It sounds like the collector is the only winner. Is this true? Does the original creditor just lose the money completely if the debtor pays off the collector who purchased their account for pennies?
2006-12-14 12:18:56 · 8 answers · asked by Anonymous in Business & Finance ➔ Credit
The original creditor mormally sells distressed debt in large portfolios. Most of the debt will not be collected so the original creditor gets paid for accounts the the buyer never collects. On the ones the debt buyer does collect, no the original creditor doesn't get any of the money beside what they were paid as part of the portfolio sale. Trust me, it is a business deal, the original creditor gets cash now, doesn't have to service the accounts and the debt buyer also expects to make money, it is a win/win for most transactions.
2006-12-14 12:28:28 · answer #1 · answered by Scott C 2 · 0⤊ 0⤋
Seems to me you're right - if the paper is sold for pennies on the dollar, then it's the collector who comes out ahead, not the original creditor. Unless the creditor sold the paper with some sort of an agreement to get a portion of the proceeds (not likely), the creditor is out of luck. The collector has assumed the risk (namely that the debtor won't pay at all), so he effectively reaps the rewards.
2006-12-14 12:27:49 · answer #2 · answered by Anonymous · 0⤊ 0⤋
The Collector is only the winner if they convince you or get you to pay it off. The Creditor is selling a debt they've spent a lot of money in trying to collect, so they are passing the work and risk to someone else. The creditor feels the winner since they have received SOMETHING for a debt they've classified "uncollectible".
The Collector is now running the risk of losing money and is only the winner if they get you to pay it off in full or make you agree to pay a figure which is obviously more than they paid. If they can't collect it, they will either sell it to someone else or take you to court.
2006-12-14 12:25:18 · answer #3 · answered by dougzinboston 4 · 0⤊ 0⤋
The original creditor makes out by #1 Insured on the item/product sold and #2 write off on taxes of so called lose. If the collector can't collect , they resell to another collector and the frist collector writes it off as a tax lose. This continues on and on.I hope this helps you.
2006-12-14 12:28:12 · answer #4 · answered by R W 6 · 0⤊ 0⤋
By the time a debt is written off, the original creditor has already deemed it a loss. A collection agency simply attempts to collect on debts you don't have to pay. Most people don't know that paying a collection agency will not remove the account from your credit report or improve your rating.
2006-12-14 12:25:53 · answer #5 · answered by Kevin K 3 · 0⤊ 0⤋
If the collection agency bought the debit from the lender, yes the lender looses out. But the lender can claim the write off amount on their taxes as a loss.
Some collection agencies will collect on behalf of a lender and give them a portion of the debt collected.
2006-12-14 12:21:35 · answer #6 · answered by Martin Chemnitz 5 · 0⤊ 0⤋
They definitely do not lose, they simply write it off as a loss, on their profit and loss, and it comes back to them through taxes.
The collector isn't necessarily a winner, they must fight to get the money from the borrower, which may take months, and may result in very little in the end depending on how tenacious they are.
Learn about credit, mortgage, and finance:
http://www.thetruthaboutmortgage.com
2006-12-14 12:27:56 · answer #7 · answered by Anonymous · 0⤊ 0⤋
yup , orig creditor sold the note
2006-12-14 12:20:34 · answer #8 · answered by bayareart1 6 · 0⤊ 0⤋