Collection law firms make a percentage
When you receive a letter from a lawyer or law firm collecting a debt for a creditor they work for a percentage. In most cases they did not buy the debt like a debt collector would.
Of course lawyers may represent debt collection firms, but in this case they do not. They are paid a percentage, negotiated by each creditor.
How much does the law firm make? What percentage of the debt do they get to keep? Here is one answer revealed in a lawsuit by HSBC, dated mid-April 2010.
A Chicago debt-collection law firm has been sued by HSBC Finance Corp. for more than $400,000 in missing funds that were supposed to be held in trust for the bank.
HSBC fired Friedman & Wexler LLC in January after it discovered the firm had insufficient funds in its bank account to cover more than $231,000 in remittances to the bank, according to the suit filed in Cook County Circuit Court on Wednesday.
Upon further investigation, the bank also found four unpaid electronic transfers totaling more than $171,000, the suit said. HSBC said it also has identified more than $24,000 in phony expenses that the firm billed to the bank. The overcharges include expenses for court-filing fees related to complaints that the law firm never filed, HSBC said in the suit.
HSBC hired the firm in 2005 to help it collect outstanding consumer loans. The bank paid the firm 25 percent of the amount collected.
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