Thank you for your suggestions, Determined1, and welcome to RegulationRoom. It seems like you are concerned that the benefits of breaking the law for some debt collectors outweigh the costs. Can you give us any specific areas or violations which need to be deterred by higher fines which aren't being deterred right now?
This option doesn't make economic sense. Debt buyers do serve a practical purpose because they allow the creditor to unload a massive amount of debt at one time. The cost of negotiating individual deals with each of those 1 million delinquent consumers would negate the benefit they get from the consolidated offload. Debt buyers allow the creditors to clear their books, which enables the cycle of lending to continue. The transaction between those two entities doesn't change what is actually owed on the account.
This is a fantastic idea. Right now, debt buyers buy debt for an average price of 4 cents on the dollar. Many debts are bought for 2-4 cents on the dollar and many other debts are given away for free. Once the original creditor has made the decision to sell the debt, they should try to contact the debtor one last time to let them have a chance to payoff their debt at a significantly reduced rate. If I were an original creditor, would like to get the most money I could for a debt owed to me. And so if I could get 10 cents on the dollar directly from the debtor, rather than 4 cents on the dollar from a debt buyer, then I would see no reason not to offer a significantly reduced debt settlement rate to the debtor (or as you call it, letting consumers bid on their own debt). Right now, original creditors offer no significant reduced rate to debtor before selling for 4 cents on the dollar. Most creditors barely even offer debtors 10% off the debt as a settlement offer. Sure, a creditor could more quickly offload portfolios to debt buyers by selling them at 4 cents on the dollar. But creditors could also make way more money offering a onetime chance at 10 cents on the dollar (or something really attractive but still more than 4 cents on the dollar). Perhaps the CFPB should make a rule that allows consumers/debtors the chance to receive a onetime offer that is valid for only X amount of days (maybe 45 days) from the date of the letter sent from their creditors of a significantly reduced rate. The offer would only be valid for a short amount of time and would also inform the consumer that, should the consumer not accept the offer, the creditor would then turn it over to a debt buyer. This letter would only be sent if the creditor’s intentions are to sell the debt and not just another attempt to collect. So that this way it gives the consumer one final chance to clear the debt owed and the creditors also have less loss and more profits and would be able to lend to more consumers, give better rates to consumers, and stimulate the economy. Because more money that is changing hands at higher values (10 cents on the dollar vs. 4 cents on the dollar) instead of sitting in the accounts receivable section waiting to be collected (one day, if ever) stimulates the economy. This rule would not negatively impact anything (or anyone) and only positively impacts everyone. One minor impact might be on the debt collection industry possibly receiving less debt in their portfolios that they buy, but this minor impact is offset by the large positive impacts on the economy.
Moderator
1
Thank you for your suggestions, Determined1, and welcome to RegulationRoom. It seems like you are concerned that the benefits of breaking the law for some debt collectors outweigh the costs. Can you give us any specific areas or violations which need to be deterred by higher fines which aren't being deterred right now?
View this comment in the discussion thread
RHN91362
2
This option doesn't make economic sense. Debt buyers do serve a practical purpose because they allow the creditor to unload a massive amount of debt at one time. The cost of negotiating individual deals with each of those 1 million delinquent consumers would negate the benefit they get from the consolidated offload. Debt buyers allow the creditors to clear their books, which enables the cycle of lending to continue. The transaction between those two entities doesn't change what is actually owed on the account.
View this comment in the discussion thread
stopwithspoofedcallerID
3
This is a fantastic idea. Right now, debt buyers buy debt for an average price of 4 cents on the dollar. Many debts are bought for 2-4 cents on the dollar and many other debts are given away for free. Once the original creditor has made the decision to sell the debt, they should try to contact the debtor one last time to let them have a chance to payoff their debt at a significantly reduced rate. If I were an original creditor, would like to get the most money I could for a debt owed to me. And so if I could get 10 cents on the dollar directly from the debtor, rather than 4 cents on the dollar from a debt buyer, then I would see no reason not to offer a significantly reduced debt settlement rate to the debtor (or as you call it, letting consumers bid on their own debt). Right now, original creditors offer no significant reduced rate to debtor before selling for 4 cents on the dollar. Most creditors barely even offer debtors 10% off the debt as a settlement offer. Sure, a creditor could more quickly offload portfolios to debt buyers by selling them at 4 cents on the dollar. But creditors could also make way more money offering a onetime chance at 10 cents on the dollar (or something really attractive but still more than 4 cents on the dollar). Perhaps the CFPB should make a rule that allows consumers/debtors the chance to receive a onetime offer that is valid for only X amount of days (maybe 45 days) from the date of the letter sent from their creditors of a significantly reduced rate. The offer would only be valid for a short amount of time and would also inform the consumer that, should the consumer not accept the offer, the creditor would then turn it over to a debt buyer. This letter would only be sent if the creditor’s intentions are to sell the debt and not just another attempt to collect. So that this way it gives the consumer one final chance to clear the debt owed and the creditors also have less loss and more profits and would be able to lend to more consumers, give better rates to consumers, and stimulate the economy. Because more money that is changing hands at higher values (10 cents on the dollar vs. 4 cents on the dollar) instead of sitting in the accounts receivable section waiting to be collected (one day, if ever) stimulates the economy. This rule would not negatively impact anything (or anyone) and only positively impacts everyone. One minor impact might be on the debt collection industry possibly receiving less debt in their portfolios that they buy, but this minor impact is offset by the large positive impacts on the economy.
View this comment in the discussion thread