Some interesting facts are mentioned “Collecting Consumer Debt in America” by Robert M. Hunt in the Federal Reserve Bank of Philadelphia’s Second Quarter 2007 Economic Research. In no particular order:
- Our federal government began the debt-selling business as we now know it when the FDIC started selling off the unsecured loans of failed savings and loan institutions in the early 1990’s. However, large-scaled collection efforts by the debt buyers failed back then because of inadequate technology, primarily the absence of sophisticated telephone calling systems, databases, and the Internet for locating debtors..
- Debts sold for an average of 4.5 cents on the dollar in 2005.
- Collection of five year old debts can pay off because borrowers’ incomes may have improved.
- High interest and fees at the first sniff of default are tools to encourage prompt payment from limited resources by making nonpayment more painful. (There’s actually a rationale for them, besides simple greed. Well, maybe.)
- Abusive practices are a another tool to increase the pain of continued defaults.
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