Debt Buyers: Discover These Three Less Competitive Markets With Large Profit Potential

Poverty Denial on a Haringey display board
unemployment fund
Image by Alan Stanton
"At the age of twenty, a child born in Tottenham today will have a quality of life and access to the same level of opportunity that is at least equal to the best in London."

This "Future Vision for Tottenham" was one of several "exhibition boards" prepared by the Haringey’s Communications Team ( the Council’s information unit ). It pretends to residents that things are getting better – despite Government and Council cuts. It also makes a breathtaking promise for the future.

On 14 January 2015 I went to a talk at the John McAslan + Partners Display Space, 451-453 High Road, N17. I photographed this display panel which was on one of their walls.
  (The talk was about a Shop Front Improvement project, which I’ll photograph and write about separately.)

I’ve tried very hard to think of any way this "Vision" statement has some practical and honest meaning. Given what we know about growing inequality in our society, it hardly stands up as a prediction. Is it a party political pledge? If so, it should not be paid for out of public funds.

Jam in January 2035?

Or is it just one more upbeat aspiration? A hope for twenty years time? Not "jam today or jam tomorrow", but in January 2035 – an arbitrary date far enough into the future that nobody will remember.
  But in 2015 I wondered whether any Haringey staff who wrote and approved this drivel read the best selling book The Spirit Level? Do they pay any attention whatsoever to the research of people like Danny Dorling? Or Michael Marmot?
  Worse, have they spent any significant time in Tottenham – and not only the High Road – with open eyes, ears and minds?

Discussing Visions of the Future

I don’t object to elected local Councils encouraging debate about the issues underlying their vision for improving society and the towns or areas they represent. But they should at least follow minimum standards of balance, objectivity and truthfulness.

   Otherwise it is at best, pointless, ignorant and
   stupid. At worst, it is despicable propaganda
   and outright lying.

In Haringey in 2015 such debates and discussions needed to include factors which produce gross and growing inequality between different groups. Including unequal profiles of health; of diseases; of disability; and mental ill health. And wide differences in life expectancy.
  There are issues of employment, unemployment and unequal access to jobs. And of the growing inequality of pay and the growth in part-time and zero-hour jobs.
  There are questions about child care, and policies for education and training. What needs to be done about housing, overcrowding and homelessness?
  Vitally, such debates must include tensions being stoked-up concerning race, ethnicity and migration.

Most of the factors I’ve mentioned are beyond the control of a single borough Council. For things to change so profoundly by 2035 barriers would have to come down and policies change drastically – if not reverse.
  I’ve yet to see any substantial evidence that Haringey Council’s leaders have engaged openly and constructively in such debates with the borough’s residents.
  In my view the display panel is an attempt to "sell" a false prospectus – the promise of a fine future. But not until a time when most if not all the posturing politicians making the promise are no longer around.

Colluding with Political Propaganda

I’m disappointed that John McAslan and his colleagues were willing to display this Haringey Council propaganda on their walls – apparently without embarrassment. Surely they don’t believe it?
  Clearly, John McAslan + Partners are successful and experienced professionals, who work in many countries. Perhaps they take it for granted that local politicians may be vain and self-deluding. People they have to put up with, while working in the place.
  In Haringey, McAslan are enjoying a freebie shop from the Council. So maybe they think it’s diplomatic to display their benefactor’s empty political slogans and posters?

If so, I suggest they read (reread?) Václav Havel on The Power of the Powerless. I’ve copied this description from the The Wikipeda entry on Havel’s essay. (Accessed on 1 February 2015.) 
 "Havel uses the example of a greengrocer who displays
  in his shop the sign ‘Workers of the World, Unite!’. Since
 failure to display the sign could be seen as disloyalty,
 he displays it and the sign becomes not a symbol of his
 enthusiasm for the regime, but a symbol of both his
 submission to it and humiliation by it."

Havel called this behaviour "living a lie" – hiding what someone believes and desires in order to be left alone by the powers-that-be. He contrasted it with "a life lived in truth".

§ "For forty years you heard from my predecessors on this day different variations on the same theme; how our country was flourishing, how many million tons of steel we produced, how happy we all were, how we trusted our government, and what bright perspectives were unfolding in front of us. I assume you did not propose me for this office so that I, too, would lie to you. Our country is not flourishing.". – Quotation from Václav Havel’s first New Year’s Address to the Nation as President of post-communist Czechoslovakia, 1st January 1990 (Source: ● Excerpt & links. ● Full Speech. English translation).

§ Other real Labour local councils have set better examples than the wretched nonentities running Haringey in 2015. Link to The Islington Fairness Commission which worked from June 2010 to June 2011.
§ Islington Fairness Commission’s Final Report.
§ Trust for London website: London’s Poverty Profile
§ The Spirit Level.
§ www.dannydorling.org/
§ The Marmot Review: ‘Fair Society Healthy Lives’ UCL Institute of Health Equity 2010.
§ The Health Gap : The Challenge of an Unequal World.
§ "It’s very good jam", said the Queen.
"Well, I don’t want any to-day, at any rate."
"You couldn’t have it if you did want it", the Queen said. "The rule is, jam tomorrow and jam yesterday – but never jam today."
The White Queen offers jam to Alice in: "Through the Looking Glass and What Alice Found There".
§ Václav Havel: The Power of the Powerless.
§ Article by Natalie Nougayrède: A tip for Europe’s frustrated young radicals: reclaim the dissident spirit. The Guardian 12 June 2015.
§ Making the History of 1989. Roy Rosenzweig Center for History and New Media at George Mason University,

Debt buyers, typically private or public companies, hedge fund investors, private equity companies, or even collection agencies, often buy portfolios of charged off, past due debt from banks, credit unions, telecom, hospitals, or other credit granters.

Debt buying has increased greatly in the last few years, causing greater competition and portfolio prices to increase. Its very probable that prices will continue to increase for another two years or so. Reasons include a decline in credit card charge-offs. In addition, since 2008, there has also been a reduction in credit card originations. This translates into smaller profit margins for bad debt buyers.

These purchased debt portfolios, which represent millions of dollars in unpaid delinquencies, are often large balance accounts. However, they’re usually acquired at some discount.

Conventional thinking is that accounts with larger balances can translate into greater profit for the debt buyer. Also, most collection agencies are attracted to and spend more of their collection activity on large balance accounts, thinking similarly. In similar fashion, the majority of collection agencies tend to prefer larger balance accounts, and they focus the lion-share of their collection efforts on these. However, there are some other options to consider, that are both less competitive, and can offer greater profit margins, such as:

-Bank Demand Deposit Accounts, that are overdrawn checking/ATM accounts (DDA)

-Stafford Student Loans (federal government loans for higher education), and

-Payday Advances

Below are some advantages:

Significantly Discounted Prices

Banks and other institutions usually focus more of their internal collection efforts on larger balance accounts, because of the greater risk involved should these default. Because of limited in house collection personnel, banks don’t place much focus on smaller balance accounts. These can often be purchased at great discounts.

Debt buyers that outsource these accounts to outside collection agencies can reduce their internal expenses and overhead tremendously. The important point, though, is locating collection agencies whose specialty is small balance DDA accounts. Most collection agencies dedicate most of their attention on larger balance accounts, due to the potential for greater profits.

Because of this, banks and other credit granters typically lower their prices for small balance debts to make them more appealing to debt buyers.

For collection agencies that specialize in collecting small balance DDA accounts, recovery rates average in the double digits. This means great opportunities for debt buyers. Investment returns of 50% or greater are not uncommon.

Debtors Normally Pay Off Smaller Balance Accounts First

Debt buyers should seriously consider smaller balance accounts. Typically, debtors pay off their smaller balance accounts first. This gives them a sense of making headway. This can seem a more manageable approach than attempting large balance credit card, or other accounts, which can feel overwhelming. After paying off small accounts, they then feel empowered to take on the larger accounts.

Collection agencies with an expertise in recovering on smaller balance demand deposit accounts will produce better collection success. Bad debt buyers will also see greater profits!

Lesser Competition

At this point, there seems to be little competition for debt buyers with respect to small balance DDA accounts, cash advance loans, and small balance student loans. Because most of the debt buying attention is on larger balance accounts, this may be a excellent time to look at this market.

As a consequence of existing bad economy, with continuing high unemployment, and increasing past due debt, banks and other companies are witnessing ever-increasing levels of delinquencies, defaults and charge-offs of small balance accounts.

Competition in this market is sure to increase, as many more investors and debt buyers become knowledgeable of the profit potential in this arena. This growth in competition will also mean increased portfolio prices, which will reduce the profit potential.

Do you want to discover a lot more valuable information as well as solutions regarding how to increase revenue available for debt buyers? David P. Montana’s insights, expertise and advice has long been highly sought after for three decades in the field of of debt collection services.

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