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So with me today, Jared Strauss from avoidbk.com.
Jared, you are a former debt collector, a record-setting,
award-winning debt collector in your former life.
You've been doing the work we do here at CRN,
working with consumers to help resolve debt for over a decade,
you're awesome.
The last segue about how collectible accounts are when
they get sent to debt collectors probably shocked a lot of people
to learn that one in five accounts is ever gonna be paid
a dime on, ever.
Next, is that debt collectors have tools, right?
In this technology age, where they have real time access to
your credit report, what does that mean?
What can they see on my credit report that makes me have to be
concerned about them?
What are they paying attention to?
>> Well, the first thing, it really actually depends on what
stage of collection someone is in.
So, let's just kinda break it up.
So, in the first six months of collections, when the accounts
are generally still with the original creditor, or
in a pre charge-off collection agency placement environment,
and in that scenario,
the agency is essentially an extension of the creditor.
They're following the same routines, the same procedures,
same policies.
In that environment, they're not really looking at all that much.
That environment is mainly a technology-based environment.
They're using predictive dialing technology.
Generally in those circumstances,
there isn't really any human interaction on your account
unless you're on the phone with them.
That's about the only time they'll see your information.
Now once the account charges off, it goes to a third party,
whether it be a collection agency or a law firm,
that's when the credit report will begin to come into play.
And the first thing a collector's looking for
in that environment, when accounts are again 7 months or,
it's between 7 and let's say 12 months delinquent,
the first thing they're looking for
on a credit report is available credit.
Most people don't have it.
Most people who end up in collections have fallen behind
on basically all of their unsecured debts.
So to find available credit, I would say a collector would be
fortunate or lucky to maybe have three or four out of every
hundred accounts again, in that stage of delinquency,
that would show available credit.
Now why is this important?
Because what's not on your credit report is your income,
your savings account balance, your checking account balance,
any retirement accounts that you have, annuities,
brokerage information, none of that, none of that's there.
So the only way a collector can determine if you have
the ability to pay the account off right then and
there is with available credit.
Everything else, they're relying on you to tell them.
So that's the number one thing they're looking for.
Back when I was in collections, when I got a brand new case,
a new business, a new account we just got and it had available
credit, I'm spending a lot of time on that account.
Simply because I know if I can get that person on the phone and
I can show them a way to solve their problem, that
there is a high probability that that consumer is going to pay.
And collections, much like our business,
Michael, is all based on probabilities, all of it, and
available credit is the number one probable trait or
indicator for a collector to say, hm, yeah,
I think I'm gonna spend some time on this guy.
Beyond that,
the next thing they're looking at is your place of employment.
Is your job history put on your credit report?
If it isn't, they're gonna do a quick Google search,
check out LinkedIn, check out Facebook,
generally they're gonna quote your name.
They'll put a quote, first name, last name, quote, and
then they'll put a city or a state,
and then they're gonna look for any jobs that you might have.
If you're on your employer's website,
they're probably gonna find it.
And again, if you have a LinkedIn profile,
they're definitely gonna find it.
And if you don't privatize your Facebook correctly,
they're gonna find that as well.
So if you're ever in a situation to where you're behind,
make sure you clean that up in a very proactive manner.
Not because I'm trying to encourage people to hide from
their debts, simply because I'm trying to encourage people to
be careful until
they're adequately prepared to deal with their debts.
The reason I say that is most people need time to recycle.
They lose a job, they get sick, something happens, they don't
repair themselves in six months, or nine months, or a year.
It can take a little longer.
So the last thing you wanna do is prepare,
basically give ammo to the debt collector to accelerate their
collection against you when you're
not financially prepared to deal with it yet.
>> When I'm preparing a file, and thank you for all of that,
that's important for people to recognize, understand, and
actually kind of deliberately go about securing their Facebook,
and maybe you question whether or not you should have your
LinkedIn at that time or what's on there.
Maybe you need to update that.
And there's a couple of ways you can update that.
We can talk about that in the comments for any viewers.
So, when I'm looking at a file and I'm preparing them for
some realistic expectations, look, I know we're gonna go out
there, we're gonna deal with these accounts, and
these are the kinda results we're looking for.
Those results are often going to, from my perspective,
be based on what I see about them.
If I put a, I gotta think like a debt collector, and I see that,
okay, so I need to know if my client's paying a mortgage,
I need to know if they rent.
I need to know if they're paying a car payment,
how much is that car payment?
Who's the finance company?
Is it Porsche?
Or is it Toyota, you know what I man?
>> Sure.
>> These kind of things start to also paint a picture
of somebody.
If they're keeping a mortgage current and
a car payment current and two other credit cards, but
just not the one that we're trying to negotiate, that's
a different collection target for a collector, I'm sure.
And I want you to kinda walk us through that.
>> Yeah.
>> Is to, okay, well, I see these things, I'm gonna spend
time on somebody who's paying everybody else on time,
all the time.
They're a high payer, a high target for collectability.
What do ya do?
If you're a collector.
>> Yeah, so to continue down the path, available credit,
place of employment.
Next thing I'm looking at is the status, the delinquency or
current status of the remaining accounts.
And like you just mentioned, I'm gonna look at the auto,
I'm gonna look at the house.
Now the reason I'm looking at the auto is because that gives
me a pretty good idea of the individual's income.
Cuz a lot of people, well, they can't afford a Porsche if
they're not making enough money to qualify for one.
So that's helpful to determine potential income.
On the house side, I'm looking for equity positions.
Simply because there might be a refinance opportunity to where
that consumer can refinance, maybe settle all their debts in
tandem with that refinance, and resolve their problem that way.
So the high concentration of R1s, R1s for the people at home
just mean you're current, it's a revolving account,
a credit card, you're current on it.
So if I'm a collector, if I'm collecting on a credit card and
I notice that you're paying everyone else, I'm going to
assume that maybe there was some kinda dispute with this card.
Whether it be an interest rate change or
perhaps a merchant situation where you disputed something and
the bank didn't agree with you.
I'm gonna spend a lot of time on that person cuz they're paying
everyone else.
If I can help figure out that dispute with them,
resolve it, and
there's some money to be paid, I'm probably gonna collect it.
So definitely looking for that.
I'm not really paying close attention to people who
are still paying their smaller balanced accounts.
To me, I mean I'll pay a little bit more attention to those
people simply because it's a sign of good faith,
good intentions.
If someone is paying little balances in my mind,
they're paying them cuz they can afford them, and the reason
they're not paying the account that I'm collecting on or
any other large balances that they are not paying is
simply because they can't afford them.
So definitely looking for consumers who are paying a high
concentration, are the ones that I used to get excited about.
And beyond that, really, just to get even deeper and
most collectors probably don't look that deep,
but it helps you kinda paint a picture of the consumer you're
about to talk to before you even talk to them,
is I'm looking at the open dates on these credit cards.
How long did they have them for?
I'm looking at the credit limit versus the balances on
the chargeoffs.
Did they max the cards out before they charged off, or
did they leave some credit on there?
If they left some credit on there,
that tells me I'm dealing with a pretty good person
here who legitimately couldn't pay their bills.
Didn't want to run them up in excess, didn't want to make
the problem worse, and someone who looks at life like that,
again, higher probability of working out an arrangement.
So that's the main stuff that I'd be looking for.
>> No, and that's really key information.
So it's really about a debt
collector setting themselves up with expectations that,
if you know in advance and you can kinda prepare yourself, or
at least understand when you're working with a professional.
You, me, anybody else out there that does this kind of work is,
is that you're more prepared, and you can expect certain kind
of settlement savings when it looks like a grenade
blew up on your credit report and shrapnel flew everywhere.
Versus somebody who might just have had a dispute with
a creditor, or selectively defaulting,
because there was a change in their financial circumstances
that led them to the inability to pay, but
they might be paying a couple of small ones.
Having a loan, a mortgage if it's not in the money equity or
in a great equity position or a regular car loan or lease.
Of course if you don't have that, you don't pay it,
they take it back, and you can't get to and from work.
So those are normal things,
but it doesn't necessarily always guide the collector.
>> Yeah, [COUGH], excuse me, if consumers are paying their
mortgage and the car, I didn't put any onus on that.
They need their car, they need a roof over their head.
And if I were in a similar circumstance to them,
I would prioritize my mortgage and
my car payment above the credit cards as well.
About the only time in history where that changed was the big
fallout.
>> Yeah.
>> In 2007 and 2008, but then, I think a lot of
people fell behind in their mortgage intentionally for
the purpose of modifying them.
>> So yeah.
>> But besides that, it's always been priority debts, mortgage,
car, secondary debts, everything else, and
that's just human nature.
>> Yeah, we're back to historical norms.
Well some people think we're still not out of the recession
or getting back into one, but for the most part,
collectors don't change their attitudes unless some major
shift like the recession,
like the event of the Consumer Financial Protection Bureau,
the cop on the block on the beat.
The debt collectors have never had to fear like to that degree.
So we've seen a lot of changes in attitudes.
We covered that on the last segment.
Moving forward,
we're gonna jump on a couple of big things like we talked about.
Stay tuned, and for
why do you wanna set yourself to settle all your debts at once?
Why do you need to care about what a debt collector sees you
doing with other accounts that weren't paid, but
now are suddenly.
So, I think we're gonna jump into that section next.
But for right now, we'll put a wrap on this.
>> Okay.
>> Thanks for all that information,
we'll see you on the next video.
>> You bet.
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