IMGCAP(1)]
Louise Epstein began building her company, Charge-Off Clearinghouse, in 1997 with a Web site and a formula for finding portfolios that yield strong results.
She found success in a hurry, which conflicted somewhat with the debt-buying industry's prevailing image at the time of being a male-dominated trade.
Today, Charge-Off Clearinghouse purchases portfolios of charged-off consumer credit cards and loans and uses nationally recognized collection law firms to collect on the accounts. The company also repackages and resells smaller portfolios to collection agencies and attorneys.
"We purchase large packages of charged-off, unsecured consumer debt from lenders, issuers and other big industry players. Then we cleanse the accounts of deceased debtors and bankruptcies and sell them," Epstein says. "We're not a collection agency. We're not collection attorneys. Providing charge-offs to professionals is our only business. Customizing portfolios to meet our clients' requirements is our specialty."
Charge-Off Clearinghouse has been profitable from the start and has bought or brokered an estimated $750 million of credit cards and consumer loans. "I have two objectives: to serve clients and to not compete with them," she says. "Most companies that sell debt are in the collection business. We're not and that is one big thing that distinguishes us."
Epstein built a model to value accounts that she believes is equal to the best around. Not only does the technology help price portfolios, it also helps match the portfolio delivered at closing to the portfolio reviewed.
"Our customers know that if we're selling something, then it has survived our model," she says. "We quit advertising years ago and our phones still never stop ringing. My customers are my referral source. Happy customers are the best advertising."
Armed with an MBA in information systems and 25 years experience in finance, specifically government bonds, Charge-Off Clearinghouse was part of a goal to embark on a new venture in life.
Before forming the firm, she was president and CEO of Peleton Capital Group Inc., which offered financial services to both public and private entities. She also was director of funds management for the Texas Veterans' Land Board, an investment banker for a regional brokerage house, assistant executive director of the Texas Bond Review Board and director of public finance for the state of Texas Treasury Department.
"I figured I can keep doing what I'd been doing or find another good starting point," she says. "I surveyed the financial landscape and it came to my attention there were vast amounts of bad consumer debt and an absence of a model to value and market it. I had that kind of experience in the bond business, so I used my education and experience to find a niche in the bad debt world."
Epstein began providing bad debt portfolios to small collection agencies and law firms that may not otherwise acquire accounts because they lack the capital or knowledge to acquire them outside of their geographic regions.
"There may be a law firm that only wants to acquire debts in their particular state," she says. "I wanted to have clients in 50 states, so that I when I found a portfolio that passed my model I could buy that portfolio wholesale and sell it on retail basis to a variety of clients."
Portfolio valuation is both an art and a science, she says. "Because we are not a collection agency and we don't have to provide product on a regular basis to a collections floor, we can selectively purchase," she says. "We are never compelled to buy. That is the big secret to our success. If we were compelled to buy, we would be forced into making sub-optimal decisions. In my mind, that is the most compelling piece of information that I can share about what we do."
Epstein has catalogued more than 7,000 e-mails of individuals and firms through her Web site. She takes pride in conducting business on a personal level, as well as professional.
"If we get a call from someone with a concern, they're getting a call back right away," she says. "I like the challenge that the company represents and I love my customers. I feel a very close relationship with my customers and it is genuine. The reason this business is fun is because of the personal relationships."
Epstein says she is not necessarily trying to sell at the highest price. "There have been times when we've had outrageous offers on accounts but the parties involved are likely going to fail or run into trouble collecting," she says. "That's not going to be good for my issuers or the customers. I want them to have a good success rate."
Her customers like the personal touch that Epstein provides. "I feel good that I can send her information and it won't get into the wrong hands. She's going to do the best for me and be fair to all parties," says Jeff Busch, member/owner of Liberty Acquisitions LLC in Golden, Colo. "She acts more as an agent for both the buyer and seller as opposed to representing just one interest.
"I think she has been successful because of her ability to allow technology to help her get her job done," he says. "It helps her run her company by combining technology through her Web site along with her work ethic. That is huge."
Getting information quickly posted on her Web site keeps Charge-Off Clearinghouse and its clients on top of sales and leads, Busch says. "She's sticks with things from the start and until a deal reaches fruition," he adds.
Epstein has attended conferences and met some of her clients for the first time, only to be greeted with a big hug. "I had one customer say he bought his first portfolio from me and I kept him out of trouble and told him what to do. What can be more gratifying than that?" she says.
Plus, she adds, individuals in the industry tend to be smart and talented or they would not be successful entrepreneurs. "They are everything that America offers," she says. "Many started out small. They're independent thinkers who like to take risks. Some of those risks will pay off and some won't but that's what makes what they do so interesting."
Epstein's opinions about the industry are respected by more than just her colleagues and customers. She is a part of three think tanks: The Roundtable Group; The Gerson Lehrman Group; and The Society of Industry Leaders.
"In these various think tanks, we provide industry experts to everyone from NASA to the federal government," she says. "In my case, it is institutional investors interested in investing in bad debt. They may be some of the biggest asset developers in the country and they'll call Gerson and ask who to invest in. That's when they'll refer them to me. I get compensated for a phone call to tell them how the market works and how to value portfolios. It is very cool and very fun."
She also has provided expert witness testimony for MBNA Corp., the Securities and Exchange Committee and many commercial financial services regarding how to value portfolios. "These are the biggest cases in the industry and when they need to bring in someone to value portfolios, they bring in Charge-Off Clearinghouse," Epstein says. "To me, that is such an incredible honor. What a joy it is to work with these incredible minds. The lawyers on both sides of the cases are the best that money can buy. In many cases when I've appeared in federal court to explain to a judge how to value a portfolio. They really want to understand it."
Epstein is happy to help them and adds that she is thrilled to have found a successful niche in her second career. Her clients are glad as well. CCR
