The State of Connecticut joins New Orleans, Louisiana; Pittsburgh, Pennsylvania; Toledo, Ohio; and Cook County, Illinois, in using funds from the American Rescue Plan to eradicate medical debt

From here:

USA what is the average price paid by collection agencies for debt - Search (bing.com)

I am not going to get into the merits or otherwise of whether the poor should be charged the exorbitant prices charged by medical facilities for treatments and price gouged big pharma chemicals.

Instead, I am wondering how this plays out – purely from a financial aspect.

Presumably, debts were incurred and represented on the books of hospitals and medics until it became obvious that they could not be paid back.

What happens then is that the debts are sold to collection agencies.

These are the largest in the US.

What are the biggest debt collector companies in the US? | SoloSuit Blog

The biggest debt collection agencies in the United States include¹:

·        Transworld Systems (TSI)

·        Kaplan collection company

·        Midland Credit Management

·        Portfolio Recovery Associates

·        LVNV

According to IbisWorld, the market research firm, other large players in debt collection include Encore Capital Group Inc. and PRA Group Inc².

Now, what I am curious about is the price paid by these debt collection agencies for the debts that they buy.

How Much Do Collection Agencies Pay for Debt? | SoloSuit Blog

“Summary: Have you ever wondered how collection agencies obtain consumer debt? On average, debt collection agencies only pay 4% of the original debt value, while they collect on the full amount. This means debt buyers can make a huge profit if you pay them your full debt. SoloSuit explains how debt collection agencies profit from buying up cheap, overdue consumer debts.”

Ok, so the possibility exists that every billion bucks of debt acquired costs just 40 million bucks. If the debt collectors can grab more than that 4% of face value of debt, they keep it as profit.

So here we come to the run.

At what price will the State of Connecticut redeem the debt owned by collection agencies? The full-face value of 100% of face value or the price that the collection agencies paid of 4%.

The hospital systems and medics have already suffered the loss on the unrepaid debt of 96% (face value of 100% less the 4% they received from the debt collectors).

These hospital systems and medics will presumably NOT receive any money from this State of Connecticut deal to forgive debts for poor residents. The people that will receive the benefit are the debt collection agencies.

(Enquiring minds are curious as to the campaign finance donations made by debt collecting agencies and the changes in bank accounts of politicians that support debt forgiveness schemes).

Any ideas/information?

Onwards!

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