Inside the Dark, Lucrative World of Consumer Debt Collection
nytimes.com
nytimes.com
If you didn't read it all the way through, do so over lunch or something; it's amazing.
The idea of "millions of dollars" worth of debt being traded for around on thumb drives, and that all those thumb drives really contain are excel spreadsheets is mind boggling. Those people in those spreadsheets are real people, and they're being completely duhumanized.
Also the fact that debt is being purchased for 1/12 of a penny is completely just...unbelievable.
Honestly this whole article reads like some dystopian nightmare. Shady former criminals trading peoples' lives around like it's nothing.
Horrifying.
Even calling people to offer terms isn't profitable at 1/1200th of a $250 AT&T receivable and much of the portfolio is physically incapable of paying the two cents! The collector is hoping to get literally three in a hundred to pick up the phone and take an offer of $150, the bulk of which goes to labor to call them.
Small businesses typically use flat fee collection agencies and rarely charge of the debt like this. Part of the reason is because to a small business charging off $10K in debt is going make them a couple hundred bucks at most.
There is no "little guy" getting stiffed by bad debtors in this story.
About people that should "know better". Sure. Doesn't always happen, and people are not all perfectly rational, highly disclipined game-theoritic individuals. It's easy to preach "personal responsibility" from an ivory tower (and who knows what kind of privileged upbringing or lucky break), but it doesn't make those people less victims. It's like a woman victim of domestic abuse ― she should know better and leave the guy, but that doesn't make him any less of a prick.
if i use a credit card foolishly and put myself into 2500$ debt, and over time receive a number of fees due to my late payments, my 2500$ debt can rise to 5000$ effortlessly,
at this point if i pay the bank 4000$, they made 1500$ off me already, then they decide to sell the remaining 1000$ for 1/12 its worth the original lender has been given 4083$ for an original 2500$ loan, and now the credit adjuster or whoever bought the debt could make 917$ by collecting the 1000$
i'd like to see statistics on how much an original debt was, how much has been paid into it, and how much it sold for
then we can discuss potential for 'total loss'
i wonder if you went to the lender and offered to pay your debt back at 1/12 its cost if they would sell the rights to your own debt to you?
The moral concerns aside... this is the question to "why haven't we replaced excel yet."
The article had me at "stolen".
If you owe a bit of money, some of the dipshits that call you may actually have misappropriated the collection account and are not connected to the original debtor in any way, who did not receive and will not receive a red cent.
This passing of the buck helps to explain why numerous agencies may be involved: people get calls from various toms, dicks and harrys about the same debt.
The fact that debt is being purchased cheaply is totally believable. Because when people don't want to pay, it takes work to extract money from them. Some people really don't want to pay, because they believe they have been wronged. No matter how much effort you sink into it, there won't be any income. Some people will pay the full debt, after a bit of effort. But that effort cuts into the revenue. If it costs $400 worth of effort to collect $1000, then you only collected $600 in reality. There is a very real risk that it may cost $999 to collect $1000, so you're left with a buck. Because of this uncertainty, it makes perfect sense to sell the $1000 debt to someone for a mere $83 and make it their problem. The $83 is a sure thing, and better than nothing, whereas the $1000 debt could well be nothing.
I suspect the crap keeps getting recycled endlessly.
that explains why many years ago some collector hung up on me when I kept on explaining to them that I had lost the bills and if they could resend... they couldn't do that.
Which conversely means that, as a debtor, you can basically convince them you have no money and ignore them, and there's nothing they can do. Any kind of investigation or strong-arming would blow their budget for turning a profit on their debts. It's not like any of the money is actually going to the company you supposedly owe to anyways
It seems that the particular deal you're referring to was a fraudulent transaction. It had been sold (at least) twice, and having paid $41K for $50M worth of debt, the agency lost money on it. It doesn't sound like legitimate deals are offered this cheaply.
However, you are right that insanity runs rampant in the industry, even among the banks themselves. There is an interesting documentary called "Queen of Versailles". In it, time share king David Siegel is shown telling friends at a party that he offered to keep making interest only payments on an $18M debt he owed until the economy improved. The bank said no, and that they were going to auction the debt. He sent a third party under his control to the auction, where he was able to purchase his own entire $18M debt for $3.2M. He concludes the conversation saying "I'm glad they did it, but who the hell makes decisions like that?"
> Will the Rolling Jubilee have to file a 1099-C Cancellation of Debt form with the IRS? No. The Rolling Jubilee will earn no income from the lending of money and is therefore exempt from filing a Form 1099-C under the Internal Revenue Code Section 6050P.
I still prefer this system to debtor's prison. It sucks that good people have bad luck and become vulnerable to things like this. No matter what the rules are, however, somebody will eventually game it.
We're talking about very sensitive info like SSN's, DOB's, home address, work history and so on.
There's nothing shocking about that at all? Honestly, did you read the article?
The lack of regulation is the most surprising thing, and the lack of interest from the US federal government to do much about it is disturbing.
Dodd-Frank changed it all and spawned many other regs + groups
"Passed as a response to the Great Recession, it brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression"
http://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_...
For instance, they buy it for $.05 and settles for whatever the debtor can reasonably pay that covers costs plus a reasonable margin, like 100%. So they buy it at $.05 and let the debtor pay it off for $.10 + the collector's cost.
I'd guess that is something like 25-50% of the value of face value of the debt.
Judging by the value of write off debt (pennies on the dollar) the implicit conversion rate of collecting is probably closer to what you might see on a Facebook advertising campaign (3-5 percent??). To make that work the agencies need to charge close to the original charge off amount.
That is likely close enough.
But then you get burned, because they settle all your debts, just as you could have yourself, and your credit is (even more) toasted, because yes, you'll pay less, but everything on your credit record is marked as 'settled' rather than 'paid in full'.
They have some emotional distance and apathy regarding the negotiation that might help, but there's nothing magical that they do that you yourself could not.
I don't know how legit they really are, but the article sure got my attention!
Within that you conceivably have debts whose collection is perhaps ethical by nature but not ethical in practice. For instance, as I said earlier, collection on bad checks circumvent many normal collection laws, and you can thus have interest rates of 200% or higher. Another example would be Student Loans, which have their own set of ridiculous loopholes that allow the debt to persist past bankruptcy, past retirement, etc. As someone who was still in college myself only a few years ago, the idea of the financial burden imposed on me for the rest of my life simply for doing the thing that society practically strong-armed me into doing seems, to me, ridiculous; for that reason I am hesitant to call any form of Student Debt collection "ethical" simply because the laws which govern it are atrocious.
With that said, I have dealt with many agencies who at least tried to operate on an "ethical" model (usually they collected on medical debt), and they seemed polite and reasonable in their collection efforts. Remember, they're in the business to make money. Some agencies will go for the "Make the debtor's life as miserable as possible to make them pay up" tactic, which includes harassment, lawsuits, garnishments, etc. I deal with them frequently, and I think they're the scum of the Earth (primarily because they talk to me in what I imagine is the same tone as they talk to debtors). Others, however, will simply try to get what they can, and if they CAN'T--i.e. they realize that continuing to call a guy about a debt when he's already stated that he has no job and no savings would be like squeezing blood from a stone--they'll stop wasting their time and move on to an account that would be more profitable.
Much of the work done by agencies these days is not only getting people to pay, but finding out who is more LIKELY to pay so that the agency can focus its efforts accordingly. This analysis might include things like the line of business, their credit score, their location (they usually figure that areas with a higher average income are more likely to pay), etc.
To answer your question succinctly: probably. It would center primarily on whether the percentage of the portfolio that actually pays can sustain the percentage that you're willing to let go when pursuing them further would entail questionable tactics.
I was mainly thinking of a cost plus model of debt repayment when I said "ethical". Trying to squeeze every last penny out of people who are [mostly] decent folks who just fucked up is the main part that bothers me, honestly.
Thank you for taking the time to answer. :)
What happens when you don't pay your Student Loans for years and years? Since it's a "guaranteed loan", it can't actually (continue to) impact your credit rating, can it? So could you effectively decide to just "let it ride" until you die of old age, never having paid a cent of it?
If so, I think this is basically the idea behind of guaranteeing the loan in the first place: to give the people who can't pay their debt the ability to just ignore it forever.
There are probably a few other less-common situations as well, where a person has no money of their own but access to plenty of the money of others, e.g. the "trust-fund baby."
Every account has a story behind it and the BEST way to collect is to personalize the settlement experience in a compliant, secure way
Having been in the space for only a few years, the depiction of the industry -pre 2010- seems incredibly accurate from what clients tell us.
Modern interpretation of the FDCPA is desperately needed. In 2014, contacting consumers via cell phone and email is against the law or at best a very grey area.
Sending letters via snail mail are mandated over email. Moreover, ACH payments are still preferred over Card payments… IMO, a 3-5 day settlement time should NOT be the standard way to move money in any industry.
For example, if you're about to sell $1.00 worth of my debt to someone for $0.10, first you must offer it to me at the same cost: $0.10.
And some people, no. No they wouldn't care. Like most people, it depends on life situation.
The option to sue is reasonable because otherwise people who are too rich to need credit would often find themselves in positions where there's little-to-no incentive to pay back. But these aren't the bulk of debts that these agencies are working with - the bulk of people who are defaulting on loans aren't people with money, they're people without money.
Frankly the harassment techniques that a lot of debt collectors use are disgusting and they prey on those who already are suffering. The FDCPA makes a lot of these techniques illegal, but the protections the law provides aren't widely known.
Odds are if one is in the position of having debt collectors come after them they'll be unlikely to afford the taxes on the "income."
It would be well worth paying 1/100th of the original bill to not have to check the mail anymore, and throw that garbage away, but if we were to actually PAY the 1/10th settlement amount, it would open us to liability for the WHOLE amount.
tldr, I'm willing to be extorted, but not ludicrously so.
You only have 30 days to do a so-called "timely" validation, but you can force past CA's to validate as well -- the only hitch is that they can continue to collect on you while they validate, something they cannot do if you demand timely validation.
One more tip: Don't sign your name on letters to CAs, and don't ever give them ANY information they don't already own. Ever. Especially your bank account information. If you do decide to pay them (hopefully strategically as part of a pay-for-deletion-from-credit-report arrangement), don't pay them on a bank draft. And send it certified mail return receipt requested.
When I called the State Of Michigan treasury to pay a bill I'd hadn't known about (having not lived in the state for years), they forwarded me to a collection agency without telling me up front. I was confronted with "we have to ask you some questions for verification" and answered them until they asked something I knew they couldn't already know. I felt seriously taken advantage of, at all levels.
Actually, wait, maybe not even that: given that you purchased the debt, you could legally mark it (as the creditor) as having been repaid and then petition (as the debtor) to have your credit score corrected, no? This is what the http://rollingjubilee.org people are doing, at least.
Forgiven debt is taxed as normal income, so you'd have to have a 40% marginal federal income tax rate to end up with $4,000 in IRS debt on $10,000 of forgiven consumer debt, which is an approximation of the maximum marginal rate being 39.6% (which kicks in at $400K income for a single taxpayer.)
I would hazard to guess that people that would be paying anywhere close to a 40% marginal federal tax rate aren't really sweating $10K credit card balances.
If self-purchase looked on a credit report just like settlement-for-less-than-full-amount (and was taxed like forgiveness), there'd still be considerable reason to in order to maintain creditworthiness.
For the same reason why they might not pay to start with. They don't pay and bank sells the debt to someone.
Or the don't pay and then choose to pay later a smaller amount.
Option 1 sounds not too far off option 2. It would be minus the hassle to fend of collection agencies.
Its a workable system if and only if you are willing to basically cut off credit for anyone who hits that 181 days on a debt milestone. Because no one will loan to them again for years.
First, you get a horrible incentive to not repay debts:
1. A relatively innocent and good-natured Bank lends a jerk $1.00
2. The jerk refuses to pay it back, knowing the bank can't transfer it to someone who isn't a pushover without giving him a steeply-discounted offer first
3. In response all loan requirements and interest rates rise for everybody
Secondly, it fucks up the negotiations, because would-be buyers can infer something when the creditor doesn't snap up their own debt:
1. The Bank offers the debt for $0.10
2. The debtor doesn't repay because he legitimately can't scrape up that much
3. The Bank offers the debt for $0.10, but nobody wants to buy it, because they can infer that the debtor has nothing
4. The Bank offers the debt for $0.09... (begin loop)
Thirdly, it's a logistical nightmare. The Bank can't just combine the debt of it's 1000 deadbeat debtors and sell it off to a debt collection agency for a lump sum. No, it needs to send 1000 mailing notifications and 1000 second-notifications and wait 30 days, etc... And then 120 of them buy their own debts, and the bank can't re-price it's set of 880 accounts without sending 880 mailing notifications (begin loop)
Fourth, what happens if it's not a straight sale? Suppose the Bank barters your debt to a collection agency for a thing (like privately-held stock) in the collection agency? You can't buy your debt because you can't provide what the Bank is looking for... And then the bank can just sell whatever-it-is later.
TLDR: Exploding legal complexity combined with shady/manipulative actions from everybody.
The only difference is that this approach would favour debtors, not lenders.
It's not as if banks don't expect exactly the benefits you're not allowing debtors when their own debts blow up.
If banks get bail-outs - and do they ever - why shouldn't ordinary people?
That probably means at least two or three snail-mail notifications and a month of waiting time... Defaulting debtors correlate heavily with people who cannot be contacted or will not respond.
There's already a big incentive not to repay debts. Some places give up without doing anything, some will offer to discount your debt even before sending it to collections. This might make the incentive a little worse, but the jerk would still get the negative credit report entry, which is presumably the bigger punishment than having to dodge some collector for a while.
Regarding the latter, I expect the stable solution is that the bank offers a package of 1000 items, the agency offers a price per dollar of debt, and 14 days later the agency receives the 880 accounts and pays on a per debt-dollar basis. It adds some risk, but debt collection agencies are experts at pricing risk.
Isn't that what credit ratings are for? You'd be able to do this exactly once for any meaningful amount of money, and then your financial life would be otherwise over.
Defaulting on debt doesn't mean your financial life is over by any means.
My mind bends, but cannot wrap around why this game is necessary.
It makes the point that it's necessary because the government wants to control people's subconscious behavior through consumerism, which necessitates (I guess?) this skew in currency that you pointed out.
It's not the use of debt that's a problem, it's the misuse of debt.
Lending is either an executive function based on (supposed) faith in the future, or it's gambling, or it's client patronage, or it's extortion.
There is no financial business model which does not reduce to these relationships.
In your example, the factory gets built if someone important decides it should be built. They charge 'interest' based on justifications assembled from some combination of gambling, extortion, or patronage.
It's an entirely imaginary and delusional system, and completely faith-based.
http://healpay.com/assets/2007_pwc_collection_industry_study...
Debt: The First 5000 Years [1] is an excellent book I'd recommend if you're interested in the history. It's very well researched and a fascinating read (even if you don't agree with the author's politics.)
Billions of dollars are being thrown around at companies where the average level of technical sophistication is Excel spreadsheets and the prototypical competitor is a high-school graduate with an average of N weeks of experience in the industry.
When they called I was confused at first, then remembered and realized it was legit, paid it, end of story. They were utterly professional and courteous about everything.
I pray I see socialised medicine in the US in my lifetime. If Hilary Clinton gets elected, the push for this will be stronger than the thin edge of a wedge President Obama has managed. We need a full single-payer tax-based system.
I pay the ridiculous sum of $700 US dollars a month for my family's health insurance. If we raise taxes by 10% for every American, we could have awesome health care. I'd gladly take the 10% tax over $8400 a year I pay now. Sick, capitalist theft. I feel I've been politely robbed every pay period.
http://www.aha.org/research/rc/stat-studies/fast-facts.shtml
One man's profit is another man's stash for bonuses and building a new wing of the hospital.
Where do you find money if your top doctor wants a raise or threatens to leave for a competitor?
It's the insurance system that is the problem, since I have insurance the hospitals won't give me a dime off my bill, and my costs are heavily inflated because those of us WITH insurance are subsidizing those without.
Now, I'm a software engineer, I make a comfortable income and have a high deductible healthplan and a health savings account, I know I will be able to afford health expenses should they come up, at worst I can make payment arrangements because my annual out-of-pocket max is $5K/10K (individual/family).
But many families in my area are just scraping by on barely above minimum wage, and planning for health issues is not high on their priority list. If something happens to them, the $5K debt can be devastating, and it would take them YEARS to pay off what I can in months.
Ultimately, the simplest solution to the resource pooling problem is to eliminate the insurance industry and go single-payer, then EVERYONE pays with their taxes. However, many insurance companies are for-profit and they'll keep fighting against single-payer until they go out of business.
An injured person has no capitalistic value. They are injured, and can either work limitedly or not at all. Therefore, they are worth little to nothing.
Why would a capitalistic government like ours care about someone who will be a drain on the "system"? I's better to send them in the insurance mill or die in the ER.
yay usa.
I pray you never experience a major medical issue whereby you are "useless" to society.
A 10% rise in taxes? That's a heck of a lot of money. The majority of the rich won't buy into it, they'll fight it tooth and nail.
In my opinion, I think it depends on how well appeals for/against a single-payer system resonate with the middle class. Do they generally feel that they will be subsidized, or be subsidizing?
Heck, even some poor people (who would be net winners) won't even support it on principle.
But now they pay insurance anyway, aren't they?. With a single-payer system, their contribution would actually probably fall.
Single payer would have to come in at about a 5-7 percent tax increase for it to be even remotely palatable to me, and that's as someone who's all for it and think it's morally bankrupt that we don't have it.
http://healthcarereform.procon.org/view.resource.php?resourc...
Actually, even without additional tax, if US government dropped Medicare, Medicaid and other state sponsored insurance systems in favor of universal coverage, it would have enough money to have world-class healthcare system without any additional taxes -- the US government _already_ spends as much on health care per capita as Germany, or France, and 30% more than UK.
The fact of the matter is: If a goal involves raising taxes on the rich (or corporations) in the US, it will be pretty difficult to achieve.
It is true that socialized medicine puts an end to the financial hardship imposed on individuals, but it also brings other problems into the picture, namely rationed healthcare. I've experienced it myself. That's why you have so many Canadians coming to the US when they get really sick.
Hardly any Canadians come to the US for medical care, it's a silly rumor that has no grounding in reality. The US has one of the most expensive health care systems in the world for people without insurance, but we're supposed to believe that all these Canadians are rushing over the border with tens or hundreds of thousands of dollars for marginally better care?
http://content.healthaffairs.org/content/21/3/19.full
"Results from these sources do not support the widespread perception that Canadian residents seek care extensively in the United States. Indeed, the numbers found are so small as to be barely detectable relative to the use of care by Canadians at home."
At any rate, rationing of healthcare is a reality in Canada. A few years back the Supreme Court of Canada stated that the ban on private health insurance violated Canadians' right to security as the waiting times for the public system were so high.
http://en.wikipedia.org/wiki/Chaoulli_v._Quebec_(Attorney_Ge...
They also polled Canadians directly to approach the question from both sides.
> Several sources of evidence from Canada reinforce the notion that Canadians seeking care in the United States were relatively rare during the study period. Only 90 of 18,000 respondents to the 1996 Canadian NPHS indicated that they had received health care in the United States during the previous twelve months, and only twenty indicated that they had gone to the United States expressly for the purpose of getting that care.
So it's that they want to go to the pre-eminent institutions in the world, not "American healthcare (as a whole) is better than Canadian" - -your- inference is weak.
If that is the determining factor, I can guarantee that if those same Canadians had needed a heart transplant in the 80s, they would have flown to Sydney to go to St Vincent's and be operated on by Dr Victor Chang (http://en.wikipedia.org/wiki/Victor_Chang). I think your causality is broken.
It's just rationed in an inhumane, stupid way in the U.S.
No one from the industrialized world comes "to the U.S." because of a severe illness. Rather, people come to specific doctors for new procedures, or to have the one surgeon in the world who's done Risky Procedure X a hundred times instead of four. If that doctor's in Paris, they go to France. If he's at Mount Sinai, they go to New York. If he's at Hopkins, they go to Baltimore. But no one from the industrialized world comes to the US itself for its not-that-great-overall healthcare system, and no one has for over 30 years.
I presume that in your socialist medical system doctors, nurses, drug chemists, medical feathers and so forth would still get paid, right? Guess what? That's profit.
There's plenty wrong with our health care system. Much of it is due to the insurance idea. Much of it is regulatory. Much of it is structural. Single payer wouldn't really address any of that (not even the insurance bit: it'd be insurance writ large). What we need is for everyone to pay for what he receives, with charity/welfare for the indigent. It works for food; it works for medicine.
Have for-profit clinics for stupid things like breast implants and other things that insurance should never be paying for -- like optional stuff.
As a large debt collector, they were easy to find and sue if one of the agents did anything wrong.
The horror stories you hear about collectors are often these fly by night places with 100 people crammed in a strip mall location. They use illegal tactics and hope to collect enough money before being shut down and forced to sell off the rest of the portfolio.
I got a $1200 medical bill, about half of which was BS. I sent a certified letter disputing the invalid charges. I never got a reply, so I never paid. I started getting calls from a collector. I blocked the numbers, end of story. I similarly never paid some bullshit charge from a landlord. These unpaid "debts" have never impacted me in the slightest.
If someone is trying to screw you, just don't pay. I don't understand why people are such cowards about it.
[citation needed]
Sure, a single unpaid bill won't hurt you, but that's because it won't hurt your credit score much. If your credit score is low enough, your bank may still give you a loan to buy a house, but will demand a lot more money up front and charge you a much higher interest rate.
If you can buy a house for cash, it might not matter, but there are plenty of non-"poor people" who can't just drop a quarter million dollars off in a suitcase.
I know people who have had problems with all of the above because of poor credit.
I agree that the credit industry relies on extortion. I also know for a fact that some debt collectors act as front men for 'legit' banks and credit card companies who use them to extort extra interest from written-off debt. So they get a double profit - a tax write-off, and some or all of the principal back, with interest.
The lenders should - and I guess do - run actuarial models which give them a good idea what current and future default rates are.
I know there's at least one credit card company in the UK that deliberately lends to people with poor credit - not because it's run by nice people, but because it knows it can maximise profit by taking defaulters to court and foreclosing on their houses.
It's a vile, despicable business run by failed human beings.
"If you have a lot of cash" speaks volumes about where you're coming from, though. Congratulations on being one of the very privileged few in this country who can afford to do what you suggest. The vast majority of the rest simply cannot.
If you have the discipline to say, "no new debt," which isn't that hard to do after you've already fucked up your score, then you can hit thirty with a clean slate.
Can't you just offer the landlord occasional use of your boat and promise to pull family connections (everyone has them, no?) to get White House internships for his kids?
Going with the implicit assumption that we're talking about someone who's making a pretty good bit of money, but who has a bad credit rating, I'm only arguing that it's not impossible to rent an apartment.
I love your blog by the way.
Some dings from the racketeers might be a problem if you want to rent a $4K apartment on a $90K income, but even then I doubt it.
I almost get the sense that upper middle class nerds have no idea how most of society actually operates and how strong a position solid income puts you in.
Much truth to this. Also much truth that pointing out to HN that most of them have no idea how the world really works is rarely useful.
Oh, the irony. Unless, of course, you meant to lump yourself in with the "clueless" upper middle class. $150k/yr is actually beyond middle class. That's affluent, at minimum. It's not "rich" in the sense that the average person earning that income could just stop working whenever he wanted, but for a single person that's top 5% territory, and for a family it's top 10%.
For what it's worth, my household income, including passive income from rental property, is north of $200k. I know very well what having a high income affords. I've also been on the other end of the spectrum, near homeless when my impoverished single mother was raising me and my brother. I'll be blunt: you're the clueless one here. You have no idea what you're talking about, and your comments make you seem out of touch and, frankly, a bit gormless.
When I bought a car from the dealer I told the loan guy that I had a 0.9% rate at my Credit Union so I didn't need financing. He was able to match the rate based on my credit score and take 300.00 off the car. I doubt he would have believed that I qualified for %0.9 if I had bad credit. So for me we are talking about a difference of at least $300 a year for having a good Rating.
Information does eventually age out of your credit report.
In many jurisdictions, they have to disclose that they're doing so. Fake a competing "exploding" offer to put time pressure on them. They'll write you an offer (if they're interested) quickly. Then, if they rescind the offer later because they don't like what they see on a credit check, threaten to sue for promissory estoppel. Whether or not you're likely to win, they'll settle in order not to be known as a company that rescinds offers. Walk away with a severance, without even having set foot on the job site.
I'm not saying that people should let their credit scores go to shit just to avoid paying small debts. It's rarely worth it to welch on a debt. However, in the case of employment, there is a strategy if you think you're at risk of losing job opportunities based on a credit report. (That said, I've never heard of anyone in tech getting dicked on bad credit. But in our scummy/chummy industry, rescinded offers over reputation issues are not uncommon and those can usually be turned into 3-5 months' pay.)
At which point they'll promptly hire you, and let you go in the first week, as you're "just not working out", and you're most likely in an "at will" state.
First, "at will" employment is pretty complicated. It's not as cut-and-dry as it's made out to be. Besides, this is a detrimental reliance case: you're arguing that you relied on an offer that was fraudulent, and if they fired you in the first week and couldn't show that it was part of a business layoff or due to criminal behavior on your part, you'd still have that argument.
Second, once you rescind an offer, that person's pissed. Letting that person into the building, even for a week, is not something a risk-averse company is going to do lightly. Third, companies would have all sorts of internal-publicity/morale issues in doing this: hiring someone for a week just to can him on an obviously phony performance case. Fourth, companies care as much about disparagement as about lawsuits, which is why you can often get a settlement even if you don't have grounds to sue (or, more commonly, the suit wouldn't be worth the time put into it). Of course, you shouldn't threaten to disparage in a severance negotiation, because if you don't know what you're doing you can end up unknowingly committing extortion, but it is a concern on their side.
Companies are risk-averse and want to protect their reputations and avoid headaches. Once they've rescinded the offer, a 3-5 month severance is easier than taking the risk of letting you into the building. What if your boss and team like you (and, in the first week, why wouldn't they)? Do they really want to deal with the morale mess of firing you in the first month?
Of course, this doesn't apply when offers are rescinded for legitimate reasons (whole-office shutdowns, massive layoffs) but that's not what we're talking about here.
You got it backwards anyways. It isn't run background check -> Offer job it is Offer job -> Run background check. Offer job is always first.
http://www.consumerfinance.gov/askcfpb/1699/how-can-i-verify...
No. Debt is not a crime in the USA. And it is generally more profitable for collectors to sell your debt on to the next collector than to take any sort of civil legal action against you. Some exceptions include IRS and Student Loans.
As the article indicated, the best reaction (assuming you don't intend to pay) is to hang up.
When enough seemingly-personal details match, gullible people get tricked into sending money. The only thing that solves this problem is for people to stop entertaining unsolicited calls of any form. How much are VOIP rates these days? Last time I looked, it took something like $50 to leave a short message for everyone in a phone prefix (10 kilopeople).
In the case that one possibly does have an unpaid debt and wants to resolve it, then call up the original creditor and follow the debt's legitimate path from the source. And when you finally have someone to pay, insist on written documentation from every party in the chain, absolving you of the debt.
So really, your question "why should a debtor pay...?" is always answered by "the collector convinces them to." Giving the consumer rights and protections is, at this point, insufficient. Their current rights and protections are not being exercised, due to ignorance. That's something that needs to be fixed.
The real question is how to make digital signatures work for people at that level. That's a really tough question; I don't have the answer there. Maybe Excel could have some sort of row-signature cell type, which could stack (e.g. First Martian Bank would sign each row upon issuance, then each seller would just sign it again). It'd be even better if it weren't just a statically-signed document, but could also document stuff like 'Joe Smith paid down $320 in principal.'
Gosh, almost sounds like Bitcoin or a similar protocol would make sense here …
About 12 years ago, I started getting letters from a debt agency about a medical bill that I did not owe. Letters that I forwarded to the insurance company.
Then the phone calls started, with people trying to convince me to pay a bill I didn't owe.
It took about 9 months to get it sorted out. What had happened is that the doctor had improperly billed the insurance, for a fee they had already billed for, and the insurance refused to pay it.
The doctor's office sent it to collections. And the collections agency would only stop harassing me if I got the doctors office to call them and admit they had billed incorrectly.
That was not fun.
Not long after getting out of prison, Wilson took a job as a debt collector. He proved quite good at it, and soon he bought some paper and opened his first agency. Later, he also became a debt broker or dealer, a type of role he knew quite well: “I used to buy pounds of weed, all right, and then break it down and sell ounces to the other guys, who were then breaking it down and selling dime bags on the corner, right? Well, that’s what [I’m] doing in debt.”
I mean a lot of it has comical tones -- granted, darkly comical. But, hey, I have probably had more real financial problems then most folks on HN and my dad once collected about 98% of the defaulted debts kept in (probably) a shoe box at a small business he worked for. So I have seen kind of both sides of this quite close to home.
they take donations to buy debt and instead of then trying to call in that debt, they just forget it, absolving the original debtor
I'm sensing a collective consumer opportunity. Form a group, take donations, buy the bad paper (for pennies on the dollar) and forgive all the debts on it. No doubt many of the people would be simple deadbeats, but lots of them are probably just people who ran into problems, and something like this would help clear up their credit and give them a new start. What a gift! I'd kick in $25 for something like this.
As a side effect, with cleaner credit the debtors would be able to start racking up more debt again and this would stimulate the economy!
Unfortunately, once your account is in collections, your credit rating is damaged and paying the debt off doesn't improve it much. While that's arguably "fair" (the original creditor still got screwed, losing 60-95 cents on the dollar) it leaves the debtor with minimal reason to pay the debt, unless successfully sued, resulting in a judgment. As the OP discusses, most third-party collectors have lost proof of the debt and won't be able to successfully sue the debtor. Full recovery of the credit rating would be sufficient incentive for many people to repay, but that's not an option.
The fact that you can't get your credit rating back (at least, not to what it was) is one of the problems with the system as it stands currently. If there was a system whereby people could make the original creditor whole and recover their credit rating, that'd probably better (if shitty for third-party collectors).
So all I have to do to get out of my loans is live off the grid for 7 years? I wonder if this is the same for student loans.
How to do such a thing? Seems impossible, but even a 4x or 5x overhead would be a giant bargain for the debtors next to the sharks, and the sharks wouldn't be able to compete on those margins.
2. Don't pay it back
3. Ask debt collector friend to buy debt
4. Pay him off
Why would this not work?
Of course, there are a lot of scumbags in both professions, but I don't see any reason why there can't be decent people there as well.