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Hello fellow "fools". I was recently approached about an investment opportunity and would greatly appreciate some fool feedback. Although this is not the appropriate board for it---the investment opportunity involves consumer bankcard debt.

A friend in the banking industry recently told me about the availability to purchase consumer bankcard "bad" debt portfolios/accounts, as a private investment. He said that the ROI is unreal (as high as 75%-100%!) and that I should check into it ASAP.

Apparently, anyone has the ability (with the right connections) to buy these accounts for as little as ten cents on the dollar and attempt to collect and recover on their own, as they now officially own these accounts.

Has anyone heard of this type of investment? If so, are the returns really that high?

Thanks in advance for any advice and/or info.......

BB
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He said that the ROI is unreal (as high as 75%-100%!) and that I should check into it ASAP.

Anytime I am offered investment advice, the first question I always ask myself is, "Is this too good to be true?"

In this case am ROI of 75-100 percent answers the question without looking much further.



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To get any ROI at all, there has got to be an R.

They wouldn't called "bad debt" cards for nothing.

You'd be lucky (and a hard worker) to get 75% Return _OF_ Investment.

(Better than the Market in recent years, but ...)
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A friend in the banking industry recently told me about the availability to purchase consumer bankcard "bad" debt portfolios/accounts, as a private investment. He said that the ROI is unreal (as high as 75%-100%!) and that I should check into it ASAP.

Apparently, anyone has the ability (with the right connections) to buy these accounts for as little as ten cents on the dollar and attempt to collect and recover on their own, as they now officially own these accounts.

Has anyone heard of this type of investment? If so, are the returns really that high?


Hi there!

First, a Fool is not a fool! Fool with a capital "F" has a whole other meaning from fool with a lower case F, ok? *grin*

Anyway, I'd say it sounds . . . risky.

Why?

Well, the accounts you're buying, by the time it gets to 10 cents on the dollar, will have been delinquent for quite sometime, have already gone through internal collections dept, probably already been to more than one collection agency. And YOU are going to be the one to make the deadbeats pay? I don't believe it.

You're going to expend a LOT of energy and your own money to try to collect and MAY get 1 out of 10. You'll have to make phone calls, deal with abuse and people avoiding you, handle a ton of letters with no response.

Nope, doesn't sound good to me.

Ishtar
(former deadbeat)
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you'd also have to make sure you were familiar with the Fair Debt Practices Act, because if you go about collecting the wrong way (ie, being overly rude or threatening) the debtor could sue...


-mjj
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My father bought a $16,000 loan for $3000. The loan holder needed money fast, called my dad and sold it to him. The loan in particular was a high risk loan and it was a second on a home (therefore not secured should the buyers of the home foreclose).

After my dad bought the loan, the buyers of the home were getting in trouble, and couldn't afford both loans, they called my dad, HE purchased the house (refinanced it) included fees, etc, and sold it to them - the benefit to them, lower monthly payments, the benefit to him - he got $5,000 cash from the refinance, and earns the monthly payments and interest (which he is charging more than the actual loan HE was able to get because of THEIR credit). There is also a pre-payment penalty. It's called "Hard Money".

So far he's MADE $2000 cash just from buying the loan - NOT including the monthly payments he made prior to the refinance and what he's making now with the refinance.

Buying hard money loans can make you money - but it's a risk also. He was able to turn the risk into a money maker AND a security (the house).

Of course, my dad does this a lot, and knows what to look for. This is just one particular scenario that I happen to know the details on.

C.
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There are companies that buy large numbers of old credit card debts. They may pay 1-2c on the dollar for old ones where the phone number and address have changed and skip-tracing is needed; may pay 30c on the dollar for any that have just gone 90 days.
Usually is is guaranteed by the bank that there are no dead people or bankruptcies in the pile.
There are people who buy these and then do nothing all day but try to collect these old accounts.
The agreement with the bank is that if someone whose account has been sold to you pays the bank directly, they then turn the money over to you.
For the astute, sophisticated, a person may make a nice return. For someone with a 9 to 5 job who comes home tired and wants to relax, not my idea of fun. You won't sit home and make in the money. It will be phone calls, bothering people who don't want to be bothered, and being very careful you don't go afoul of the law by violating Fair Debt Collection Practices.
Not a scam, but a tough way to make any money.
Best wishes, Chris
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9-5 jobs? Do they really exist? I thought they were a myth (like Exeter17's S/O picking ablilities)


Ex17
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A friend in the banking industry recently told me about the availability to purchase consumer bankcard "bad" debt portfolios/accounts, as a private investment. He said that the ROI is unreal (as high as 75%-100%!) and that I should check into it ASAP.

Apparently, anyone has the ability (with the right connections) to buy these accounts for as little as ten cents on the dollar and attempt to collect and recover on their own, as they now officially own these accounts.

Has anyone heard of this type of investment? If so, are the returns really that high?


Yes, they are legitimate. Anyone can buy old, "bad" debts from lenders and attempt to collect on them. However his rate of return is WAY off. Think about it - how many people do you think are going to pay on a debt that went bad five years previously. You might be able to devote time and effort to it and make some money but likely you'll find it more hassle than it's worth.

Leviathan
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Sounds similar to buying tax liens. Yes, the returns could be that high, on the bills you can collect, and how many of them do you think you, as an amateur in the field are going to get? You know any debts that might have a good chance of being collected are going to be snapped up by professional bill collectors just as most good properties at a sheriff's sale are. As for any paper you would pick up how do you plan to collect it? Going to spend your days making harrassing phone calls? What about those collections you don't collect, that's money down the drain and I'm sure there will be a lot more of them than the other type. I've been know to go for some speculative deals but this is one I wouldn't touch.

herb
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cyber

the other thing is your father is not buying bad debt just hi risk paper. This is done a lot, especially mortgages tho it's usually between businesses and not individuals but it is still an active loan. what the other poster was talking about was buying bad debt and trying to collect

herb
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A few years ago I read about a man who bought these old debts. He started a small company and went about collecting them a different way. He trained his employees to be NICE to the people he was collecting from. They went out of their way to be extrememly nice, polite and understanding. They set up easy no interest payment plans (since he paid such a small amount for the total debt, he didn't need to add more interest to the debt). They never made threats, were never rude, just persistent. He was very successful in collecting these debts, as he took a fresh approach and ended up making friends with these people. They, in turn, made an effort to pay him.
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Do you remember anything about this article? I'd like to search for it on the web to read it just for my own interest.

If you find anything, please reply.

Thanks,

Marla
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