How do debt collectors work? I had [a post about debt](https://www.reddit.com/r/YouShouldKnow/comments/fgfal5/ysk_you_have_rights_when_it_comes_to_debt/?utm_source=share&utm_medium=ios_app&utm_name=iossmf) in another sub that went viral so I’ve been getting a lot of comments on it. There’s so many people saying that they didn’t acknowledge their debt and eventually the debt collectors stop trying.
How tf is this a viable business? From what I understand, they buy debt at a discount and charge the full debt or even more than 100% to profit. Do most people pay the debt collectors? It seems like if a lot of people don’t pay that this would not be a feasible business to ever start.. so they obviously make money some how. Am I on the right track or am I missing something?
In: Economics
They purchase the debt from someone else. They get more money back than they spend.
A simple example. Jeff owes Visa $15,000. He hasn’t paid a single cent in over a year. I buy the debt from Visa for, say $500. Visa is happy, because $500 is better than nothing.
I go after Jeff and he agrees to pay me $1,500. He’s happy because it’s less than paying $15,000, and the calls and letters will stop, and it will show on his credit report that the debt is settled.
There are people who just never pay up. Say, I also purchased Mike’s debt of $20,000 and I paid $500 for it. But he keeps ignoring me, or maybe he moved and changed his phone number and I don’t know how to contact him. You might think I’m out $500, but remember, I made $1,500 from Jeff. So this week I brought in $1,500, and I spent $1,000, so I made a total of $500.
Now there’s a bit more to it than that, but the basics is they spend less than they make. Some debt collectors purchase multiple people at once, for steep discounts. So out of 10, if they get 2 or 3 to pay, that could be enough to make a profit.
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