are credit card companies insured against loss

larp

I had over 10 years ago a credit card and due to ill health then homlessness i couldn,t pay the card off,,, so i am pursued by a debt collection agentcy ,, that part i,m not concerned about,, but what i would like to know is,,

the credit card issuer would they have been insursured separatly against my failure to pay back the money i owed them ?

please excuse the spelling all part of having a head injury

grumbler

I don't think that CC companies use and need any insurances. They have their own 'insurance' that is built into the interest rates they charge their customers depending on the estimated risks.

However, this is absolutely irrelevant as it doesn't affect the fact that you owe them in any way.

Have they been pursuing you for all 10 years or started recently?

bengal-stripe

There will always be a certain number of people who cannot pay their debts, or in the case of death, where the estate cannot settle. That is built into the business model, just like a retailer selling perishable good will have to write off a certain percentage.

Nevertheless, both will try to keep the written-off percentage low and if need be, the CC will chase you and demand payment by all legal means.

InsideInsurance

In theory they could potentially buy insurance but in practice they simply hold capital to cover those losses. In recent years you'll have heard on the news many banks having to increase their bad debt provisions because of the increased number of peoples defaulting. Indeed the rules are now going to be changing such that the lenders must put in provisions as soon as they are aware of the problem and not only once the default has occurred.

Debt collectors work in one of a couple of ways, they either are simply instructed to get the monies and either charge a fee or keep a proportion of the monies collected or alternatively they "buy" the debt in which case the bank gets paid and the debt collectors keep whatever they manage to get back.

Years ago I used to work for a catalog company and we used to sell the debt to the collectors but we only received about 20% of the debt and the other 80% was written off

The providers overall risk appetite is reflected in the interest rates they charge and a chunk of the interest they earn is used to create the capital to provision against bad debt.