DCAs and Interest Rates

[blackrain]

Hi, if this sounds naive then sorry but when a debt is passed to a DCA do they carry on adding interest? Or do they make their money by buying the debt cheap and then adding unlawful charges for letters etc?

 

I did look at some threads but didn't see Interest Rates mentioned anywhere.

[andrew1]

Now, I'm not totally sure, but I think you'll find some DCA's charge interest if you do not keep to an arrangement. Cabot tried this on me @12%. Yes they do buy them cheap from the banks etc. but do not let this cloud your mind. The selling of the debt is a commercial decision undertaken by the bank, what the DCA pay for it is, for all tense and purposes, non of our business ( I am not a fan of DCA's). If you were still paying the bank that equation would not come into it - so forget it for the time being. This knowledge that they generally pay somewhere between 7 & 12% of the face value CAN be useful if you want to do a full and final settlement deal on the debt AND ONLY if you KNOW the debt has been purchased by the DCA. Many debts are just passed to the DCA for collection as a service for the bank and not purchased so the % bit doesn't come into it. Although, if you have the cash you might be able to negotiate a reduced amount it certainly won't be anything like that which it might be if the DCA had owned the debt as the debt still belongs with the bank. So, clarify who owns the debt first.

 

Generally, the terms of the contract you had with the bank actually terminate once the debt is sold and a new one effectively starts with the DCA from what I can understand from other posters who have some good knowledge of this, but most dca's do not charge interest and are trying it on if they do unless you do not come to an agreement with them. My argument on this interest follows your point about the the price paid for the debt if indeed the debt is sold.

 

The dca will charge 12% on the full amount of face value when actually they have not financed the full amount, so how can they charge it? - would it be deemed a penalty? I think you can talk your way out of the interest part of a dca bill.

 

Hope that helps. I'd cca any DCA and make sure they have all the supporting documents before you pay anything as most of them don't have the proper paperwork to chase you anyway.