Agencies and corporations whose names these individuals have never heard of suddenly ask for immediate payments of large sums of money.
How does this happen, and why? Why are collections agencies so pervasive and so aggressive?
The fact is, for the past ten years, people's old debts have been exceedingly profitable for the right kinds of companies. Credit companies used to stand to lose more than they would gain by trying to get people to pay off their old debts. In the past, it was more profitable to just forget such old debts.
Nowadays, the situation has changed. How? With recent advancements in technology, debt collection agencies are able to target the debtors by a likely they are able to repay the debts. Financial statistics about all Americans are collected into vast databases. Debt collectors can pull up people's credit scores and other crucial lifestyle information with the push of button, and target people accordingly.
The more aggressive a company is, the more money it now stands to make collecting on debts. Some of these agencies spring up like mushrooms after a rain, buying maxed-out, unpaid credit accounts, such as credit cards, from companies like Visa or American Express. For every single US dollar of debt will cost the collection agencies just pennies for these accounts.
Then, they pull up their databases and target those they expect to persuade to pay the debt. A collection agency sometimes pays as little as 25 cents for every $100 of debt. At that low rate, if they make the delinquent borrower pay back even one dollar of debt, they make their money back. If the debtor only pays $4 for a total liability of $100 then the collection company will make a profit of around 400%. Persuading people to pay is not very difficult, since these collection agencies now have the power to destroy people's credit rating. People are harassed night and day by phone calls, made to feel worried and guilty until their spirits break and they pay up.
Debt collection is now so profitable that finance researcher and analysts predict that collection agencies will buy $110 billion worth of debt in 2008 alone. In 2000, third-party companies purchased only $55 billion worth of debt from original lenders.
That's a huge rate of growth, and it's only going to increase--despite the fact that old debts are now being sold to collection for slightly more than before, in the face of all the collection agencies scrambling to make money from the old debts. The majority of collection agencies are short term companies, here today and gone tomorrow.
One of America's biggest buyers of old bad debt is Asset Acceptance Capital, which made a whopping $51.3 million in profits in 2005. Another company, Portfolio Recovery Associates made $36.The revenue of the company has increased by five times since the turn of the millenium, and in total $8million that year. The upshot? Make sure to pay off all your debts. Also at this time, be ready to fight with these over eager debt collection agencies that are toeing the line of the law with fierce tactics in order to repay your debts, some of which are not actually real debts.
Gary Milton has been writing on the subject of debt for several years and his articles are distributed widely on the web. He writes for the debt relief site, Rebuild.org and has many interesting debt consolidation and help articles prionted there including Debt Consolidation - What Are The Options?
Article Source: http://EzineArticles.com/?expert=Gary_Milton
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