A debt collector's return on investment was made clear when the debt collector filed suit to collect a $66.00 chiropractic bill. The debt collector easily convinced a judge to enter a judgment for $275.000, which is $209.00 more than the original debt. Looked at in a different way, the judgment debt totals an amount that is over 3 times greater than the amount of the original debt.
The $209.00 excess judgment reportedly represents costs, attorney's fees, and interest. Nearly half that amount is a part of the collector's return on investment, and the rest is expense. But even that is not the entire amount of the return on investment collecting a $66.00 debt.
Debt collectors start with a percentage of every amount they collect. The debt collector's percentage is of course not revealed by the judgment debt.
So, in this case which was one of "100 randomly selected cases" filed in Nebraska and reviewed by ProPublica, the debt collector probably made a profit of up to 1 1/2 times the amount of the debt, or up to 150%, conservatively estimating the amount of its percentage and the interest at about $100.00, with expenses in court costs and attorney's fees totaling perhaps $109.00, and of course the original debt of $66.00, all of which together would total the amount of the $275.00 judgment. And the debt collector's expenses in pursuing the debt in court were all returned, to the penny, as a part of the eventual judgment against the debtor. Not a bad business model, perhaps, if you are interested in pursuing that line of work.
In another case reported by ProPublica, a debt collector garnished at least two of a debtor's paychecks after the case against the debtor was closed. It took the collector "more than a month" to return the amounts it garnished from those paychecks, money which it had no legal right to garnish in the first place at that point. See Paul Kiel, "For Nebraska's Poor, Get Sick and Get Sued" (ProPublica, posted on April 28, 2016).
You cannot get any more "bad faith" and unfair dealing, it seems, but there's more in the ProPublica article.
Please Read The Disclaimer. ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with Supplements). You are invited to visit the author's website here. All rights reserved.
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