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Old 07-14-2012, 04:17 PM   #26
SebastianHalf
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Re: Starting Collections Agency

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Originally Posted by KatoKrazy View Post
Just in the bolded I see violations of FDCPA and CROA.
except none of that is violations. We have an attorney on retainer, and we are perfectly in our rights to use his letterhead to threaten legal action as long as he is on retainer with us. There is nothing wrong with saying if they pay we will no longer harm their credit. There are no violations there.
Our definitions of "Junk Debt" obviously differ. This is debt that is less than one year old, and I have a history of liquidation rates from various debt collection agencies that suggest I will be able to collect on the amount that I have estimated.
I am also fully aware that I may have overestimated my abilities and will fail. I am also asking for advice from people who know the business. You sound like you have some experience.
To my knowledge my plan won't be violating any collection laws. Tell me specifically what is in a violation and I will be grateful
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Old 07-14-2012, 04:22 PM   #27
SebastianHalf
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Re: Starting Collections Agency

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I don't see this working out well. A lot of debt sellers won't even sell to people in Buffalo because it is known as scumbag central in the collection universe.

Also, it is going to be very hard to liquidate even 5% of your paper in 120 days on the junk debt you will be able to buy.
Bolded for proof of ignorance. Debt sellers will sell debt to anybody who will pay. It is a commodity that is bought and sold for what the market dictates by anybody who will pay. Buffalo is the debt collection capital of the world, because the largest debt collection agency in the world was here in the 80's, and when it was sold a lot of the successful collectors there started their own companies. There is nobody in the industry who thinks Buffalo is scumbag central in the collection industry, and I am wondering what you are basing that on.
What you MIGHT be thinking of is collection agencies who work on contingency by not actually owning their debt but collecting on debt somebody else owns. The laws on what they can do legally are very different since they don't own the paper. An agency who works on contingency cannot use an attorney letterhead threatening legal action because the debt is not theirs to legally take to court. As a debt OWNER, I am legally allowed to do that, although it is cost prohibative.
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Old 07-14-2012, 04:37 PM   #28
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Re: Starting Collections Agency

http://www.insidearm.com/forum/forums/debt-purchasing/

A lot of people won't sell debt unless they have fully vetted the person they are selling it to. It isn't as simple as "Sure, you have the money I'll sell you the paper." In this industry your reputation is VERY important and you don't want your name in the chain of paper that gets in the wrong person's hands.

As far as the violations:

You can't threaten a consumer with an action you have no intention of taking.

If you are offering to repair their credit in exchange for payment, you are acting as a Credit Repair Organization. You also may run amok with the credit bureaus because it is against your contract with them to delete in exchange for payment.

While it may not be technically illegal, be very careful when talking about credit. How do you know what will happen if they do/do not pay? Are you the credit bureau or FICO (the answer is no, so how would you know what would happen with their proprietary score after they pay or do not pay the bill?) Are you going to be the one lending them money or giving them services? If not, how do you know someone else won't just because they have your collection on their report?
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Old 07-14-2012, 04:42 PM   #29
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Re: Starting Collections Agency

I think you will likely be able to liquidate the % that you think you will, I just don't think it will be in the time frame you are looking for. You will have lots of people on PPAs paying $25-$50 a month, and it will take more like 6-12 months to resolve a lot of accounts, and some longer. The first few months will also be very hard until you get your post dates built up.

What software are you planning on going with?
Are you setup to report to the credit bureaus?
Have you looked into all the necessary insurance and licenses?
Who are you going to use to do your skip tracing?
Are you going to be manually dialing or auto-dialing?
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Old 07-14-2012, 04:44 PM   #30
SebastianHalf
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Re: Starting Collections Agency

LOL I'm a member of that forum. It is that simple. I mentioned on that forum that I was interested in buying debt and I got calls from a number of people with great reps that you can find on there that offered to sell me debt and help get me started.
I never said that I was going to repair their credit. What I said was that I would make their credit worse if they didn't pay by reporting it, and if they did pay then it would go on their credit report as a paid debt. That is exactly what happens.
At this point you are clearly being argumentative for the sake of it. They don't know that I wouldn't actually sue them, but I could. It's a gray area, but really isn't anything shady IMO because I'm threatening something I am allowed to do.

Again, as for your link... it leads to the front page of a debt purchasing forum I am a member of. It shows no link that says people vet who they are selling debt to, or that anybody won't sell to those in Buffalo.
I have no issue with people thinking I will fail, or offering criticism, constructive or otherwise, but you are just arguing for the sake of it.
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Old 07-14-2012, 04:49 PM   #31
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Re: Starting Collections Agency

No, I'm just trying to make sure you don't get in over your head. I'm a collector, and I'm very successful at it. I've seen lots of people come and go, but it's a great industry if you have a knack for it and do it the right way. If not, prepare to be sued into oblivion by litigious consumers.
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Old 07-14-2012, 04:51 PM   #32
SebastianHalf
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Re: Starting Collections Agency

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Originally Posted by KatoKrazy View Post
I think you will likely be able to liquidate the % that you think you will, I just don't think it will be in the time frame you are looking for. You will have lots of people on PPAs paying $25-$50 a month, and it will take more like 6-12 months to resolve a lot of accounts, and some longer. The first few months will also be very hard until you get your post dates built up.

What software are you planning on going with?
Are you setup to report to the credit bureaus?
Have you looked into all the necessary insurance and licenses?
Who are you going to use to do your skip tracing?
Are you going to be manually dialing or auto-dialing?
I appreciate more posts like this. I am going with Collector Express software. It comes highly recommended, and they offer 60 days of training and unlimited support.
I am not setup to report to credit bureaus yet, and I plan to do it as soon as I get back to Buffalo in one week.
I have looked into necessary insurance and licensing. You only need a license if you are inside the city of Buffalo proper, and I plan to be in the suburbs strictly to avoid licensing and costly bonding which is needed inside of the city.
Skip tracing is a problem. That is a very carefully vetted part of the industry. They want to see a record of reputable collecting since they are researching sensitive information. I am strictly buying debt that has already been skiptraced in the past 3 months, since I won't be able to do it myself for some time.
I have used predictive dialers myself when I cold-called selling insurance, and I think they may be counter-productive in this case. When you powerdial like that, there is a lot of dead air in between answering calls as they come in. Once they answer and hear dead air, they know to avoid that number. I would rather take more manual time and have them hear a voice as soon as they pick up, but my opinion on that may change.

You are right about having to build up a pipeline, and taking a while to collect at the rate I want. That is hopefully not going to be a huge problem, as I have 4 months of living expenses after the 20kish initial investment that I will be spending on this.

I appreciate the comments and we can be friends now??
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Old 07-14-2012, 04:52 PM   #33
SebastianHalf
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Re: Starting Collections Agency

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Originally Posted by KatoKrazy View Post
No, I'm just trying to make sure you don't get in over your head. I'm a collector, and I'm very successful at it. I've seen lots of people come and go, but it's a great industry if you have a knack for it and do it the right way. If not, prepare to be sued into oblivion by litigious consumers.
I'm already in over my head, but I know that. I think that is one advantage I have over a lot of people that try to get involved in the industry, which is that I know how little I know. I am relying on others to really point me in the right direction in the beginning here.
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Old 07-14-2012, 04:54 PM   #34
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Re: Starting Collections Agency

Of course, never was mean to be anything different. Was just presenting some things for you to think about.
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Old 07-14-2012, 04:55 PM   #35
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Re: Starting Collections Agency

In regards to licensing. You may not need to be licensed in New York or Buffalo, but if you are collecting in other states many of them will require you to be licensed and post a bond.

Steer clear of TX and FL debt. MA sucks too because you can't solicit a post dated check.
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Old 07-14-2012, 05:00 PM   #36
SebastianHalf
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Re: Starting Collections Agency

I've already found the list of states that need licensing and bonding... there aren't toooo many if you already own the debt. TX is the worst, and I've known that for some time now. FL and MA I wasn't aware of. MA makes sense bc of that, but why FL? Short SOL or some other reason?
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Old 07-14-2012, 05:02 PM   #37
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Re: Starting Collections Agency

FL isn't worth your time because there are too many consumers and consumer "rights" attorneys that will file frivolous lawsuits.
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Old 07-14-2012, 05:19 PM   #38
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Re: Starting Collections Agency

OP have you considered maybe continuing your current career and moonlighting for a collections agency for a little while? Even 3-4 months would probably be invaluable to you.

EDIT: probably wouldn't work well if you have a day job
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Old 07-14-2012, 05:28 PM   #39
SebastianHalf
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Re: Starting Collections Agency

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OP have you considered maybe continuing your current career and moonlighting for a collections agency for a little while? Even 3-4 months would probably be invaluable to you.

EDIT: probably wouldn't work well if you have a day job
I actually have considered that. I'm still considering doing it for a few weeks just to get a handle on it. However, my day job as of now is selling a type of insurance that is legal in 49 states. Obviously the one state it is not legal to sell in is NY. Boo.
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Old 07-14-2012, 08:15 PM   #40
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Re: Starting Collections Agency

This might be a stupid consideration but, have you ever though of lowering your settlement rate of the debt you are willing to take? Instead of 75%, just present it and sell them on the opportunity that you are doing them a HUGE favor that they cannot pass up, and wipe their debt at 50% or even 40% etc., thus potentially increasing your success rate.

You said it was a numbers game, which clearly it is so wondering if this is a negotiable point for you in the business.

So if you called me wanting 75% and I tried to negotiate to 40% would you even work with me?
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Old 07-14-2012, 08:43 PM   #41
SebastianHalf
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Re: Starting Collections Agency

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This might be a stupid consideration but, have you ever though of lowering your settlement rate of the debt you are willing to take? Instead of 75%, just present it and sell them on the opportunity that you are doing them a HUGE favor that they cannot pass up, and wipe their debt at 50% or even 40% etc., thus potentially increasing your success rate.

You said it was a numbers game, which clearly it is so wondering if this is a negotiable point for you in the business.

So if you called me wanting 75% and I tried to negotiate to 40% would you even work with me?
That's not a stupid consideration at all. However, the way it's presented would be a problem. If you start at 50 percent, you can collect AT MOST 50 percent. You need to start asking for 100percent and claiming that they owe the whole amount, and you're doing them a favor by working with them and not reporting it to the credit bureau after all this time/pressing charges. Then if they seem like they really do want to get out of debt you get the 100% easily sometimes. If they want to get out of debt but are legitimately pressed for cash, this is when you set up an extended payment plan. However, like it has been mentioned in this thread, these people often don't manage finances well, so it is in your interest to get it all up front. You can offer to settle for 90 on the dollar TODAY, or work your way down to 75, if they can pay right now, since a bird in the hand is worth 2 in the bush and all. Also, capital available right now is worth more than it will be in 8 months, since you need to reinvest in more debt.
That being said, collecting on PayDayLoans, I would almost never settle for 50% because there is no risk of bankruptcy with such a small debt. I would always push for a bigger payment over a longer period with that type of debtor. If I felt 50% was all I could get I would take it, but I rarely would, and it would depend on how long I have had the file and how hard I worked it. I would never take it on the first call. After I had worked the file for 2/3 months and I was ready to buy a new portfolio, then I would take it just because something is better than nothing. With the collection software I have, I can put a note on somebodies file that they want to settle for 50 on the dollar or something like that, and refuse anything else. I won't see that file again until I am ready to sell the debt... then the software will pop it up for me and remind me to call these people back and take whatever I can get in the couple of days I have left with their file.

That being said, if I was collecting on larger debts, like credit card debts with 2-10k in debt, I would be much more likely to settle, since bankruptcy becomes a legit issue with larger debts. I would also be much more likely to settle for 50 percent or less if I was buying "junk debts," or debts that are 3 years old or so. These are sold at less than 1cent on the dollar a lot of times, so even settling for 50percent is a huge coup. Some agencies make a ton of money collecting on these junk debts. However, you need many more people working them than I have, because it is truly a huuuuge numbers game. For 10k you would own literally over 2mm in debt, and collecting 1percent would make a ton of cash. For those types of debt, I would try to get the whole amount, but would get into settlement talks on the first call, because people have already tried and failed to get cash from them... any amount you can get is a success.

I guess to answer your question directly, I would personally not work with you because the debt I will own is to small for that, but if you owed a significant amount of debt I would def work with you. Also, if the debt is older than 2 years, I would DEF settle with you for way less than what you owe. Any more specifics I'd be glad to answer as well, although I am very green to this type of thing as well.
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Old 07-14-2012, 08:58 PM   #42
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Re: Starting Collections Agency

How does compensation work for people making the calls -- do they get minimum wage plus commission or commission only?
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Old 07-14-2012, 09:05 PM   #43
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Re: Starting Collections Agency

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How does compensation work for people making the calls -- do they get minimum wage plus commission or commission only?
Depends on the collection agency. For prime debt or one agency debt it is normally an hourly wage with commission after you hit a goal. Currently my friend collects on prime (0 agency) paydayloans. He gets 11 dollars an hour (started at minimum wage) and 25% of any amount he collects past 15k in a month. So if he collects 16k, his bonus is 250... 25percent of the 1k he collected over 15. Lots of times with junk debt collectors work strait commission, 40-50 percent of total collected is usual. I've seen collection agencies with prime debt that pay 15-20 percent strait commission. The goal and the hourly obviously depends on what type of debt you are collecting. It's really something you can play with.
To start, I plan on paying myself and my friend a strait salary of 500perweek each. The excess money will stay in my corporate account in order to grow the company and buy more debt. I'm obviously ok with this, and he's ok with it since it works out to 12.50 an hour, and he understands that if we are successful somehow he will grow with the company and me.
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Old 07-16-2012, 01:48 PM   #44
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Re: Starting Collections Agency

Sebastian,

You mentioned collecting on payday loans. Maybe this is opening a whole new can.... but I really think offering payday loans is a good business idea. I haven't done a ton of research since I am not in the market to be self employed right now. But wouldn't this be a great way to generate cashflow fairly quickly?
You seem educated on that scene - something to consider?
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Old 07-17-2012, 12:56 AM   #45
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Re: Starting Collections Agency

Lemonzest... I'm actually not educated at all on actually offering loans. Also, I don't have enough capital to make it work for me. I could only afford to give about 20 1k loans out, and if any default I'd be kind of screwed. Way to much variance for my starting capital.
The laws on paydayloans are very iffy as well afaik. It would be a way to generate cashflow quickly, but only if you have a large amount of cash to begin with. Takes money to make money and all that. Plus, I really only know about the collection aspect.
But for a person with more money and time to research? There is a reason there are tons of PDL companies.
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Old 07-17-2012, 01:57 PM   #46
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Re: Starting Collections Agency

I know nothing about this industry, but is there a way you could tap into social media sites to shame people into paying you? Think if you took these leads and managed to friend people on facebook (maybe it only works for a few % of people), then you call them asking for payment and when they refuse or ignore you then you expose them.

An underhanded suggestion, sure, but it seems like the entire business is pretty underhanded.

The other thought would be try to use these leads to further some other business related to busto degens, such as debt consolidation, scratch off tickets, or penny auction sites. It seems like if you could become an affiliate for some of these other businesses that have synergy with your clientele then you could give yourself a much better shot at making it.
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Old 07-17-2012, 05:29 PM   #47
SebastianHalf
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Re: Starting Collections Agency

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I know nothing about this industry, but is there a way you could tap into social media sites to shame people into paying you? Think if you took these leads and managed to friend people on facebook (maybe it only works for a few % of people), then you call them asking for payment and when they refuse or ignore you then you expose them.

An underhanded suggestion, sure, but it seems like the entire business is pretty underhanded.

The other thought would be try to use these leads to further some other business related to busto degens, such as debt consolidation, scratch off tickets, or penny auction sites. It seems like if you could become an affiliate for some of these other businesses that have synergy with your clientele then you could give yourself a much better shot at making it.
Wildly illegal, and if convicted of doing this you are looking at 6 figure fines and disbandment of the agency. You are legally only allowed to speak with a debtor about his debt, or his/her spouse. Nobody else is allowed to be told of the debt.

As for the affiliate idea... I'm not sure of the legality of it. It sounds like it could be profitable, but a bit to skeevy even for me I think.
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Old 07-20-2012, 10:14 PM   #48
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Re: Starting Collections Agency

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Old 07-23-2012, 04:46 AM   #49
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Re: Starting Collections Agency

I have nothing of value to add but found this to be a very interesting idea/business and hope you continue to update with your experience and subsequent knowledge. Good luck!
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Old 07-23-2012, 11:16 AM   #50
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Re: Starting Collections Agency

Andy Beal made the largest portion of his manies buying bad debt..
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