Transplant Athlete
Friday, February 04, 2011
  The Soldier, The Credit Card, And Bill Bartmann

As I was perusing Notes on LC, I came across a soldier who was interested in borrowing $25k at a 20.58% interest rate to invest in delinquent credit card debt. He will pay $15453 in interest over the life of the loan. Logic tells us that he would have to get a rate of return greater than 20.58% interest rate to profit here. He mentioned in the Q&A section that he was going to be buying "fresh" charged off credit card debt at an extreme discount and then he would hire "the best debt collection agency in the USA" to recover the money for him. He mentioned the name Bill Bartmann. Which I promptly googled. First red flag: Every result that came up on google heaped high praise on Bartmann, used the same language, and most looked like affiliate pages. It didn't smell right.

In Google's autocomplete feature there were a couple options the highest was "Bill Bartmann Scam" So I guess a lot of people are trying to figure out if this guy is legit. Based on limited internet research here's what I think. This guy gets people to pony up a few bucks to attend one of his seminars, where he tells them how rough his life was and how he made and lost fortunes. Then he tells them about an exciting new opportunity to make money if they sign up for one of his expensive seminars. At the expensive seminar, he tells people that credit card companies sell off "freshly" charged off debt for pennies on the dollar. They can purchase large chunks of this debt at an extreme discount and use his debt collections agency to recover their money. He promises them a 3x return on their money in 6 months or a year.

I checked out a public company in this space, Portfolio Recovery Associates (PRA), to see how much money they make. They do make 3x on their money, but it takes anywhere from 5 to 10 years. As a large public company, they have economies of scale that you can't get from a small $25k investment.

I'm guessing Bill Bartmann's debt collection company doesn't work for free and the industry standard fee is 30% of recovered assets so they would need to recover $58,000 for the soldier to break even. That's about a 40% rate of return on his $25k. Have you ever seen an investment product that earned 40% because I sure haven't. A lot of things have to happen right for this soldier to make his money back on the loans A) Bill Bartmann's collection agency has to be as efficient as PRA's B) There is a serious lack of diversification here. He could be getting a block of loans that are uncollectible and he loses ALL his money. I found another site that alleges hefty monthly fees and also illustrates the lack of diversification.

If (and that's a mighty big IF) he can average what PRA is doing, he might make a small profit maybe $7k. The problem as I see it is he is already carrying $37,000 in debt and he wants to add another $25,000 on top of that. He will most likely pay $10k - $15k in interest on his existing debt over the same time frame. Not smart. I put together a business case for avoiding this "opportunity" and sent it to the soldier. I sure hope he passes on it.

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I've gone through kidney failure twice. The first time in 2000, my mother donated a kidney; and again in 2008, I'm on dialysis waiting for a breakthrough in immuno-suppression medicines before seeking a new kidney.

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