Frequently Asked Questions and Answers

How does SunLAN’s management compare to management found at other companies in this industry?

SunLAN prides itself on having a small management team. SunLAN has learned from its competitors that having a large staff does not always mean large profits. By having a smaller management staff than their competitors, SunLAN has cut its costs and remained a very nimble company. It is always important to be able to react to economic conditions quicker and with minimal impact to the Company’s operations. To accomplish having a small staff, SunLAN adopted a strategy different than most companies. Most businesses make decisions when the need for a decision arises, however, SunLAN knows in most instances exactly what decision must be applied before there is a need for a decision. Therefore, SunLAN developed a strategy based upon having rules that limit the scope of operations confronting management every day. These rules govern how the investor owned businesses will be managed on a day-to-day basis. SunLAN’s management knows that if they follow their rules, they will achieve profits at the level expected. Having rules made it possible to develop, in most cases, computer programs that handle many of the business processes. The greatest advantages in this type of operation are that decisions are consistent and there is little opportunity for human error. Another great advantage is that when the management staff is kept at a minimum, costs are lowered and the savings passed on to our investors.

How SunLAN can earn above average profits for their investors when the economy is in such dire conditions?

The reader needs to understand that to be successful in the nonperforming debt industry, there must be both good and poor economic conditions. Prices for debt falls during poor economic time and rises when the economy returns to better times. In other words, debtors have the ability to pay their obligations during good economic times and often falter during economic downturns. Because of this constant fluctuation in the economy, SunLAN understands the need to purchase debt when the prices are low during poor economic times and the opportunity to collect the debt improves when the economy returns to better conditions. This strategy allows SunLAN to earn above average profits for their clients.

You state that debt buying is a multibillion dollar industry that is relatively unaffected by the ups and downs of the economy; can you explain?

It is important to remember that higher collection rates achieved during good economic times does not necessarily equal higher profits. The same can be said when collection rates fall during poor economic times in that they do not necessarily equal lower profits. The reason is that while collection rates are higher during good economic times, so is the cost of debt when debt is bought at the same time collections occur. The counter statement is debt prices are lower if bought at the same time debt collections are lower. Hence, it doesn’t take a rocket scientist to figure out that price and collection rate are relative when calculating profit margins; leaving the broadest margins in play when debt is bought during poor economic conditions and collected on during good economic times.

Profits for our investor owned companies are the ultimate goal of SunLAN. To that end, SunLAN desires to earn at least as good a profit during poor economic times as good economic times. However, one way SunLAN improves investor profit margins is by purchasing as much debt during poor economic periods when prices are low and collect on that debt when the economy returns to better times; a point when debtors have the means to pay their obligations. So as you can see, we need the economy to fluctuate for profit maximization.

News articles are describing huge losses by banks and how it is necessary for our government to bail them out of their financial problems. What impact does this condition have on the SunLAN group of companies?

When the economy is down there is some impact on SunLAN’s ability to collect debt at the same rate as when the economy is in good times. However, the news articles you are reading are directed at banking problems and conditions experienced by debt collection firms following the 2008 banking crisis. Keep in mind that news people need to sell copy, so they tend to point out the extreme conditions in the news they report.

Banking woes were brought on by the mortgages written by banks. Many of the mortgages written in the past 8 to 10 years were high risk in nature. When mortgage rates trended upward and the home owner’s monthly payment rose, it became more difficult for them to meet their monthly obligation. Couple this fact with the economy going into one of its down cycles (as it does every so often) and people started getting laid off, the problem compounded. People panicked, thinking they will be the next to get laid off, so they stopped buying homes. Realtors and investment clubs that had heavily invested in homes they thought would quickly rise in value were caught with homes they couldn’t sell. These investors were caught by surprise holding thousands of dollars in mortgages they couldn’t pay. As housing prices fell, the people still in their home soon realized they were holding a mortgage that was larger than the value of their home. People started walking away from their homes, but, if they were still working, they paid their other debts, including credit cards.

SunLAN companies are debt buyers and as such are not trapped by the cost of debt collection. When the economy takes a downturn, SunLAN’s companies don’t experience any change in their overhead. The amount of collections fall to some degree, but so do prices paid for debt; hence, profits remain high and are often improved.

How secure is my investment. Given that the economy is in the dumper and stocks are falling like a rock, will I lose my investment with SunLAN?

Every investment outside a FDIC insured savings account is at risk of loss. The trick is to minimize the opportunity for loses as much as possible. Investing in nonperforming credit card debt may sound risky, but the fact of the matter is, the risk is seriously reduced by the fact that your money is invested in negotiable instruments that (when purchased correctly) do not fall in value (like stocks) and can be readily sold on the debt market. In most cases, sales are at or near the same price originally paid and often are sold at a higher price than originally paid. The ability to resell your investment at about the same price paid reduces the risk you take in making the investment and the potential for gain is so great, it only makes sense that investing in credit card debt is a good deal.

What is the historical collection rate experienced by SunLAN’s companies?

Collection rates vary greatly between portfolios due to the quality of debt included in the portfolio. A better way to view collections is to look at the historical rate of collection compared to the amount of money required to purchase a portfolio. Typically, SunLAN has returned approximately 4 times the purchase price in about 4 years. Since this return is based upon net dollars after expenses are paid, it gives the investor a solid 15 to 30 percent return per annum.

What happens to accounts when the debtor goes bankrupt?

SunLAN either sells bankrupt accounts to buyers specializing in such debt or the bankrupt account is written off as a loss. Most portfolios experience a 7 to 10 percent loss due to bankruptcy, death, indigence, incarceration or similar circumstance.

What is SunLAN’s strategy for collecting debt knowing that debt cannot be collected when the Statute of Limitations has ran out?

SunLAN has adopted a three prong strategy for collecting debt: 1, Telephone calls; 2, U.S. Postal Service; 3, Judicial. Part of the decision to use a collection path is based upon how much time remains between the time an account is bought and the end of the statute of limitation. When debt is bought directly from a bank, there is about 2.5 to 3 years remaining on the statute of limitation. In this case we can employ all three approaches for collecting the debt. When time allows, we make contact with the debtor and begin collections by negotiating a settlement with the debtor. When there is little time remaining on the statute of limitation, then we go straight to the legal route. In all cases, the process of getting a judgment negates the statute of limitation and provides the time needed to employ a more patient, long-term collection strategy. Debts are often collected several years after making the purchase.

Does SunLAN ever get sued by a debtor for violating the “Fair Debt Collection Practices Act” (FDCPA)?

Yes. SunLAN has been sued twice in 7 years. The first suite was won because the debtor made a false claim and we were able to prove our position. It is the constant vigilance by our collection agencies and SunLAN over the collection agents employed by the agencies and the extensive recording of phone calls, transactions and other interfaces with debtors that prevent such cases from occurring. The second case is one that is unavoidable. The debtor was served with documents; we won the case and filed a claim on her bank. In the meantime, she filed for bankruptcy and before we could release her assets, the bankruptcy judge granted her bankruptcy. She, in turn, filed a charge for violating her rights. Unfortunately, the law does not provide time for us to react through the various departments we must deal with to get assets released in a time frame that would keep us from violating the law. There is no way to avoid this violation, because the law states that we are in violation as soon as the judge’s gavel hits his desk. This violation is rarely pursued, but when it is, it results in a $1,000 fine. Most bankruptcy judges will not allow debtors to file a cross complaint for this violation and tell the debtor they need to wait about 20 days. Some judges allow the debtor to file. Our posture is that when a judge allows the claim, we pay the fine and move on since it is too costly and not worth fighting the issue.

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