congrats , and gl .

Congratulations, please keep theperiodic updates coming - great to follow along with you.

Really interesting thread. Will have to seriously consider what I read here!

Thanks for posting and GL!

My collection agency has 8 solid employees now. I am still trying to add more, but it seems that for every 3 I hire, only one is able to be kept on the payroll for more than a month for various reasons. Hiring is slow going. One piece of good news though is that September is the end of the slow summer months. Business should be picking up.

In other news, I officially started my debt buying company. It is a registered LLC, and as of Friday I officially bought my first package. 12.5k invested, and hoping that it was money well spent. Because of various software and data issues, we will probably not actually start collecting on my own debt until next Monday. I am extremely excited for it however, and had been searching for the right package to buy for quite some time.

I will update in another month or so with preliminary results.

Update please!

I've been meaning to update this.

Well our first purchase had some bumps, and I wouldn't call it a home run, but it's definitely a double or triple. There were some hiccups because of the structure of the deal, but the long and short of it is that I purchased $333,340 and 560 accounts of debt for 12.5k. This works out to 3.75c on the dollar. I was refunded about $400 because of bankruptcies and deaths that occurred before I bought the debt, so I paid 12k for 320k in face value or so in reality after settling those.
We started working our debt on September 11th. We did not work it exclusively, as I have a client to keep happy, and they wouldn't really have stood for it if we shoved all their work to the side. My collectors actually just finished getting through my package about 4 days ago. To date I have collected just under 9k on my package with another 11kish in postdated checks. I expect 75% of our postdates to clear, but I also expect to collect on another few accounts, so I imagine we will collect another 10k when it is all said and done on my package. Call it 19k estimated collected on what I paid 12k for.
That isn't as good as it sounds though; remember my collection agency still has to get paid as well as my debt buying agency. If my client would have given me the debt I imagine I would have gotten about 45% for my collection agency with 55% going to my client. So that's how I set up my package. 45% of gross collections goes to my collection agency as if it were any other client, and 55% goes to my LLC that purchased the debt. When it is all said and done I expect my debt purchasing company to get about 55% of 19k, or 10.5kish. In addition to that, I expect to be able to sell the remaining 300kish of debt I have left at approximately 2.5-2.75c on the dollar... we'll lowball and say 2.5c. That's an additional 7.5k. That makes 18k for my debt buying company for a 50% ROI in about the 6 months it will take to liquidate all our post dated checks. It went very well despite the hiccups, and I am making another purchase from the same seller in November, and hopefully another one in December if I have the funds available.

As for the collection agency side, our liquidation rate is super high still, but my volume is low. I have 10 employees including a manager, and my net is not where I'd like it to be. I need to find a way to increase our volume while not crashing our liquidation rate; I need to keep my client happy with our liquidation rate while putting on increased volume. I am thinking of upgrading our technology and investing in a predictive dialer to do this, although this may open me up to some lawsuits as well.

What I do know is that tax return season is about 3 months away, and I really need to purchase a lot more debt by that point, because I made more than 1/2 my income this year from the agency in the first 4 months of the year... I want my debt purchasing LLC to be a part of that this coming year as well.

To be continued...

Wish I found this thread a yr ago. I am also debt buyer, mainly auto that hasn't been recovered. We are a small company but purchased over $100 million in auto debt in last few years. Maybe there's something we can help each other with.

Amazing thread. A lot of people think you go into business having everything figured beforehand. It's really not possible.

I have great respect for the way you had an idea that you thought would work and than you tried to execute it at 100%. For the people that say it looked like you started over your head, of course you did. You don't think Mark Zuckerburg or Steve Jobs were over their head when they started? Nothing prepares you but the actual trial and error. On top of that, you start as a debt collector, but you are a manager, IT guy and a 100 other things.

Best of luck,

JV

This has to be the absolute WORST time to be in collections, right? Nobody has any money. At least back when people weren't broke you could probably convince them to pay some of their debt, but now for most people who have delinquent debts, they literally cannot even afford to pay a small portion of it to a collection agency.

I'd love to talk business, and I'm certain that we could help each other out in some ways, but my company isn't really equipped to handle auto debt. My collectors don't know how to collect on it and our talk-off isn't really suited to debt that had been secured at one point. If you have any unsecured credit card, payday loan or retail debt I'd be happy to talk, and if you want somebody to work or purchase your auto debt I could put you in touch with some trustworthy and good people, it just wouldn't be me.
Thanks for the love man. It's been quite the journey. I ABSOLUTELY was unprepared to jump into being a business owner right off the bat... I was waaay over my head. If I wanted to wait until I was ready though I never would have started. Plus I've always been able to hustle up a few k here or there if I needed to; I wasn't petrified of failing.

The more people that are in debt the better time it is for collections. Collection agencies are still making a killing. The price of debt had actually been going up because it is a sellers market; so many people are wanting to buy. I'm doing really well off my first package as far as ROI goes, but for the people that were buying debt 7-10 years ago, they were sometimes literally getting 100% ROI in 6months or less in some cases.... those days are gone.
To answer your question though, the recession we are going through right now has not been bad for collections, at least not in my limited experience and asking my colleagues.

Very interesting... I wouldn't have thought that.

Do you or your clients feel the pressures of the CFPB? I hear through the rumor mill that it will become near impossible to purchase debt with their prescence and agencies will be held accountable under clients compliance standards. Does this new regulatory environment concern you? Have you had anybody try to sue you yet?

It's a combination of a lot of things that makes the price of debt go up actually. It is a seller's market to an extent, but another piece of it is that original creditors are often putting in "no-resale" clauses when they sell the debt; meaning that the purchasers cannot resell it themselves. This artificially makes some debt scarce. People want to buy in many cases, but debt is not always available. Some people I talk to think that prices for certain classes of debt will fall soon, so we will see what the market dictates.

I've been sued three times. I have settled once, one suit was dropped because of lack of any sort of evidence once I refused to settle, and one is ongoing.
I have felt no pressure from the CFPB and actually got a call from them today asking us to register with them. As for our client, I'm not sure what pressure they feel. What I do know is that they are very large and very well established; they have lawyers telling them exactly what to do and don't make many mistakes. As for purchasing debt, well that has become more difficult as I stated in a response right after you posted this question. For Payday loans, which is what we mostly work, we have not felt any pressure but I imagine we will soon with the increases regulation on Payday lenders. There are a lot of issues with PDLs, and I'm not quite sure how it is going to shake out yet. For now I'm going to keep purchasing in the same fashion and keep collecting the same way though until I am told I can't anymore.

if you are a big boy in this space, the name of the game is COMPLIANCE. cfpb bulletins have dictated that all supervised entities (i.e. everyone) are responsible for serving as quasi-regulators for their vendors. so any big time clients are now placing big time demands as far as quality assurance, compliance management, etc., on anyone who will work with them. this is a huge strain on any small to mid size business. JP Morgan Chase just shut down there unsecured collection litigation as a result of the pain in the ass + the recent OCC consent decree .. that timing is not a coincidence.

on top of that, anyone who wants to keep buying debt has other **** to worry about. DBA international (vegas conference, woop!) is imposing "certification"-type requirements, and any seller subject to any real CFPB oversight is going to vet the **** out of their buyers. again, look at chase. in the crash they bought the card departments of a ton of regional banks, and that all used to get sold. that flow has stopped.

to OP, i'm really happy for you that you're making it work. but I can tell you that this space is on rocky ground right now. there will always be a spot for the small side of the business - doing local work, small volumes, for local businesses that will never garner CFPB scrutiny (unless they screw up massively) - however, be aware that the regulations are scooping out the mid-size of this industry ... in order to handle the big-time clients, you need to be able to minimize the marginal cost of compliance (i.e. distribute the cost of compliance over many files, many dollars collected). stay vigilant, and don't you dare get greedy and overextend yourself. seems like you've got a good thing going.. don't screw it up.

maybe all this limitation on liquidity of unsecured debt will pinch the credit market for high-risk borrowers (i.e. the ones all this **** was supposed to protect in the first place), and we can get some meaningful legislation/regulation that both protects consumers and allows for the fair collection of delinquent debt. a pipe dream? yeah, but it's what this space needs right now. it's chaos out there.

basics of supply and demand. fewer cards being issued, charge off rates are down for unsecured debt (due to lower proportionate risk across the world-wide "portfolio")-- plus less being sold, and a bunch of debt buyers who have built infrastructures, cash flow plans, and business plans reliant on volume... they need to feed the machine, and there's no good paper out there to buy. prices go up

I agree with you for the most part. I'm nowhere near the point of the CFPB turning my client away from me. Any client that takes on non-0 agency PDLs is not the type of client that is going to be scared away by an agency that has a lawsuit or two filed against them. If I was attempting to collect on 0s or 1s as far as credit cards, well then I think I would be SOL because of the massive compliance issue. I agree with you that medium size agencies may be squeezed out of that arena simply because they do not have the manpower dedicated to keeping them out of hot water as far as compliance goes.
However, as a small company that is not the area I will be playing in. If I work c/c debt, it will most likely be 2nds, terts or quads that are purchased by myself. The big boy C/C I have no chance of getting my hands on anyway.
However, you hit the nail on the head when you said I would be running into trouble there. I'm smart enough to know I'm not the smartest guy out there, and I know enough to stay in my lane. Right now, PDLs are what we do and we are fairly good at it. I would like to expand into other asset classes eventually, but with the environment being what it is, now is not the time. I may expand into retail, installment, etc, but I am not fooling myself into thinking I should enter the fray of what you are talking about at this time.
On a side note, some people that I respect very much do not think very highly of the DBA certifications and are waiting to see what comes of that process before giving any merit to it.

You sound like you know a lot more about this industry than I do even now though, and I'd love to chat a little bit more if you'd like. Shoot me a pm if you want to shoot the **** about the industry, or if you have any tips you want to pass on to a poor kid trying to make it in this crazy world.

yeah, i don't know a ton about the DBA certifications in detail. all i know is that the cycle for mid to large debt buyers (not-ECM/AACC -i.e. now all under ecm) is largely dead. people are either getting out or trying to position themselves for a reemergence of the industry. the feds have said that they want ACA/DBA/NARCA to prove their worth in being self-regulated trade groups. that's where these certs are coming from (DBA, ACA's renewed push behind PPMS, etc.. plus all the other SAS/ISO and other accounting-type certs becoming popular in this space) .. everyone's sort of boxing out getting ready to try to grab the rebound - and not a lot of shots are going up

like i said, keeping small is smart IMO. such a supply squeeze for debt buyers, and the costs on the mid-high end are not sustainable for many.

feel free to PM me if you want to chat about anything - i'll do my best to help if i can

I did an interview. It is about how I started my business and the problems I faced. Listen to it if you want.

http://armgenius.com/blog/32/arm-gen...ast-episode-1/

If I were in that business, I'd be very, very removed from the company's public records footprint. I realize people have different tolerances for exposing their identity and in some cases naming your business after the proprietor/owner inspires confidence but in the debt collection business? It seems naive to do that.

Anecdote: A friend of mine owns rental properties. He handles his own property management and ran the business under "His Name" Properties, LLC. Moves a college kid into one of his condos. Within 2 months, he starts getting harassing calls at his office about 'bringing a sex offender into the neighborhood'. Turns out the guy he rented to had begun dating a sexual predator (yes, gay) who registered himself with the Sex Offender Registry at that address. The neighbors rallied and his name got absolutely shredded on the internet. He wound up renaming the company but the damage was done. In the internet age, everyone is 'nuclear capable' with their ability to malign someones reputation, rightly or wrongly.

In such a potentially hostile and combative business as yours, I can see no reason whatsoever to thrust your personal identity into the middle of that.

If I had to do it over again I probably wouldn't name it after myself. That being said, we color inside the lines as far as collections go. I haven't had any issues yet, but I agree it was foolish to name the company after myself. My company has a pretty good reputation at this point, and I'm not sure if changing the name would be beneficial anymore. I'm still considering it.

In other news, I signed a lease for a second agency today. This one is a little over twice the size as the first with room for 24 employees plus a private office for myself. The lease comes with an option to move into a space next door a little more than twice that size in 18 months if all goes well. This new agency will be focused on credit cards. Because of all the issues with payday loans I wanted to diversify asset classes and am now doing that. I have had multiple new potential clients attempt to contact me, and the new office is scheduled to be open by January 7th. I haven't been this nervous since I started my first agency.

Credit cards are a new animal for me so I'll be learning all over again. I will update again when I open for business and will answer any questions if they exist.

Awesome - best of luck in the New Year and keep us updated.

following. thanks for the updates this thread is really interesting

Sorry if I'm hijacking your thread for a different topic for a bit. I just have a generic collection agency question and can't find an answer anywhere. It seems you guys may have some opinions on this situation I have.

I have a judgement against a debtor and signed a contract with a collection agency to collect. Their fee is 50% of collections. It has been several years now and the collection agency seems to have found some assets to collect. They sent me a document and they want me to assign all interest, right and title to the judgement to the collection agency. They want this document notorized and will submit it to the court. My question is whether this is standard or are they now trying to keep all the money?

why didn't you just hire a lawyer if you want to liquidate a judgment via judicial remedy.