I’ve seen stories of individuals buying up a bunch of debt for cents on the dollar then just forgiving it. Why can’t this been done on an individual scale?
In: 4529
Generally speaking there are two limiting factors, time and access.
The debt only becomes “cheaper” as it passes through multiple sets of collector hands, and generally only reduces in purchased cost with time. The closer the debt gets to being “expired” (almost all debts will fall off credit reports eventually, and become roughly meaningless), the harder it is to capitalize on it for a collector. For every dollar a collector spends trying to collect the debt they may only get one or two debts to pay out and the rest expire out. Higher risk, higher reward.
The second reason is that these debts aren’t listed as “John Doe SN 001-00-0001 $NonsenseAmount”, they are sold as blocks of debt, and they aren’t sold on an open market, it takes a great deal of time and resources to be able to access those markets. By the time a single individual managed to get the licensure and other accesses necessary to buy a block of debt they would generally have been better off just paying the debt itself.
A highly dedicated person, willing to take the time necessary to get the necessary access to the debt markets, research their specific debt, and manage to find said debt available on the market, could in theory buy it up for pennies on the dollar (or even less. A church just bought 3.3M USD worth of debt for less than 16000 USD and wrote it all of, at a rate of less than 0.003 per dollar of debt). In practice, it’s really difficult to find YOUR debt and get onto the market at the exact right time to buy it.
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