Hacker News Reader

Comment by tptacek | Hacker News Reader

This is currently, and for obvious reasons, trending towards a thread about how evil the debt collection industry is. That's a shame, because there's a lot of interesting stuff to learn from the mechanics of the debt collection business, and it's stuff you can put to use to protect yourself (and others) from its worst abuses. There are "is" arguments and there are "oughts". We probably all agree on the "oughts", at least for the high-order bits of it, but isn't there some interesting "is" stuff to talk about?

I'd read this stuff the same way I'd read a HOWTO posted on a carder forum. We probably wouldn't waste our time with a huge thread about how evil carding is; we'd read it for interest, to see how a distributed criminal conspiracy functioned. We should try that here too.

View on HN

I would be interested if they at least said "Yeah, we're shitbags, but that's just how it is, and someone's gotta collect delinquent debt". What I'm not okay with is putting in shit like this:

> The Debt Buying and Debt Collection industries can be a very rewarding career if it's right for you. It is also a risky business to be in and has a somewhat negative connotation among some groups because of a few people/companies that have exploited the industries for personal gain or because of a general lack of understanding of the laws or regulations in place for consumer protection. Be mindful of who you deal with and always practice honest, legal and ethical business to help prevent any further negative stereotypes from being cast over this industry.

It's not a negative stereotype, and it's not because of a "few people". It's the facts. Don't pretend like you're doing something noble here.

I certainly wouldn't call it noble, but neither are 95% of other professions.

If you say you'll pay a debt, you should pay it. A necessary and IMO objectively good consequence of that is if you try to shirk that responsibility, someone somewhere is going to try to find you and try to collect. That doesn't by definition make anyone (including the person with delinquent debt) a bad person.

I would agree with you, except that people who sell debt at these crazy low rates are doing so because the person with delinquent debt is so destitute they've given up trying to collect. They sell to people who will go to every single length allowed by the law to harass people with absolutely nothing to their name until they squeeze the last bit of water from the stone of poverty.

This debt doesn't come from people like you and me. They come from people who literally don't understand what debt is and have been fooled into a life of poverty. That's who's being targeted here.

Removing the ability to effectively service non-performing debt would simply drive up the cost of borrowing for people that need it. Debt collectors are a necessary evil...

> This debt doesn't come from people like you and me. They come from people who literally don't understand what debt is and have been fooled into a life of poverty. That's who's being targeted here.

Exactly - the problem isn't debt collectors, its predatory lending.

Recourse debt and its consequences have been a disaster.

We can do better but there’s not much will.

Is there anything inherently shitbag about collecting debts? As long as you’re professional, follow the regulations and treat the debtor fairly, I’m not sure what the problem is. The debtor presumably agreed to take on the debt and still owes the money until either it’s discharged or they’ve paid what they owe.

There are obviously a load of shitbags in the debt collection industry, but the only way to change that is for non-shitbags to get into the industry and replace them.

> non-shitbags to get into the industry and replace them

I don't think this really works in this case. Much of the debt being purchased by the shitbags is unlikely to be affordable by the debtor and the collector usually ends up unsympathetically ignoring the financial situation of the debtor to shotgun-harass (contact 20 people and hope 2 answer) them in an effort to make a profit. The non-shitbags realize that this is the only winning strategy and choose to do something else.

>Is there anything inherently shitbag about collecting debts?

What's practically involved in collecting debt? I don't actually know.

Lots of sending out letters and making phone calls. I spent a lot of time and energy trying to automate the process but the industry refuses to modernize.

>Lots of sending out letters and making phone calls.

Can you elaborate? Who are these letters to? What do they contain? What happens if someone doesn't pay after you serve notice? What's the whole process like?

If no letter has been sent about the debt in 2 or 3 years, the owner of the debt loses the right to collect the debt.

(I can’t remember exact duration- probably depends on jurisdiction).

A debt collector who exclusively purchases corporate debt to collect isn't the person who's calling my parents to harass them about a surprise medical bill. There may indeed be "a few people" relative to the industry as a whole who are doing the "shitbag" thing.

Funny enough, I wrote about debt collection in an HN comment recently. The most important thing to remember is that if you defaulted on a debt AND that debt has already been sold to a third-party collector, then you actually have NO incentive to pay the debt collector. At that point, the debt has already been written off the creditors books, so not a dime of the payment goes back to them. Further, if the debt resulted in a black mark on your credit history, paying it back will not erase it. Debt collectors cannot "fix" your credit rating.

The only thing that paying a third-party debt collector will do is stop them from calling you. Possibly.

(If a debt collector is hounding you about a debt you never legitimately owed, pretty much every state has a procedure for rectifying that. And the punishment for a collector not cooperating on said rectification is you get to sue them if they don't.)

Also: Everyone (including myself) has been talking about unsecured debt, but it may be worth mentioning secured debt as well. I once had an interest in buying real estate notes (mortgages, essentially). It turns out these are bought and sold for some percentage of face value all the time. The amount of the discount depends on the status of the mortgage payments, the balance of the loan, and the reason for the seller looking to unload it. When buying notes, there are multiple exit strategies but the most profitable one is often to work with the home owner to restructure payments in order to "rehabilitate" the loan. Meaning, the owner gets to stay in their house, possibly with a more favorable payment, and the investor gets to keep a performing note, or sell it to a more conservative investor.

>there's a lot of interesting stuff to learn from the mechanics of the debt collection business

I'm intrigued. Can you elaborate?

It's a legitimate need, it's just a corrupted industry because of misaligned incentives. We need some form of debt collections otherwise credit couldn't exist. The problem is that regulations are absolutely inconsistent and don't incentivize people to operate ethically. It's a regulatory problem.

An interesting fact is that a lot of agencies buy debt for about 1 cent on the dollar and liquidate around 2%. Collecting debt is actually very hard and the success rates are super low.

Presumably if the debt is liquidated at 2%, it doesn't make a material difference in offering credit, since it's pretty much a write-off for the credit-issuing institution anyway, right?

I'm not seeing how the debt collection in this case helps provide more credit for the economy - might as well just write off the non-performing debt altogether.

Sure, but what are some of these "interesting mechanics" you referred to in your earlier post?

Did I say that? I don't recall writing that. It's just credit markets really. Not all that interesting. Most people just don't think about them.

Ok, I had you confused with the person who made the original comment, but you're not really answering the question...

>That's a shame

Is it a shame? Could the guy instead have written an article entitled, "How to Protect Yourself (and Others) From the Worst Abuses of Debt Collectors"?

A thread on Hacker News isn't usually a referendum on the author; it's a discussion in its own right.

I probably have. I've been out of the industry since 2019 and I tend to create a lot of content. Since that is currently how I align I'd be surprised if I haven't done that somewhere.

I don't think its "a shame" at at all. The obvious and most important issue here is that the debt collection industry is evil and immoral. Those "worst abuses" aren't outliers, they're standard practice. "Abuses" are how you make money in that industry.

Reply on news.ycombinator.com