Some interesting points of Debt assignment

[Matt5791]

I thought I would post some observations and interesting points about the assignment of debts.

 

I am sure many on this forum have had debts asigned from the original lender to the sort of companies who specialise in buying debts.

 

Some of the better known names include the likes of Lowell, Capquest, Wescot.

 

Firstly a debt is normally (but not always) asigned following a protracted period of non payment by the borrower, and often after a default notice has been served. It has got to the stage where the original lender just wants to write off a proportion of the debt and wipe their hands of it.

 

Step in Lowell etc. Now a lot of people bemoan the likes of Lowell because often when they buy the debt they take a much more agressive stance to collecting it than the original lender. And yes, I would agree that the likes of Lowell sail pretty close to the wind in terms of how they go about collecting the debts and are pretty unethical to say the least in terms of their business practices.

 

However all that is for another thread.

 

The fact is that the purchase of a debt can put the borrower at a considerable advantage in getting the matter settled and saving a load of cash in the process.

 

Firstly, debts (and in particular credit card debts and bank loans) are notoriously difficult to collect so these companies only ever pay a proportion of the debt to buy it - and rarely more than 50% (don't forget we are talking purely about bad debts here - banks buy and sell loans and mortgages that are not in arreas and good)

 

Thus as the borrower, you are at an advantage to kick off with if you want to make a silly offer to settle the debt which will be accepted.

 

Here is how to work it out. Take a debt of £5000 owing to Bank A. You have defaulted and not paid a penny for months. Maybe you are arguing the validity of the debt or enforceability on some technical issue. Suddenly Lowell or someone comes along and buys the debt.

 

Through a contact I have in the industry who works as an accountant on deals to sell portfolios of debt I can confirm as GUIDELINES (debts are purchased as part of a portfolio and so this can vary) the following as being a way of working out what they may have paid Bank A for your debt.

 

For debts that are disputed, probably genuinely, or maybe time barred (yes they do buy time barred debts in the hope they might make a return) they may pay in the region of 0.15p in the £. So for our £5000 debt they paid £750.

 

For debts that have been long defaulted, but nothing is being paid by the debtor and hasn't paid for ages, they may pay something in the region of 0.20p - 0.30p in the £. So our £5000 debt was bought for £1000 - £1500.

 

For debts where there is a payment of some silly amount (£10 per month or something) by agreement with the original lender, it could be 0.40p in the £ (£2000)

 

Now here is the important bit. These companies are looking for a return, typically in the region of 20% pa on their investment in your debt. This means that the sooner you make an offer to settle a debt after it has been asigned the better.

 

For example, if the £5000 debt has been bought for 0.20p in the £, they will be looking to earn £200 return pa - that's £16 per month. Thus if after 4 months of owning it, the debtor offers £1066, this would be a reasonable offer. Round it up to £1200 or £1300 and they should bite your hand off - that represents a superb return on their investment, but a massive discount on your debt.

 

For good measure you can always stipulate the offer is conditional on any defaults etc. being removed.

[MilkTrayMan]

If a DCA can NOT legally prove that an 'alleged' Debt is owed by a person to the DCA,

why should that person offer to pay ANYTHING to the DCA???!!!...

 

...END OF!!!...IMHO

[diskmandave]

Some very good points there Matt. Thanks very much for taking the time to post them.

 

Good luck & best wishes. Regards, Dave.

[Hippy-chick]

Agreed - I think this post should be up in the DCA forum, which is what I've asked.

[rory32]

Hi Matt I'll move your post to the DCA forum but please be aware that you thread has been discused in far greater detail before as well as the points you have covered.

[rory32]

Thread moved

[Seahorse]

Some reasonable advice. I would, however, take with a pinch of salt the figures mentioned. Up to 50% for a debt? Hardly likely. Around 10% would be closer to the mark IMO. Certainly less than that if there is the slightest doubt about the debts' enforcability.

 

Remember, these companies specialise in analyzing the portfolios they buy. And if I might hazard a guess... the values of many portfolios will have been reduced dramatically as a result of growing consumer awareness in the market. Supply and demand; the DBSG are having kittens at the moment with all these "vigilante debtors" spoiling their cosy little empires, and so they will hardly be likely to offer as much for dodgy portfolios.

 

Just bear that in mind when you are making an offer to these people.

[Hippy-chick]

Well, that's the highest figure mentioned, Seahorse. I thought, looking at the post as a whole, it showed how little debts were bought for.

[Seahorse]

Can you not sleep either HC?

 

Yup, it's a real eye opener when you find out how greedy they actually are. And they have the gall to charge interest on the WHOLE amount too, in some cases. I'm not having that! Unjust enrichment, IMVHO.

[Hippy-chick]

You would not sleep through the storm I have here. Scared!

 

But yes, this gets me. Buy for peanuts, charge the full amount plus extortionate interest.

 

And folk pay!

[Matt5791]

If a DCA can NOT legally prove that an 'alleged' Debt is owed by a person to the DCA,

why should that person offer to pay ANYTHING to the DCA???!!!...

 

...END OF!!!...IMHO

 

Obviously, if the debt can not be proved or enforced for any reason, then the "debtor" nned not consider offering anything.

 

I am talking about the situation where it is going to be difficult to argue the debt and you want to simply close the matter and need an idea of what to offer.

[2Grumpy]

I think that if they have a valid CCA, default notice & assignment note then they would more likely go for a lot more than that. I suspect that they are more likely to discount the dodgy ones

 

Grumpy

[Belaflat]

I am with 2Grumpy.

If a DCA has a fully enforceable debt which can be applied via CCJ and secured with a charging order, then given the nature of their operation and the willingness shown to sail as close to the wind legally, as is possible, it doesnt look good for many and with the consumer getting more savvy and more unenforceable debts being written off, that makes collections on these easy accounts more likely to be vigourously applied.

[ODC]

One thing that puzzles me and no doubt someone here will answer it. When a bank sells a debt they claim tax relief on it. The HMRC effectivly gives the bank money for the debt. The DCA gives the Bank money for the debt. Bank is happy. How can the DCA then proceed to make a huge profit on a debt that the government in the form of HMRC has paid the bank for.

[make them aktiv runners]

One thing that puzzles me and no doubt someone here will answer it. When a bank sells a debt they claim tax relief on it. The HMRC effectivly gives the bank money for the debt. The DCA gives the Bank money for the debt. Bank is happy. How can the DCA then proceed to make a huge profit on a debt that the government in the form of HMRC has paid the bank for.

 

HMRC was one issue RS was going to add to his investigation. I think I read, if anything is paid against the debt then the tax reclaim position has to be corrected. It was posted by one of the mods some time ago (Caro?).

[Quoth]

There are times when I feel sorry for these companies. Take Thames for example, they went to all the effort of buying a portfolio for pittance and then in the middle of it find a load of accounts they somehow link to me. Now of those account some were highly questionable and a cca led to the withdrawal of their claims. But to make it worse for the poor blighters, they had a few that I did owe that they purchased after a ccj had been obtained.

Now I pay them £1 a month per account by cheque, sent to them in an unstamped envelope. So they pay for presenting the cheque and postage. I wonder how much of that £1 a month they actually get?

[Matt5791]

I am with 2Grumpy.

If a DCA has a fully enforceable debt which can be applied via CCJ and secured with a charging order, then given the nature of their operation and the willingness shown to sail as close to the wind legally, as is possible, it doesnt look good for many and with the consumer getting more savvy and more unenforceable debts being written off, that makes collections on these easy accounts more likely to be vigourously applied.

 

I can understand that outlook, but it isn't the case.

 

A very close friend is very heavily involved in this area and deals directly with the boards of the likes of Lowell and Capquest - he even has the personal mobile numbers of the CEO's of these companies.

 

The fact is that they are in business to make a return - if that return is presented to them they will take it.

 

As a recent example, Lowell have been chasing me for £7500. Whilst I had disputed then debt when it belonged to egg, and also since Lowell's purchase, I knew that arguing it was going to be difficult.

 

I offerd £2760, and they accepted. I worked it out on what I suspected they had purchased the debt for, added 20% return, added a bit extra for luck.

 

Faced with getting a healthy return on their investment, or continuing to chase the debt (with all the costs that involves) it is hardly suprising the offer will be taken up.

[Hopeful1]

I think the difficulty faced by many on this site, is that they can't even afford to make a discounted offer. I know i can't!

[Matt5791]

Ok - yes that is an obvious difficulty.

 

As an alternative, you can try offering a payment plan coupled with a reduction - you have to work out how long it will take to pay off the debt on your payment plan (as they want 20% pa) and also whether the payment itself is giving them a return.

 

The difficulty is that they will expect you are not going to stick to the payments - in which case you need to agree a payment you can keep to, stick to it, and then ask for a reduction when you have stuck to it for 12 months and proved youself - mayby ask for a reduction in the overall balance in exchange for an accelerated payment. (in whihc case it would be advisable to offer a little lower than you can afford in the first place so that you have something to give after 12 months.)

[ODC]

Now I pay them £1 a month per account by cheque, sent to them in an unstamped envelope. So they pay for presenting the cheque and postage. I wonder how much of that £1 a month they actually get?

The idiots are losing money because the Post Office charge £1 plus postage to deliver an unstamped letter.

[onecall1]

Matt, I am not sure if you are on their side or just giving them the benefit of the doubt.

 

The fact is that the DCA's prey on the very weak and vulnerable. Very often people get into financial hardship through no fault of their own. In my case an employee embezzled huge amounts of money out of my firm. It has taken 3 years and much hardship to hang onto my home and my sanity!

 

Irresponsible lending is also partly to blame. It is almost as though the lenders want you to default. They are only coming down heavy now and passing debt across because they cannot get away with their extortionate charges anymore.

 

If the banks have cocked up over their CCA's then it is their own greedy faults. They make billions out of the little man. A bank is not even a bank anymore. Years ago it was an institution to look up to. We knew our bank manager and he knew us. Now, no bugger gives a dam!

 

Government and legislation is to blame to allow them to have us over a barrell. Well the little man is fighting back with the little protection we have and they only have themselves to blame.

 

The DCA's should be regulated along with every other financial institution. Some of the postings I have seen here have reduced me to tears. No-one should have their life destroyed over money! Dont feel sorry for them they are leeches.

[Matt5791]

I totall agree with everything you say.

 

All I was trying to highlight was that it is possible to work out the sort of level to pitch an offer of settlement to these people, if it is going to be difficult to argue the debt is unenforceable for some reason.

 

I definitely don't feel sorry for them!! I do however recognise that they are in business to make a profit - people need to remember this when dealing with them as it can be very helpful.

 

As far as I am concerned the banks will get anything they can out of the individuals they deal with, and will sail as close to the wind as possible - that is why I have absolutely no compunction over screwing them back by exploiting any loopholes or non compliance with legislation.

 

As you say, gone are the days of the traditional bank manager who had an authority and who made decisions.

[onecall1]

Apologies if I took your posting out of context.

 

I agree that everyone is in business to make a profit, but the way these guys go about it is criminal in every sense of the word.

 

I think most people want to face up to their responsibilities, but to terrorise and intimidate people when they are at their lowest is dispicable.

Can you imagine contemplating your taking your life because of these b***ards.

 

I pray that the majority of all agreements are unenforceable having been on the receiving end of in excess of 200 telephone calls every day.

[Matt5791]

I woudl strongly advise you write to them to tell them to only deal with you in writing, and then also change you phone number.

 

You must never speak to them on the phone - it's the first rule in debt management!

 

I would also suggest you go through the individual debts, assess whether they are or are not enforceable (use this forum to get help in how to do this) and then negitoate the ones which are likely to be enforceable and dispute the ones that are unenforceable. Don't ignore them.

 

Just remember, with the ones you negotiate, these companies make no money chasing debts - this only costs them - they only make money when they start getting something back by way of a return. Hence why you are in a strong position to negotiate - just don't subscribe to silly requests, and demand that defaults are removed as part of the deal - you can indicaute that if they do not agree then you will argue the debt (even if you know you can't) and they wont want this as this just costs them more money.

[tifo]

I suspect that they are more likely to discount the dodgy ones

 

Grumpy

 

Now then, as i'm getting offers to settle many of my alleged debts from DCAs at 25%, does this mean they are on dodgy ground, especially since they haven't supplied any documents to a CCA request?