Yes, scrubbing is a real term in the settlement industry, and a process that is invaluable to consumers who are enrolled in an effective Debt Settlement Program. It is a process that has been worked out by both settlement programs and effective collection firms which are trying to work in the most efficient manner possible of finding consumers ready to settle their debts.
So, are there advantages to list scrubbing? And, if so, what might they be to you the consumer? There are definitely advantages, because it takes out of the equation the adversarial aspect of debt settlement. How so? Here is a simplified excplanation. The debt collector has purchased as a debt buyer, a large amount of debt from a particular creditor. Lets say that creditor XY credit card company has old debt which the consumer has not made payments on in 8 months. So the debt collector approaches the creditor to purchase the debt at a discount of lets say 25%. So, the collector is willing to pay 750.00 dollars for every 1000.00 dollars of debt.
Why would the bank or original debt holder be willing to sell the debt for less than its face value? Yes, excellent question, please allow me to answer. The bank or original creditor is not able to keep a non performing asset on its books forever. Remember when the banking system almost collapsed? This was one of the problems. Consumers were beginning to default on assets like mortgages, and no one knew about it, or if they did, they had no way to figure out, what the degree of the default was. So, now financial institutions must remove the debt from their books so everyone is clear just what the real value of the stated assets are. The debt buyer is looking to make a profit, nothing more and nothing less. The settlement company is looking to protect its client and get the debt settled for them, the original creditor is looking to get the non performing debt off of its books, so here is why everyone wins. The bank first sells the debt to the collector, then they collect on an insurance policy protecting them from defaults, and claim the difference between the sale amount and the insurance proceeds as a loss on their tax return for that year. The debt buyer or collection company gets an asset they can settle on for a profit, and the consumer gets their needed settlement for less than what they owe, and the debt settlement company looks like the heroes. Avoiding endless litigation, along with the famous debt validation defense. Everybody wins.
I can tell you firsthand that we receive a large number of calls asking if we can provide companies that are willing to scrub there client list on a monthly basis, in the hopes of getting things resolved.
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