20 Sure Fire Ways to Lose Money, and Get Sued

Many companies invest in purchased debt. Portfolios range from thousands to billions of dollars. Some companies, however, have found ways to lose money, create unnecessary liability and exposure in their collection and litigation of purchased debts, and be less effective than they could be.

The following is a partial list of some of the many ways companies can make less money, and even get sued in the process in acquiring, collecting and litigating purchased debt portfolios. Please keep in mind that these are certainly not recommended practices, but are in fact a list of what not to do:

1. Overpay for the portfolio. The days of paying 1% for purchased debt are long gone. However, some companies are substantially overpaying for portfolios. There is obviously a huge difference between very small dollar out of statute paper which has been bouncing around collection call centers for many years, and paper which has never seen a collection floor. But don’t worry about it; just go ahead, pay what you have to grab everything you can find, and just hope for the best.

2. Pay no attention to the chain of title. Your seller is giving you computerized information. Of course, they own the debt. If not, why would they be selling it? What more could you ever need?

3. Don’t bother to worry about any written terms and condition in the Bill of Sale and acquisition agreement. You don’t even need a Bill of Sale from the seller. A simple handshake and check will do, especially if you’ve never done business with each other before.

4. Don’t plan ahead for obtaining documentation from your seller in the future. None of the debtors will ever ask for any proof. They’ll just get out their checkbook. Right?

5. None of the accounts are currently in collection or repayment. You can assume that no collection agency is currently working the paper. Just go ahead and forward the new portfolio to your call center.

6. The balances are correct. After all, the computer wouldn’t lie. While you’re at it, don’t be bothered whether there are any "paid prior" accounts.

7. The debtor died? Probate and creditor claims are so complicated. Just call their heirs and make demand. They’ll pay you, won’t they?

8. Ignore scoring – Don’t bother to ever score the portfolio. Treat everything the same. FICO scores usually aren’t that accurate. Send the entire portfolio to the collection floor, and then to outside collection and litigation. Sue them all. Don’t worry about the huge differences in the collectibility of certain accounts; just send them all to your collectors and attorneys and hope that they can make you money.

9. Don’t send any demand letter. Debtors usually just throw them away. Skip the demand letter and save money on postage.

10. While you’re at it, completely ignore the FDCPA, and other Federal and state statutes. In addition to no demand letters, ignore debtors’ requests for verification under the FDCPA. While you’re at it, don’t worry about any other applicable state or Federal laws. In fact, calling debtors after midnight insures that they’ll be home for your call.

11. Don’t check for any prior or current bankruptcies. Ignore the 11 USC §362 automatic stay. Besides, you didn’t receive any bankruptcy notice from the debtor. If the debtor files bankruptcy in the middle of your collection activities, ignore it. Maybe the debtor will pay you anyway.

12. Pay no attention to Identity Theft. It’s probably just another scheme for the debtor to avoid paying the debt. Besides, the police report they fax to you could be a fake.

13. If you skip trace and find some one who may be your debtor, go after them. Don’t worry if they’re actually not the correct party. They probably owe some one some money, and might as well pay you.

14. Call debtors who have provided the seller or prior holder of the account with a Cease & Desist request. After all, they didn’t provide you with notice. Just go ahead and call them anyway.

15. Make collection calls into "closed" states, and cities regardless of whether you’re licensed there.

16. Sue everybody. Don’t bother to check asset/employment information first. Most debtors will immediately settle as soon as they’re sued.

17. Statute of Limitations. What statute of limitations? It’s just a defense anyway. Just redate the last payment/credit date, and it’s no longer a problem.

18. Print up your own statements. Pretend that you mailed them out to the debtor. Courts really like to see them.

19. Is there a co-debtor? Even if you’ve been paid, you can always sue them later in a separate lawsuit for the full balance.

20. When suing, ask for late charges and other fees when they’re not in the contract or terms and conditions. Courts will always give them to you.

Just follow these simple steps, and we will guarantee that you will collect more money, and never be sued. (If you believe this, we have some prime swampland we’d like to sell to you – complete with running water.)

George L. Cohn is a senior attorney with Collection Lawyers (www.CollectionLawyers.com), a California-based debt collection and litigation law firm. Mr. Cohn has over 25 years experience representing creditors and can be reached at GCohn@CollectionLawyers.com.