Those that can't do, Hate

As I said, go find my AMA thread.

Last post on this, don't want to derail this thread further. Goodluck.

haha my man... was a pleasure meeting you. Hell of a dinner too.

Have you digested the new rules from CFPB? How much of an impact do you expect this to have on business?

I read from start to finish! Congratulations, what an amazing accomplishment! Funny thing I find this forum here when I have been all over the internet researching Debt Portfolio purchasing and estimate liquidation rates. I will be looking to get into the debt purchasing side of this industry in 2017. Do you have any recommendations for reliable companies that sell good paper in batches of $10,000? I'll be able to invest $40,000 next year in 4 increments of $10,000. I have a steady income and I am able to reinvest all the money that I'd earned within that year right back into the business. Any companies you can recommend would be greatly appreciated. Hope your still updating, was a fascinating read and pretty amazing the thread has been open this long. Hope the journey updates have not ended. I grew up in Buffalo NY spent my first 17 years of life there. Maybe we know some of same people.

Just read the whole thing. It was such a motivational boost for me. Thank you!

If there is anyone working in the Payday loan business and would like to talk/share ideas pm me.

Just a small update, as I'm headed to Vegas today for the annual RMA convention, which is a convention for debt purchasers and collection agencies from around the country.

In 2016 I had my first $1,000,000 profit. Personally, I cleared just over 1.3mm that year. It was fantastic, and I had approximately 70 call center reps plus admin staff at my height. We ran into some legal problems in 2017, still ran a slim profit, but by early 2018 I was down to 12 reps. Things turned around for us March of last year, and 2019 is shaping up to be my best year yet. I think I have a real shot to clear 1.5mm, maaaaybe 2mm this year.

I learned a lot during my downswing. Number one with a bullet was that uncontrolled growth has major downsides... especially when dealing with regulatory authorities. Specific to my industry, I realized that I would rather own all my debt with a smaller call center than have multiple clients and collect debt on a contingency basis. I am on pace to match or exceed my 2016 profit in 2019 with less than half the reps because I own almost all my debt now. Because of that, my footprint is much smaller, and I have less exposure to lawsuits and regulatory authorities.

I'll be staying at the Aria from today until Friday the 8th. Feel free to reach out, as I have a lot of free time to lose the cash I'm bringing.

Thanks.

Nice update. I've been following since you originally opened the thread and always found it interesting. If you're around to answer questions, I have a few.

Knowing what you know now what would you do differently if you could start again?
How has the industry changed since you first got into it? How have you adapted?

How do you keep your reps motivated and manage both the personalities of people in these roles and staff turnover? (If I'm right in assuming that these reps are all on auto dialers calling your debtors seeking payment).

How do you manage risk/ cashflow? Is there a lot of variance in the batches of debt you buy? Or can you confidently predict monthly income based on how much and the quality of what you buy?

Finally, I saw this article in Bloomberg a while ago, how prevalent are bad actors like this in the industry these days? Any run ins with other debt collectors?

If I had to start over, I would not grow as quickly and as unchecked as I did. 2016 was a blessing and a curse. It was great because I made 7 figures, which I never dreamed of doing. It was a curse because I felt invincible. I was sued by 2 different attorney generals, and that lost me a lot of client work, which made me downsize anyway. In addition, I would have moved away from clients more quickly, and worked a lot more of my own purchased debt. You can make just as much money with less reps that way, and the less reps, the less complaints/lawsuits/regulatory actions.

I missed the Wild West days of the industry. I came in at the end of 2012. The industry has changed a lot since then. The CFPB exists now and has teeth; that wasn't there when I was beginning. Consumers/debtors are much more educated; that means collections are harder, but price of debt has come down.

Reps being motivated is difficult. We offer performance based bonus obviously. In addition, we do raffles, happy hours, etc. It can be a ****ty job, so we try to make it less ****ty. Also, the pay is good considering the city we are in. We rarely use autodialers though, and almost always do manual calls. Staff turnover is crazy. We are constantly hiring and firing.

At this point, I purchase a lot of forward flows. That is to say, I have deals with lenders that we buy their inventory every month. The quality of that debt is fairly consistent, since the underwriting is usually the same. It has some seasonality, but it's mostly consistent. That means the price is usually fair for both sides, so it is a consistent profit, but no home runs. On some of the one-time purchases, or deals with new lenders, we analyze the portfolio best we can before making an offer based on a number of variables, and hope for the best. I have lost a lot of money on certain deals based on a faulty analysis, and most likely will again. I am usually pretty fair about predicting cashflow, although there are unknowns, such as unexpected legal costs, or a new portfolio. Sometimes agencies that we outsource debt to will rip us off and we have to chase them, and sometimes we find a new buyer that lifts our flow for the month. There is a ton of variance based on the lender, age, etc.

I read that article. There is a Netflix episode based on the lender he was dealing with that is really good, and shows how slimy he is as well. It is part of the "Dirty Money" series, and the episode is called "Payday." It isn't prevalent anymore at all, due not in small part to the consequences the lender faced. As far as the article you linked, there are still a ton of ****bag collection agencies, and ****bag agency owners, out there. Everything in that article takes place to this day, and I actually know people personally that have dealt with the subject of the article. Because of the nature and education level of the typical subprime consumer, there are always going to be people that prey on them. A lot of lenders know that, so there are often no resale clauses on debt we purchase now. If a consumer complains to the lender, they come to me, and I damn sure better know who is calling the consumer or it's my ass.

After reading this entire thread, I want to say congrats but I am sure that you have heard this many times before over the last 7 years of your journey, however I am not going to say it! I am going to wish you bountiful returns for your next 7 instead! Your journey on this forum has encouraged me and obviously others who have posted here to chase their dream of entrepreneurship.

As of right now, I am working on licensing my agency in the state of Tennessee so that we can work contingents in state as we gear up to our first portfolio purchase. My question for you is in regard to licensing. You mentioned prior that you use a 3rd party agency to do all of your licensing and I would like to know if you could disclose a reputable agency that does this. I would also like to know what software packages you would recommend these days for hungry, yet modestly funded startups like mine. Thank you in advance and in retrospect as this single forum has been more informative than most of my chats with Industry Insiders.

Chris
stratys2016@gmail.com

Curious how much capital you expect to deploy in 2019. How hard is it for a buyer of your size to get approved from any of the major sellers in the space?

https://imgur.com/a/yeTOEMe <<<<8 Years of Work



Probably my last few updates this week; I'm selling my collection agency to one of my admins. She just celebrated her 5 year anniversary with my company a few days ago, and I want out. She is buying the call center for 3mm, paid over 10 years at 300k per year. The real value of the company is approx 1.5mm if somebody came in and paid cash, but she is paying no money down, and I probably only spend 10 hours working there now as is, so I needed a hell of a deal to sell. This deal means I basically get paid my salary over the next 10 years, and get my name off of the paperwork.

I have dealt with way to much stress behind this call center in the last year, and I'm sick of it quite frankly. I have dealt with attorney generals in 3 states at this point, and my lawyer bills are crazy. It's time for someone else to deal with the headache. It's been a crazy ride, and I've made a lot of money, as you can see from the bank account.

I'll still be purchasing and outsourcing debt that I buy, just no longer working it in a call-center that I control. The debt buying makes me way more money than the call-center currently, with 10% of the stress. Plus, without having to concentrate on the physical call-center, I can work remotely from anywhere.

I'm 34 years old, net worth of approx 5mm, with 3mm of it in cash, and semi-retired now. The debt buying will continue to net me another 500k-2mm a year for the next few years, depending on how the winds blow. I also started a payment processing company for high risk businesses approximately 5 months ago, and I'm already cash-flowing 7k a month out of that business, and on track to net 150k in 2021. Life is good.

The funny thing is, I'm already bored. I'm ready for the next thing. I'm going to probably buy some investment properties, and I think I'm going to move up the food chain and start getting into lending instead of debt collection. I learned a lot over the last 8 years. I'm smart, but not that smart, and I didn't know a single thing about collections when I started. What I learned I am good at, is people. From my employees, to my clients, to the people I ended up partnering on things with, people trust me, and they want to work with me. People that were smarter, and better at collections than I am, didn't get to the same spot, because people didn't like them. People want to be comfortable with who they are working with when they send millions of dollars a month to each other over everything. Agencies that may have returned a better ROI didn't get the same deals, because even though my collections may not have been as solid, clients/partners knew that the money was safe, and they liked me.

Thanks for letting me use this as a personal blog over the last few years. If anyone has anything they want to collaborate on, I feel like I have some pretty good experience in the financial space, and I'm a hell of a salesperson. Reach out if you have any ideas or questions.

Congrats! You mentioned the business is worth about 1.5mm if you took cash, I’m curious how those kinds of businesses are valued (what kind of multiple on ebitda or SDE) and also curious if you talked to any brokers before exit?

How confident are you that you’ll see all 10 years of the payout?

I assume you structure the sale so the payout is capital gains ? Does the ownership transfer in chunks over time or all at once and you have the note?

Great work, I remember when you started this thread.

Thanks dude! I valued it with my attorney at about 1.5mm for the following reasons:
1. The company cashflows about 400k a year
2. there is about 700k in "inventory" (our fee for payment plans set to run over the next 12 months).
I took a 2x multiple and the inventory, and that was it. It's a tricky business to sell, so it has to be pretty straightforward.

I am about 10% sure I'll see all 10 years of the payout. I think I'll get 3-7 years, and if I get 3, I'm OK with it because that will be more than I get if I just shut the business down and ran out the payment plans (700k). Also, the money I get from the sale will be long term capital gains, so I pay less taxes than just running it out. She is going to own 100% day one, but she is limited from taking distributions or taking salary increases until I get a certain payback. I am carrying the note.

I really like my admin, and I want her to be successful on a personal level, and also because it allows me to place debt there that I own with somebody I trust.

Thank you for the kudos; it's been a fun ride.

Glad this got bumped I'll have to go back and give it a read.

I live in BC, Canada and have considered this type of business. I would be able to put up low 6 figures to get started, just a thought I have had before reading this thread, now I am really interested. I would have to do more research but wondering if this is something you can start in any city and buy debt from all around the country? I noticed OP did have to move to Buffalo but you would think this type of work can be done from anywhere.

I know a local one in my city who I think mostly deals with small business collections and doesn't actually buy their debt. I assume it is higher percentage for collection on those but no risk for the agency. They take 30%, 50% under $100.

One advantage to buying debt in the states is you circumvent some federal regs that apply to debt collection. I'm going to hazard a guess that Canada has more consumer protections than in the U.S.

I've had things go to collections when I was in my early 20s, they definitely didn't seem like they were operating under many consumer protection rules. They were persistent enough to get 50% on my 10k over an overdraft and CC after I went through a severe drug addiction and homelessness.

Final therapeutic update for me. Settled with the NY attorney General about 8 months ago. They alleged a whole bunch of stuff that I'm legally not able to expand on due to my settlement. At the end of the day, I am completely out of collections, and will be for the rest of my life. That said, see picture below for how it worked out. Take away 500k I'll owe for taxes this coming year, and add 825k that I paid cash for a house about a week ago. I made it 9.5 years in the game, and got out cleaner than just about anyone I know. AMA for the next few days. Keep in mind, I can't get into details of my settlement but may be able to talk in generalities.

hey man, finished going through the thread

doubt you're still checking up on this but worth firing some questions anyway


1 i was really surprised by how little capital you had to start things, do you think that is typical or that you took a lot of risk of ruin that people normally wouldn't engage in with such little starting capital



2 what is the day to day of working at your shop - they just call in and say "hey we purchased your debt and you better pay us?" like how does the script go?



3. a few years back my student loan organization sent me an email congratulating me for having paid off my loans - this was news to me since i'd been making min payments and was pretty sure it would take a few more years

even called my dad to double check that i didn't have some aunt die or something and he used that money to pay off my balance and he confirmed he had nnot

call up the student loan service to verify, the person on the phone said "yup we have your balance as paid off"

so i'm traveling abroad, don't really have any paperwork available but just assume that either i grossly overestimated the amount of debt i had left, or they made a mistake and i luckboxed my way out of it - felt about 50/50

years later nothing happens, then towards the end of covid another student loan company is calling my parents, saying that I'm a delinquent payer and that they could take their assets in order to collect on my student loan debt if i didn't resume payments

so they alert me, i give them a call, tell them this is the first i ever heard from them, tell them i was told by my old provider that it was paid off, none of my contact info had changed and thus i can't understand why it took them about 5 years before contacting me

they remained firm that all this was my fault, and luckily since it was covid, there were all these forgiveness things going on - so my credit isn't destroyed (was bad at the time due to the late payment hits (which btw didn't pop up until this time - so i think my account just got lost for a while or something because they weren't even reporting my non payment until rona) but in the last 2 years got it back up to what is now a good score

am wondering if you can shine any light on that and help me understand what exactly happened, why my old loan provider would sell my debt and then not tell me it was sold but instead congratulate me for paying it off and then and then why would it take the new company about 5 years before contacting me

overall i would say that "i won" out in the exchange because all in all only about 2k of interest and fees were tacked on during that entire period, but it still feels really messed up

which leads me to the final question



5 how do people sue you? how can they afford to sue you? under what grounds do they sue you? are they being irrational or does it make sense to sue a collections agency?

thanks in advance, doubt you'll see this, but worth a shot

This thread- and its timeline, with the updates, and an ending- is a pretty amazing snapshot.
BFI has always punched 200 pounds above its weight on **** like this, even now that 2+2 is dead.

If the OP still checks in, what are your TOTAL TAKEAWAYS from getting into this?
If you had to do it over again, would you have chosen this path given the stresses associated but knowing it turned out well, or something else?

It's pretty standard to ask for a document that states that you are free of debt after you paid your debt.

Just read the entire thread, it reminded me of this article I saw last year written by a debtor advocate: https://www.bitsaboutmoney.com/archi...sumer-finance/

For those who are knowledgeable about the industry, how accurate do you feel this article is? I'm particularly interested in comments on this snippet:

The former advocate in me will observe that the single most effective method for resolving debts is carefully sending a series of letters invoking one’s rights under the FDCPA (and other legislation) to a debt collector who is operationally incapable of respecting those rights, then threatening them with legal or regulatory action when they inevitably infringe upon them in writing, leading to them abandoning further attempts at collection.

This effectively makes paying consumer debts basically optional in the United States, contingent on one being sufficiently organized and informed.

The article suggests that breaking the law is standard procedure for debt collection agencies, who are able to do so because so few debtors understand how to work the system to their advantage.