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What does ROI (Return on Investment) have to do with choosing to sue a business customer who has stopped paying for product received? Everything! There are costs involved in filing suit against a customer. In addition, the legal process is typically very slow, and the chances of collecting the debt owed goes down the older the debt becomes. For these reasons, it behooves a company to look at the ROI of a law suit before any legal action is taken.
To estimate a lawsuit’s ROI, the company must look at four things:
· the original debt amount;
· the lawyer’s contingency fee;
· the chances of successfully collecting the debt;
· and the company’s out of pocket court costs.
The total amount that could potentially be collected is the dollar amount of what is owed by the customer. From this total amount, the contingency fees of the lawyer must be deducted. If the litigation contingency fee is 35%, the Net Potential Recovery would be the original amount plus interest and recoverable costs less the contingency fee. Next we estimate the likelihood of collecting from the customer. Factors such as if the business is likely to continue operating, the quality and value of the customer’s asset base, other liens or judgments, must be looked at to arrive at this percentage estimate. Apply this percentage to the Net Potential Recovery amount to calculate the Expected Value of Recovery. The difference between the Expected Value of Recovery and the company’s out of pocket costs to litigate is the estimated return on investment..
If the ROI is large enough to make filing suit against the customer worthwhile, then the company should move forward with a lawsuit. If, however, the ROI is not significant, then it is probably better to not invest time and money in litigation. The Kaplan Group is a commercial collection agency specializing in large claims. More information including an infographic depicting the decision process behind filing a lawsuit and sample ROI calculations can be found on our website.
A Cause to Support – the ARM Industry Needs To Occupy Wall Street!
I know, I know, we're getting into the game a bit late, but this may be our final, great chance to not only get positive press but to further our own agenda as well. It's time to Occupy Wall Street.
What's that, you say? Leave our comfy desks and auto-dialers and join a bunch of recycled or reincarnated Hippies to bite the manicured fingers on the hand that feeds us, to attack the very same financial institutions which has filled our calling queues and pockets for oh-so-many glorious years? Yes.
Hear me out as I present a considerable number of reasons for us to weigh in on the side of these protestors and others of us who comprise the "99ers." (1% rich; 99% poor)
#OccupyWallStreet (on Twitter) is a movement that began in NYC on September 17 with an encampment in the financial district. The occupiers proclaimed their methods to be non-violent and their purpose to be the ending of the moneyed corruption of this country.
Like a spark to tinder, it caught fire.
What started out as an isolated protest group unacknowledged in the mainstream press has spread nationally and internationally, reaching Madrid, San Francisco, Los Angeles, Madison, Toronto, London, Athens, Sydney, Stuttgart, Tokyo, Milan, Amsterdam, Algiers, Tel Aviv, Portland, Chicago, Palestine, Phoenix, Montreal, Cleveland, Atlanta, Kansas City, Dallas, Orlando and Miami…and on and on.
Notice any positive parallels? Our industry is certainly people-powered, we can be found in cities nationally and internationally, we assert that our methods are non-violent, and our purpose is to…make a buck or two? (That last doesn't seem catchy enough.)
And, we have common ground in attacking Wall Street transgressions. After all, have these people not undermined the very source of our revenue – uncontested debt? Legitimate debt, legitimately owed, has always given our industry a fairly decent shot at working hard to both satisfy our clients and make a fair return on that effort.
Thanks to Wall Street, this is becoming impossible.
Think about it. Even if a debt we are pursuing is undisputed and acknowledged by the debtor, thanks to the ripple effects of the Great Recession (which no one disputes was brought on by the greed and excesses of Wall Street), fully one-sixth of U.S. citizens live in poverty and overall some 18% of our workers are either unemployed or underemployed.
A few examples of the getting-blood-out-of-turnips problem we are facing:
Medical. Roughly 40% of consumer collections is in the medical field. With roughly 50,000,000 Americans without health insurance and health-profiteering unencumbered by legal strictures adding to what is owed, how do we expect to collect from a shrinking pool of those who are still well and still employed?
School Loans. Wall Street moved into "Higher Ed" a few years back by bankrolling For-Profit Colleges. They, in turn, charged excessive tuition (by any standard) and then annually proceeded to dump students into the workforce burdened by tens of thousands of dollars in loans. Student debt is reaching 1 Trillion dollars – already having passed credit card debt – and is seen as the next "meltdown bubble." Student loan default rates are vaulting into the teens, and fully 50% of these defaults are from students who attended for-profit colleges.
Our industry has already begun to collect on those accounts, and we are surely "feeling their pain." Try getting as much as a $50/Month payment out of a kid flipping hamburgers at a local fast-food outlet who is saddled with as much as $100,000 in debt.
In fact, there is a major student-stoked national campaign that is demanding that ALL student loan debt be forgiven – and it is gaining momentum. Put THAT in your portfolio and smoke it.
Credit Cards. Speaking of credit cards – a major source of lust and revenue for debt purchasers as well as traditional agencies – but is it really profitable – or even ethical to collect on? Banks not only ran up these losses by the unconscionable escalation of interest rates and service fees, but then sold our industry hundreds of millions of dollars in "tainted" write-off's which never should have been sent out to third-parties to start.
I am referring, of course, to the famous "Linda Almonte" whistle-blowing case at JP Morgan Chase which is still wending its way through the halls of government oversight agencies. That shoe, when it drops, will not land lightly. It will shake the banking – and our – industry.
Mortgage/Home Loans. Faulty foreclosure paperwork, loans proven to be incomplete and in some cases downright fraudulent, and the outrageous robo-signing of mortgage with or without proper authentication; how it is that not one banker or wall street executive has been arrested?
Things are so rotten in Bankster Land that the Attorney Generals in a number of states are refusing to release a number of our major banks from lender liability. Banks have been seeking broad releases to protect them from legal claims growing out of securitization, servicing, loan costs, unresponsiveness to requests for modification and robo-signed foreclosures, etc. Santa will not grant them their wishes this year.
Collateral Damage. Yep, you know them well – the people who acknowledge their debts, are more than willing to pay them off, but due to job or home loss brought about by a bankrupted economy – have barely enough to meet even basic needs for food and shelter.
Now, let's get back to our thesis – that the ARM Industry would be well-served by joining our young and unemployed friends on the protest lines. Let's let them know that they are not the only ones who feel, in their words, "wronged by the corporate forces of the world" and that "upon corruption of that system, it is up to the individuals to protect their own rights, and those of their neighbors."
As responsible citizens and business owners, we must stand up for the legitimate rights of the debtors, our neighbors.
After all, we want our neighbors to stand up for OUR legitimate rights, yes? See you at "Liberty Square."
Beginning January 1, 2012, new Maryland rules will make it tougher for debt buyers to collect their debt
The Baltimore Sun reported on September 7, 2011, that Maryland’s Court of Appeals has enacted new rules to protect Maryland debtors- http://www.baltimoresun.com/news/maryland/bs-md-court-of-appeals-ru... .
Reading the new Rules, http://www.courts.state.md.us/rules/rodocs/ro171.pdf , at p.4 through 11, it is clear that the Court is reacting to the excesses of debt buyers who have been forced to dismiss thousands of debt collections cases. Just about ten days ago, LVNV Funding LLC, was forced to write off about $10,000,000, in debt owed by approximately 3,500 people, as part of a class action suit, see article in Baltimore Sun
The new Maryland Rules, 3-306, 3-308 and 3-509, apply to all cases filed after December 31, 2011. Given the fact that tens of millions of dollars of debt were sold to debt buyer who did not know about the new Rules, the interesting question, is, “What will happen to all of that debt?” I cannot imagine that the debt buyers required the detailed records necessary now to prove their cases. Particularly, if the debt was sold more than once, the chain of paperwork may well be lacking. Debt buyers who purchase large blocks of debt may not be able to obtain the paperwork on each debt to prove their case. As a bankruptcy attorney who is consulted by debtors on a daily basis, I will recommend to them, even more so than in the past, that they should go to court and demand strict proof of the purchased debt. It will be a brave new world after January 1, 2012.
7. the Affidavit will have to include the name and last four digits of the account number for the original creditor and the nature of the debt;
8. if the account was charged off, the Affidavit will need to include information as to when and the amount of the charge-off, as well as an itemization of additional fees and payments made after charge off and the date of last payment; and
9. (in direct response to companies such as LVNV Funding, who were not licensed properly as a debt collector when they filed suit), the plaintiff must include in the Affidavit their Maryland debt collection licensing numbers and dates issued.
If the Debtor files a Notice of Intention to Defend and there is a trial, what does a Plaintiff have to prove? According to the new Rules, if a plaintiff is not the original creditor, the Court “shall consider the requirements” listed in (1) through (9) above before granting a judgment. What does it mean that the Judge should “consider the requirements”? The new Rules give the Judge a certain amount of flexibility, but, clearly, some Plaintiffs, who bought debt that was sold three or four times, will not be able to obtain judgments against the debtors.
The devil (and the debt) will now be in the details. :)
Do we need more proof Washington's not working for middle class families? We got it once again this week.
The big banks and their army of lobbyists couldn't stop the creation of a new Consumer Financial Protection Bureau, so now they are trying to undermine its work, enlisting their Republican friends on the Senate Banking Committee to stop the nomination of Richard Cordray to lead the agency -- just to try to slow up the agency from doing its work.
It's outrageous -- and we've got to hold them accountable.
I'm starting a petition: Sign on now to call on the Republicans on the Senate Banking Committee to protect the interests of middle class families, to confirm a director for the Consumer Financial Protection Bureau, and to let the agency do its work.
The goal of this new agency is to protect consumers by ending the tricks and traps and fine print banks have used to make it hard to understand and compare the costs of mortgages and credit cards. We need to hold Wall Street accountable for issuing the kinds of deceptive loans that nearly brought our economy to its knees in 2008.
I fought hard for these new protections and faced an army of lobbyists to hold the banks accountable. I am proud to have been part of the David vs. Goliath effort that led to the passage of this new agency. I was also proud to help set up the new agency over the past year as an assistant to the President.
We've made a lot of progress toward fixing the broken credit markets and preventing the next crisis, but the enemies of reform are at it again.
It's time for Republicans in the Senate to put the interests of hard working middle class families over the special interests of large financial institutions. We've got to speak out and make sure our fellow Americans know the truth.
Sign my petition to Senate Republicans now: Urge them to put the interests of families first and to allow this consumer protection agency to do its work!
We need clear rules to fix broken credit markets, protect consumers, and get our economy growing and creating jobs.
I've made my life's work fighting for middle class families and pushing back against special interests. I know what it means to live one pink slip or one health crisis away from economic disaster, because I did. That's why I'm working so hard to change things.
But I can't do it alone. I need you to stand with me, today. I need you to make this an issue that the Republicans can't duck.
Sign my petition to Senate Republicans now: Urge them to put the interests of families first and to allow this consumer protection agency to do its work!
And I'll make sure the petition and our signatures get delivered to the Republicans on the Senate Banking Committee.
Thanks so much for your help.
Judges have signed off on more than 5,000 warrants allowing borrowers who don't pay to be jailed since the start of 2010. Portfolio Recovery Associates, a debt buyer, made $44 million last year on $281 million in revenue, a 16% net margin.
You wouldn't be crazy to think that debtor's prisons are a thing of the past. Debtors have historically been treated pretty poorly: under Roman law, a debtor's body could be chopped up and the pieces given to his creditors (although they were more likely to be turned into slaves). So debtor's prisons, in comparison, might seem less harsh. But they were squalid and debtors weren't given any provisions. No sentences were set; you were there until you paid up. Borrowers owing as little as 60 cents could be jailed indefinitely. They were officially abolished in the United States in 1883.
But they're now making a comeback in a modern form. As the debt-collection industry buys up bad debt and then seeks payment, it's started relying on arrest warrants to get its way, throwing those who miss court appearances or don't pay in jail. The Minneapolis StarTribune was one of the first to report on the resurgence: after analyzing court data it found "the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009." The practice is inconsistent, varying state-by-state, and the actual punishment varies. But there have been some cases that stand out:
In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.
It's impossible to say how widespread this is across the country as no national statistics are kept. But the Wall Street Journal recently reported on the same phenomenon:
More than a third of all U.S. states allow borrowers who can't or won't pay to be jailed. Judges have signed off on more than 5,000 such warrants since the start of 2010 in nine counties with a total population of 13.6 million people, according to a tally by The Wall Street Journal of filings in those counties.
In Minnesota, arrest warrants have been issued for debts totaling as little as $85. It's not free to put people in jail, either, and taxpayer dollars cover the cost. Not to mention the distraction from pursuing violent offenders. Law enforcement "can't quickly access arrest orders for dangerous criminals because their computer system is clogged with debt cases," reports the WSJ.
And there's something else we're being distracted from. In Joe Nocera's weekend NYTimes column, he told the story of Charlie Engle, a marathoner who has been serving a 21-month sentence for mortgage fraud. Was he a lender who suckered borrowers into loans they couldn't afford? A banker who sliced and diced mortgages into securities with AAA ratings? No. He's a borrower who supposedly lied on two liar's loans (although as Nocera reports, the evidence for that is pretty fuzzy). So while Angelo Mozilo walks free, making a nice profit for his company and himself, Engle goes to jail.
Banks and debt collectors are making a tidy profit, while the customers they prey upon are being thrown in the slammer. "We have now imprisoned one generation of debtors after another," Samuel Johnson observed in 1758, "but we do not find that their numbers lessen." His words ring true today.
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