I just watched sausage being made

[bigswanging23]

Alright you can thank me later, but I just spent the last hour listening to Asset Acceptance’s 2nd quarter results conference call (don't ask, I am bored waiting for the lady to get home). I think it was Sun Tzu who advised to know your enemy--so in that vein, here ya go.

Knock yourself out if you wanna, but I wouldn't advise it.

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=148416&eventID=1908745

I'll give you the cliff notes.

Even though they aren’t doing that well as a company, they’re practically high-fiving each other over the fact that credit card chare offs have increased each of the last three quarters—nearly 5 percent of all CC consumers get charged off. Some interesting highlights:

-Because of the increased supply of charged off portfolios, AA is snatching them up on the cheap; AA averages paying 3.38 percent of face value of the debt (that is, 3.38 cents on the dollar). And they’re buying them up aggressively.

-Cash collections are down, phone collections are down, but legal collections and portfolio purchasing are way, way up. Doesn't sound like a successful business model to me.

-The new CEO is planning on ramping up legal collections even more.

-Legal collections keep AA profitable

-Not really surprising, but AA has a huge problem with turnover and retention. Even so, they averaged 939 in-house collectors with plans to expand by 500 more within the next 1-2 years. Get excited.

-Each representative collected on average $45,538 in Q2 (that’s north of 180k collected per rep, per year )

-They’re implementing new, more efficient, evil-sounding skip tracing and data mining processes over the next couple of months.

So what to take from this?

They're buying more and more accounts, getting better and better at finding you, and getting more and more litigious.

Bastards.

[LeslieR]

Great summary and good info. for all to have.

[Tazjeepcj7]

Thanks bigswanging23 for listening to all that mess and giving us a summary.

[bigswanging23]

Another thing I found interesting, but forgot to put in the OP was that the stimulus checks caused no significant increase in their collections.

I say bravo, American people .

I'm not advocating not paying your obligations, but I really can't see any reason to ever pay a JDB unless a court orders it.

[Flyingifr]

It's like holding a lifeguard's convention and being glad more people are drowning.

[Robert Nashville/Savannah]

While I detest the “business” junk debt buyers are in and especially detest the practices the engage in to collect; I think it’s in everyone’s best interest to remember that is it debtors who don’t pay their debts, as they promised to do, that is the ultimate cause for the existence of junk debt buyers.

When I hear people say things like “I’ll only pay an OC” I can’t help but wonder why they didn’t pay the OC in the first place???

Likewise, when some say “I’ll never pay a JDB” and concurrently throw around the “pennies on the dollar” mantra as justification for not paying a JDB, I find myself very doubtful that those who say that that would feel any differently even if the JDB had pay 100% of the face value of the debt!

Knowing approximately what a JDB paid for a debt is good information to have when trying to negotiate a settlement (assuming one does actually owe the debt) but let’s not kid ourselves into thinking that anyone is really to blame aside from the face that looks back at us when we look into a mirror.

[Tazjeepcj7]

RN - You must have had a more reasonable JDB to negotiate with that some of us (or maybe you are just a better talker...)

[Debt Guy]

Posts like this can easily mislead. I am not suggesting that is the intent of the OP -- most likely the intent was to inflame passions. But, misconceptions are easily reinforced.

While it is not my intent to defend debt buyers, this thread cries out for an appeal to logic and common sense. And maybe a little tone down of the emotions.

1. JDBs purchase large pools of assets -- usually 10s of thousands at a time.

2. The price they pay is a function of what they think they can collect out of the pool. Their forecast is based on their experience with that particular CC company, the age of the assets, how hard they have been worked, states of residence, the competitive marketplace, etc. Typically, the OC will provide multiple DBs a statistical analysis of the pool to be sold and each debt buyer will submit a bid. High bidder takes the pool.

3. The buyer takes a business risk in the purchase. They put up cash to purchase the assets, pay for the cost of operations to collect, etc. The goal of any business is to make a profit. Otherwise, they will no longer be in business. More than one collection agency or debt buyer has found itself on the shoals of an unworkable business plan. As the OP observed, the challenges are many.

4. They know that an expected percent of the debtors in the pool will die, file bankruptcy, be "unfindable", have no assets or income, etc. The debtors they collect from must carry the freight for the entire business.

As a rule of thumb, if the DB pays 5%, they will collect about 15% on the pool -- 1/3rd goes to pay the purchase price of the pool, 1/3rd goes to pay operating costs (salaries, rent, phones, etc) and 1/3rd goes to other (legal costs, financing costs and profit).

So, logically, if the DB pays 5% they know there is a whole bunch of people they are going to get nothing from; a few they will get a lot from and some in the middle. What they get from any one debtor is not important but they live and die by what they do on the pool. What any one debtor pays has absolutely nothing to do with the allocated cost to purchase that debt -- the DB just does not think that way and they cannot afford to think that way.

DBs are not as profitable as many suspect and the observations of the OP confirm such. If DBs were outrageously profitable, everyone would be in the business. A lot of these companies are public. You can get their financials. You can buy their stock if you think differently.

Now, one can ask if the whole mess is fair. Well, it was fair when the borrower took the money from the original creditor. The borrower agreed to repay the money. Any debt sold by the original creditor to the debt buyer is directly the result of the borrower not keeping their end of the deal. While life can surely dish out harsh and unexpected blows, none of that changes the reality.

Somehow, it seems strange that our anger and resentment of life's travails should be focused on someone who had absolutely nothing to do with the causality. Sounds a lot like shooting the messenger.

One final observation -- debt buyers are moving more and more to the courtroom to collect. As an outside observer, I've noticed this as a growing trend over the past two years. It seems that the trend is accelerating and will likely continue to do so. I don't know where the breaking point is in the legal system -- seems to me collection cases will crowd out the other business of the court until something gives.

Whether court is a good thing or a bad thing I cannot say for sure although I have a hard time thinking it is good for the defendant in the big picture. I will note that the drivers for the change in business model are (1) debtors who are better educated in the ways to frustrate the traditional techniques and efforts of the collector, and (2) the availability of better and better documentation to support discovery in the courtroom.

Of necessity both adversaries are adaptive. Only time will tell if the balance shifts one way or the other. Personally, I continue to hope for a major rewrite of the FDCPA that will clarify outstanding questions and update the Act to recognize a more modern environment. In my mind, a thoughtful rewrite would recognize the legitimate needs of both parties in a far more rational (and hopefully, less frustrating and confrontational) manner.

[Tazjeepcj7]

Excellent Debt Guy - although I understand most debt collection cases are defaults so I don't believe the courts will be overburdened by the increased case load anytime soon. JDB's look at every case as an asset on their balance sheet and each debtor should make decisions on his/her own case just as dispassionately, however hard that may be.

[chrismg]

"The supply side of the business continues to improve as charge-offs rise in response to more difficult economic times. We continue to be opportunistic but selective in our approach to purchasing charged-off debt and quite frankly, we have been looking forward to this type of purchasing environment." - Chairman for Asset

It's great to see that people other than the CEOs of the oil companies and halliburton are enjoying the current financial and economic conditions.

[bigswanging23]

I listened to a conference call and gave a truthful summary.

Quit being a bunch of drama queens.

[chrismg]

I listened to a conference call and gave a truthful summary.

Quit being a bunch of drama queens.

It's an internet discussion board, what do you expect?

[bigswanging23]

I know how many of you (not naming names or anything) like to be the smartest person in the room, but really my reason for posting this is because I thought people might find it interesting--and that is it.

I'm not trying to inflame passions. I gave you a rundown of the facts that I heard.

Listen for yourself.

[Tazjeepcj7]

I appreciated your post and thought the summary of info was interesting as an indication of where the debt buying market is going.

[LeslieR]

LMAO

predictable

[AboveAverage]

I know how many of you (not naming names or anything) like to be the smartest person in the room, but really my reason for posting this is because I thought people might find it interesting--and that is it.

I'm not trying to inflame passions. I gave you a rundown of the facts that I heard.

Listen for yourself.

You are the proverbial smart-a$$, but you are also smart. Take that for what it's worth.

I not only found your post informative, but I did give you rep for it. I also gave Debt Guy rep for his post simply because it was well thought-out and informative. It makes me wish I was never such a scumbag debtor in the first place. But then...I'd have never ended up here. I guess everything has its positives and negatives...

[bigswanging23]

You are the proverbial smart-a$$, but you are also smart. Take that for what it's worth.

Thanks AA.

You're right...on both counts.

[bigswanging23]

this thread cries out for an appeal to logic and common sense. And maybe a little tone down of the emotions.

I somehow missed this gem the first time I read the post.

Seriously?

Thank you for being our rock.

[Robert Nashville/Savannah]

RN - You must have had a more reasonable JDB to negotiate with that some of us (or maybe you are just a better talker...)

I've never had to negotiate with a JDB nor do I have a clue why you apparently thought otherwise.

[swtprncess281]

Great post! I think that information is good to know. I didn't realize how little they paid for bad debts.

Also, IMO, I came here for help cleaning up, repairing, and learning to better manage my credit/debt. Is is the norm for someone to always remind you that its YOUR fault your in this mess. I kinda think we got that part....

[AboveAverage]

Also, IMO, I came here for help cleaning up, repairing, and learning to better manage my credit/debt. Is is the norm for someone to always remind you that its YOUR fault your in this mess. I kinda think we got that part....

Good point swt...

I have seen folks (no one in particular) always asking for how to get out of a debt (legitimate or otherwise) as part of their personal credit repair. If these folks can't look within themselves to figure out why they are in the mess in the first place, then what is the sense in doing credit repair if you are not going to fix the underlying problem that got you there? I won't speak for anyone else, but for me, everyone does deserve a second chance. I'm working on mine now. But second chances does not mean you repeat the stuff you did on your first chance. I guess I just care too much for my fellow man (and woman... )

I personally don't want to see anyone repeat that same pain again. I know it sucked for me...I would not want it sucking for anyone else. It just started to stop sucking but there are still elements in my CRs that prevent me from getting the red carpet rolled out....I'm just getting the used red rug right now....but the red carpet treatment is at least imminent insofar as I'm concerned.

[Robert Nashville/Savannah]

Also, IMO, I came here for help cleaning up, repairing, and learning to better manage my credit/debt. Is is the norm for someone to always remind you that its YOUR fault your in this mess. I kinda think we got that part....

I suppose you are referring to me.

Why do you feel the need to personalize comments not directed to you (or to anyone specifically for that matter)?

The problem is people often don't "get that part"...there are far too many people who seem to want to forget where 98% of personal financial problems actually reside.

"Credit repair" without dealing with the underlying issues is like putting on a $5,000 suit without having taken a bath in weeks; you'll look good (for a while) but that's about it

[swtprncess281]

.....

I know! I went through a really rough spot and I don't ever plan to repeat those mistakes again. I get so motivated listening to everyone here discuss how much better they are doing, or come to the aid of someone who has questions. My only pet peeve is the occasionally "Well technically it's YOUR fault" I think for the most part, the people that are actively participating here are trying to do the right thing. No sense in continuing to tear them down.

[AboveAverage]

My only pet peeve is the occasionally "Well technically it's YOUR fault" I think for the most part, the people that are actively participating here are trying to do the right thing. No sense in continuing to tear them down.

Without tying religion into this, but if our actions that led us here are sins, then we are all sinners.

If someone is living in a glass house wants to throw a stone at you for sinning, you should only need one good throw at one good spot. (And that is directed at NO ONE in particular...)

[swtprncess281]

Without tying religion into this, but if our actions that led us here are sins, then we are all sinners.

If someone is living in a glass house wants to throw a stone at you for sinning, you should only need one good throw at one good spot. (And that is directed at NO ONE in particular...)

True