling with debt have credit limit raised by card companies without asking for it

Citizens Advice figures show unscrupulous firms are lending too freely and putting individuals at risk as a third of people already struggling financially were given higher credit limits

Unscrupulous credit card firms are pushing thousands of pounds worth of extra credit onto millions of people who can’t afford to pay, a debt charity has warned.

Six million people had the credit limited increased on their card last year - yet they didn’t ask for an increase.

Citizens Advice figures show card companies are lending too freely and putting individuals at risk as a third of people already struggling financially were given higher credit limits.

Over the past year 8.4million card holders had credit limits increased, but just one in four actually asked for it.

Average increases were £1,481 and one in ten were £3,000 or more.

Dawn, 53 knows the financial heartache unsolicited credit limit increases can cause. She has ended up in a debt spiral unable to pay her credit card bill.

Dawn, from Blackburn in Lancashire, has arthritis in her back and had to give up work. She relies on employment and support allowance. She was approached on the street and offered a credit card with a £500 limit.

She had never had a card and didn’t want to turn the offer down as the people were really kind to her. Before she had reached the £500 credit limit it was extended to £1,000. Then without any requests from Dawn it rose to £3,500.

Dawn said: “It was all good at first but the more I spent the more the interest went up and the higher the repayments. I used the card for unexpected bills such as a big vet bill for my cat. Then I spent too much on it over Christmas.

“It’s too easy to spend on plastic, it’s not like handing over cash. I kept thinking I’ll get on top of it in the New Year. But then it was too late.”

Dawn was paying her credit card bill, just the minimum repayment each month, then having to use the card for essential bills as she had no money left.

“I’ve been a fool and now can’t afford the repayments. I know it’s partly my fault but I didn’t really understand how credit cards worked. When you are struggling on a low income and someone offers you credit you will use it when you’re desperate.

“I spend all of my time worrying about this. I’m scared to open letters or answer phone calls and haven’t had a proper night’s sleep for months.”

Citizens Advice wants the Chancellor to announce a ban on unsolicited credit limit increases in his Budget statement next week, to protect vulnerable people like Dawn.

Gillian Guy, chief executive of Citizens Advice, said: “It’s clear that credit card companies are contributing to the rise in consumer debt.

“Rather than credit card holders seeking to take on more debts, lenders are actively pushing it on people without enough consideration as to who can afford to pay and who can’t.”

City watchdog, the Financial Conduct Authority has carried out a study into the credit card market and proposed new rules. These include greater control over credit limits.

he FCA wants new credit card customers to be given the choice on whether to make firms obtain consent for each unsolicited credit increase. And it wants existing card holders to have a straightforward way to decline increases or choose how they will be offered in future.

Richard Koch, Head of Cards at UK Finance said: “Credit card providers are completely committed to responsible lending and the industry has come together to voluntarily agree new protocols to ask customers whether they would prefer to opt-out or opt-in for any credit limit increase offers.

“Furthermore, the customers who the Financial Conduct Authority and Citizens Advice are most concerned about will be excluded from receiving any such offers.

“The regulator has confirmed that it is satisfied that the proposal relating to unsolicited credit limit increases achieves its objectives in an effective and timely manner.”

Just hope Dawn knows about CAG.

Hi, Ive just been trawling thruogh the tinternet with a computer savvy mate of mine (ironically he works for a major bank) and we eventually found a forum for those people who work in the Debt collection industry ( I don't know how he got into it). I've downloaded the entire forum just in case I can't get back onto it.

1 thread of particular interest was on how employees could set up their own debt collection business. Most of the advice was don't do it. But a lot of it was about how the industry works.What you pay for the portfolio (apparently 6p in the £).

They also mentioned "churning" quite a few times. This is where one DCA will sell to another, then to another, until it comes back to the original DCA. A bit like pass the parcel. But it is a business model "churning" I don't know why? Does anyone know what IRR and NPV are?

Here's 1 post from someone inside the industry:

Hi Folks,

 

Its interesting to go through this piece with so many varied opinions and thoughts. I have been in the collection industry for the past 4 years and have worked closely with companies servicing contingent consumer debt,along with companies servicing purchased consumer debt.

 

I also agree that there are a lot of big established players in this highly regulated sector of business.Its getting difficult day by day to collect debt,especially when the debtors are becoming more and more aware of the ways to not pay their debts.

 

However for any small/new entrant there still is opportunity to make money if you become a bit innovative within the compliance framework.

Here is a real life example from a purchased consumer debt, this is based on the overall results of the portfolio which is unworkable now,due to it being statute barred.

 

Total accounts bought were 210K, in 2005.

Contact established on 140K accounts in the last 8 years.

Purchase value was 6P to Pound.

Monies paid by 80K accounts worth 75 millions.

Rest of the accounts with contact,but no payments were 60K. Imagine if the lender could have just closed these 60K accounts for just £100 each,he could have made an extra 6 millions.

However since most of the industry doesnt know the concept of IRR and NPV, they would find it difficult to close the accounts for lower value settlements.

The phone collectors are not trained on NPV or IRR calculations. In most of the cases, each account gets the similar treatment based on a similar logic.Which isnt correct, as you have to look at the portfolio from a financial perspective.

Here is the second aspect of those 60K accounts,which had contact but didnt pay anything...now most of complaints to the regulators came from this lot of customers. Which could have easily been avoided.

 

So the summary is that with a little bit of intelligence you stand a chance to get around 3X to 4X returns on your purchase value in 5 years time.

 

The returns will also depend on the type of data enhancement decisions which you will make. Analytic plays a major role as well. Creating a financial profile of your portfolio based on information available from credit reference bodies goes a long way in making informed decisions when negotiating.

 

Feel free to get in touch for any further analysis or input.

 

Hi Sidley

Whats the site?

Net Present Value and Internal Rate of Return.

https://www.propertymetrics.com/blog/2013/06/28/npv-vs-irr/

Andy

Thanks Andyorch,

I knew someone on this site would know.

Yes there were links to other sites, but this one describes the type of *&^%$£" they have to deal with.

We categorise them

Willing & able - yes they do exist

Willing & unable - pressure here. Get them to borrow of friends or bank of mum&dad.

Unwilling & able - courts, ccjs threat of homelessness etc.

Unwilling& unable - waste of time.

Which was also mentioned in the other website I've just discovered.

I don't know whether it's a mirror site, but this one seems to have more data anyway.

churning in stockbroking is buying and selling on behalf of a client just to earn your trading commission. As the client is paying you it doesnt matter whether they make or lose money