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 a profit is on the purchase. So, they have to buy this bulk amount of unpaid debts at a good enough price, and then be able to collect 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 are 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 the money, pay us in full.
Whereas a debt buyer might start off with, your first interaction could be, hey, we’re offering you a discount. Well, we’re willing to accept less. They’re the opener. So, just that alone is a difference maker. There are some attributes of 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 than 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 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.