Debt Collectors

August 10th, 2012

These excerpts were taken from the Debt Collectors article by the CQ Researcher.
By Barbara Mantel
July 20, 2012

The entire industry — third-party collection agencies, debt buyers and law firms in the collection business — “was a boom industry for about 15 years, from around 1993 until 2008 or 2009, driven in large part by the proliferation of credit cards,” says Mike Ginsberg, president and CEO of Kaulkin Ginsberg, an industry adviser in Rockville, Md. But the industry was “hit square in the mouth” by the recession, says Ginsberg, as credit-card loans dried up and more consumers began paying off card balances. Just over 11 percent of total credit-card balances were 90 days or more delinquent in the first quarter of this year, down from about 14 percent in early 2010.

Debt buying has become one of the fastest-growing parts of the collection business, and “it can be much more profitable” than collecting debt on a contingency basis, according to industry adviser Kaulkin Ginsberg. Debt buyers purchase portfolios of older debt for cents on the dollar, then collect what they can — sometimes “up to three times or more of the original purchase price,” Kaulkin Ginsberg said.

“At the end of the day, if the bank is not providing the kind of documentation that is needed in the original sale, it’s not going to be available later on,” says industry adviser Mike Ginsberg. “That’s where the regulation needs to be.” ACA International wants the federal Truth in Lending Act amended to require original creditors to maintain consumer account information for at least seven years after a debt is written off.

With installment credit came delinquencies, and small collection agencies proliferated in the 1920s and ’30s. Debt collectors, usually with just a few clients and employees, used phone and mail to reach debtors and if necessary made personal visits, becoming known as “door knockers,” according to Kaulkin Ginsberg, the industry adviser. Collectors kept hand-written records on index cards.

The full article can be found on the CQ Researcher website.


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