Negative equity - hounded for 13 years

[Eduin]

...they now own the debt they will have to tell you and as Alan says the price they pay for it is about 10- 15% which gives you a much stronger negotiating position. They won't settle for 10 or 15% but anything over that is a bonus so take stock if that's the case and come back here for advice. ...

 

Try 2 to 3%. Possibly less. And no they won't accept close to that because they need to cover the cost of purchasing the 95% that will never pay with the 5% that will. Basic maths will tell you that their profit position on individual debts is roughly 20 times the cost (assuming 5% will pay which is not unreasonable but *can* be optomistic) - i.e. 40% if they pay 2% to 60% if they pay 3%. Often bought debt on old accounts will change hands for fractions of 1% if it is old enough. Neg Equity is considered junk debt as there is little likelihood that a successful trace will result in finding a homeowner (the best way of actually get money out of a debtor is when they have an asset) as the repossessed seldom get back on the housing ladder.

 

Regards,

Eduin

[Eduin]

Eduin - do you know something I dont about these debt purchases? between 7 and 12% was the figure I was given and that was for the likes of Cabot buying old credit card debt. for the debt to be sold for so little it would have to be pretty old and well passed around the market place surely? I can't imagine MarianG's debt being that old from what she says. She'll get a flat refusal in those kind of figures. Still we learn something everytime someone comes into the forum with experiences and I'm still learning! Thanks.

 

I'm a debt collector.

 

You're right about the age of the debt being relavent to the price paid but the age is only one of the factors in debt pricing. Basically once an account has defaulted, you begin the filtering process. The most likely to pay should always be picked up by the first stage of collections which will be (definately for a large financial enterprise like a bank or finance co) be internal.

 

By the time debt gets to the "Prime" stage (first placement with a collection agency) you are looking at an absolute maximum of 15% recovery (and this varies greatly with the business cycle of the economy) and of that 15% only a proportion will appear "immediately" much will be paid over time. Debt purchase companies need a margin, so they aren't going to pay more than they can collect for a batch of debt, they will also look for a decent return. Again any large financial company will always "place" Prime debt with a DCA (Debt Collection Agency) where the DCA gets a cut, its more profitable than selling at this stage.

 

At the Secondary stage where obviously the likelihood of getting payment has fallen again (well under 10% by now) a lot of the big banks will sell rather than do a secondary placement. The banks are smart, they know that Debt Collection is a competitive market, they'll farm out debt as "Prime" more than once in many cases and the DCA will lap it up because they don't have any power over their client. So even if it is classed as secondary for pricing chances are its already been to two DCAs, possibly an "internal DCA" (a department of the bank using an assumed name) and first pass internal recoveries (usually called "account correction" or "customer support" rather than collections).

 

The pricing is very complex. It will depend on the risk profile of the acceptance (credit score) of applicants to the debt product, the likelihood of the debtors still being solvent, having assets (like houses) along with the age. When you actually take all the factors into account - gone aways, untraceables, bankrupts, asset free, nowadays people using the Banking Code and Debt Management Companies as a shield, the payment rate is ridiculously low and it is very hard to actually enforce debt (I often wonder why anyone pays unsecured debt - ever).

 

As I said, for post-repossession formerly secured loans the status will be junk. Slightly better if it were mortgage debt than second secured loan debt but still not good given that the debtors have already most likely lost all assets and the only compulsion to pay is the "honour" of the debtor which these days is not very high. Fractions of 1% paid for the debt will not be uncommon.

 

Regards,

Eduin