Despite More People Being Late With Payments, Debt Collection Companies Are Struggling
I'm In Debt
- Posted:
1/30/2009
Consumers in America owe over $2.5 trillion, and more people are late making their payments than ever before. Believe it or not, despite these depressing financial statistics, the debt collection companies are struggling! How is that possible?
There are about 6,500 debt collection agencies in the United States. Of these, 70% are what are known as "contingency collectors", which means they only get paid if they collect money on a debt. The other 30% are known as "debt purchasers", and they will buy debts from companies for pennies on the dollar, and then attempt to collect more than they paid from the debtors.
Contingency collectors are experiencing higher than ever work volume from companies who enlist their help collecting debts owed to them; including credit card companies, loan companies and even municipalities who need to collect overdue taxes, library fines and parking tickets.
The problem is most people aren't just forgetting to pay their bills. If people had money, they'd pay their bills! Debt collectors are attempting to get blood from a stone, so to speak, since they're calling people who are behind on payments and asking them to make a payment with money they just don't have.
Many debt purchaser collectors are actually losing money. They're purchasing credit card debt and loans for pennies on the dollar, hoping to recover the full amount (or at least more than they paid for the debt) and discovering that they can't even get back what they paid for the debts from most debtors. In the past, debt collectors would obtain credit themselves in order to keep themselves in business, but with the tightening of the credit lending - they are not able to obtain financing.
It's true that debt collectors notice the most when people are having trouble making their payments... but I think it's also safe to say that they'll be the first companies to recover from our current economic situation - as people have more money they'll start repaying their debts.
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