Cover Story

To make a fortune on America's mountain of credit-card debt, Bill Bartmann first had to go broke himself

On an October day in 1985, in Muskogee, Okla., Bill Bartmann--company founder, father, community leader--stood on the floor of his factory and wept. So did his 71 employees. Their final work shift complete, they filed past Bartmann to shake his hand, return his embrace, clap one another on the shoulder, and cry some more. "I've been through some deaths in the family, including my father's," Bartmann says quietly today, "but nothing was more traumatic than that afternoon. It was the most tearful, soul-wrenching experience of my life." Bill Bartmann's business had failed.

The demise of Hawkeye Pipe Services Inc ., a manufacturer of pipes for oil rigs, could not have been swifter. On July 25, OPEC's oil cartel all but crumbled. Prices dove as crude flooded the market, bringing drilling in Oklahoma to a near halt virtually overnight. For thriving Hawkeye Pipe, it was an unequivocal death sentence: July sales were $1 million, August sales were precisely zero. As Bartmann puts it, it was as if a hand had reached out from 10,000 miles away and turned off the faucet. He snaps his fingers: "It was just that quick."

And so, once the company's assets had been auctioned off at yard-sale prices, Bartmann found himself in that most dreaded of entrepreneurial circumstances: ensnared in his personal guarantees, more than $1 million in debt.

That's when the telephone calls started. Surly collection agents rang at all hours of the day and night, promising lawsuits, hurling insults, demanding money the family didn't have. Bartmann's 7-year-old daughter, Jessica, once fielded a call. "Your dad's not there, huh?" the voice growled. "Well, you tell that deadbeat if he doesn't pay his bill, we're going to repossess his car."

As the collectors appeared friends and business associates seemed to vanish. "It was like they were all made of smoke on a windy day," Bartmann says. "People who used to come over to my house Friday night to play poker or go to a ball game--suddenly, they sort of clicked a button and said, 'You don't exist anymore.' It was as if business failure were contagious, and if they hung out with anybody that had had one, they might get some on them."

Personal bankruptcy was an option, of course, but the idea was anathema to Bartmann. "These were people I owed money to," he says. "It was under a corporate name, but it was basically me they were doing business with. To declare bankruptcy would have been to stiff them." Instead, Bartmann resolved to do the implausible: find a way to repay his creditors the more than $1 million he owed them.

The goal was outlandish, considering there were only a few cans of food left to feed his household, which included Bartmann, his wife, Kathy, and two daughters. Clearly, salaried employment would not do the trick. Bartmann decided he needed a truly outsize risk, an absurd long shot, a you'll-never-be-able-to-pull-this-off sort of enterprise. Risk, he knew, was the reciprocal of reward, and the reward he required was very, very large.

He shared that insight with Jay Jones, his former chief of operations ("One of the few people in town who would still associate with me," Bartmann says), and the pair sat down to draw up a list of possibilities. How about a chain of pawnshops, offered Jones. Or what about a franchiser of hot-dog carts? Nothing quite fit the bill--until Bartmann spotted an unusual advertisement in the local newspaper.

The Federal Deposit Insurance Corp. was auctioning off the delinquent loans it had inherited from a failed bank in Tulsa. In so many words, the FDIC wanted people to throw good money after bad debt, a concept that drew howls of derision from Jones and Bartmann. They tossed the ad, only to see it reappear the following day. "Our reaction wasn't quite as venomous" that time around, says Bartmann, but the ad again found its way into the trash. It wasn't until its third appearance that it gave them pause.

Impulsively, the two men hopped into Bartmann's Chevy Blazer to make the one-hour trip to Tulsa. Unable to spare the 40¢ toll for the interstate, they stuck to dusty back roads.

As if to emphasize the absurd nature of their mission, only one other bidder showed up at the auction. Some 200 portfolios of bad loans were for sale, ranging from the mildly delinquent to the long-since-considered-unredeemable. Bartmann began inspecting the latter. "They were the double-uglies," says Jones, "the bottom-of-the-bucket kind of loans," and were therefore the cheapest. As Bartmann perused the files he saw the collectors' records of their unsuccessful efforts: "This deadbeat won't pay, he says go to hell." And then it struck him: "I realized, This is me."

He thought about the gruff voices hectoring him and his family. All the collectors' bluster and intimidation, he felt, "was not fair, was not right, and"--here was his epiphany--"was not productive." He decided he could do better. Not as a standard collection agent who would earn a simple 30% commission. Rather, he'd assume actual ownership of the debts, buying them for 2¢ on the dollar and hoping to collect more. Nobody had done that before.

Now, here, Bartmann said to himself, was a suitably excessive risk. But no one could have guessed what the reward would be.

Gates...Buffett... Bartmann?
The present day, 12 years later: Bill Bartmann strides into the 55th-floor boardroom of Commercial Financial Services Inc. (CFS) and unfurls his company's organizational chart with a flourish. All his employees are on it--which would be unexceptional if there weren't nearly 2,500 of them. The chart is 30 feet long.

Few outside Tulsa and certain financial circles have ever heard of 48-year-old Bartmann or his 11-year-old Commercial Financial Services. Yet CFS is now the world's biggest repository of bad consumer debt; it owns, and is trying to collect on, some $7 billion worth. An impressive percentage of America's vast and growing pool of credit-card delinquencies ends up here, in Tulsa's CityPlex tower, where it's worked by an army of highly trained collection agents on the floors below. Fifty more such agents are being hired every week.

Indeed, though it has already acquired substantial girth, CFS continues to grow at a rate that's normally the preserve of fledgling start-ups. Revenues have quadrupled, on average, every year since 1993 and are poised to triple this year. But that's not the shocking part.

The shocking part comes when you peek at the company's income statement. Check out this year's first-quarter results: CFS reported quarter-year net revenues of $224 million. And on those revenues it made a net profit of--you might want to sit down for this--$108 million. That gives the company an eye-popping net margin of 48%.

Something's wrong, you say. In any reasonably competitive economy, profits of that magnitude aren't supposed to exist. Surely, something has been overlooked.

But there it is, unmistakable in its obesity: a bottom line that's almost half as big as the top line. The 1996 full-year numbers tell a similar story: $137 million in profits on revenues of $349 million. A 39% margin.

For context, consider that Intel and Microsoft, two of the country's most insanely profitable corporations, can boast margins of no more than 26%. Few companies attain the double-digit range. And here is obscure CFS, quietly on track to generate nearly half a billion dollars in income this year on just under a billion in sales.

The supranormal numbers are enough to make normally circumspect Wall Streeters punchy. "He's just off the charts," gushes Steven Pasko of BT Securities in New York City. "The numbers are so mind-boggling they're hard to believe." This past spring a leading investment bank affixed a $3-billion valuation to the privately held company, of which Bartmann owns 80%. (Jones owns most of the remainder.) That would give Bartmann a net worth of roughly $2.4 billion. But some say that's too conservative: if CFS were to go public at an earnings multiple typical for a financial-services company (around 15 to 1, after taxes), Bartmann's stake would be closer to $3.5 billion. Which, according to the best information available, puts him among the 25 wealthiest people in America--just ahead of Rupert Murdoch and Ross Perot.

All of which begs the question: who is this guy--this guy who 12 years ago was a commercial dead man, with more than $1 million less than nothing?

From his perch atop Tulsa's tallest building, Bartmann can overlook the downtown skyline with the knowledge that he is, quite literally, atop everyone else in the city. This morning he's just off the phone with an employee who wanted permission to hold an office meeting on Sunday. "In'nat cool?" says the newly minted billionaire, his small frame all coiled energy as he struts ramrod straight into the glassy boardroom. "She wants to work on a Sunday!"

A high school dropout from Iowa who left his impoverished home at age 14, Bartmann exudes a sort of look-what's-become-of-this-kid giddiness--an effect that's accentuated by his slight lisp. Today he's clad in jeans, Nike Airs, and a camp-counselor T-shirt. He doesn't much look the part of a multibillionaire. True, he goes home to a 20-acre estate with a driving range, and two off-duty policemen stand watch there around the clock. And true, he's able to declare that he has "enough money that if I set it all on fire, I'd be dead before it went out." But he doesn't really reinforce F. Scott Fitzgerald's observation that the very rich are different from you and me. Bill Bartmann isn't different because he's rich.

He's rich because he's different.

The Comeback.
The bank president looked puzzled. "Gee, Bill," he finally said, "this is the most unusual request. What would I tell my board of directors?"

It was 1986, and following Bartmann's back-roads trip to the Tulsa FDIC, he had walked into the American Bank of Muskogee, which he already owed $1 million, and requested another $13,000--with which, he declared, he was going to buy bad loans. "That was a tough sell," Bartmann remarks with considerable understatement. "I was scared to death. Would they even talk to me? Would they be polite? Would I be escorted out by a guard?" To his relief, he was greeted cordially. And in what must have been a bravura performance, he wheedled the money out of the bank.

Bartmann collected $64,000 from that first $13,000 portfolio of bad loans--a tidy 400% return. He did it alone, using the telephone on his kitchen table. Returning victorious to the bank president, Bartmann made an even bolder proposition: He wanted to borrow another $100,000 to buy a larger package of FDIC loans. He'd pocket $20,000 of the collections to cover his expenses and put the rest toward paying down his bank debt. Impressed with Bartmann's earnestness, the banker consented. Several months later Bartmann returned with $204,000 in hand and asked if the bank would fund the purchase of yet a larger package. And so it went.

To continue collecting others' debts, however, he had to fight a rear-guard action against the repercussions of his own. One of Hawkeye Pipe's commercial creditors, Maverick Tube Corp., filed a petition to force him into involuntary bankruptcy. Bartmann resisted. "I said, 'Bullshit, I owe this money. I'm not bankrupt, by God, I'm broke." But Maverick pressed its case, anyway.

Meanwhile, Bartmann wrestled with an abiding sense of shame. Worst of all were the run-ins with former employees in the streets of Muskogee, a conservative and insular town of 35,000. "You're walking down the street," says Bartmann, "and one of them's coming out of the hardware store or the post office. You weren't planning on meeting, and all of a sudden, there you are, in the middle of the sidewalk, staring at each other. You can tell by the look on their face that they haven't found work yet, they can tell by the look on my face that I sure can't employee 'em. Real awkward," he says softly. "Real awkward."

Attitudes toward his new line of work didn't help, either. "People laughed when Bill said he was going to make money buying bad loans," says one former employee. At times Bartmann succumbed to profound self-doubt. "You fool, you can't do this, you're $1 million in the hole," he recalls thinking in his blacker moments. "There isn't a person in this community who will talk to you anymore. You don't know anything about collecting delinquent loans."

Maybe so. But he kept collecting them, and kept trying to repay his own creditors, and kept trying to keep those creditors from forcing him into bankruptcy. In 1988, after three years of acrimony and $50,000 in legal fees, Bartmann v. Maverick Tube Corp. had reached the 10th circuit court of appeals. And there, at last, the court adjudicated that Bartmann was not bankrupt. He had won his right to owe a million dollars.

The legal victory set the stage for a full-blown comeback. For it was only a matter of months before Commercial Financial Services--as Bartmann christened the company upon its incorporation--generated enough income to repay Bartmann's creditors, the bank included. Remarkably, he had dug himself out of his million-dollar hole.

In the process, CFS had picked up an unexpected head of steam. Profitable since year one, it reached 71 employees by 1990. And as the wave of bank failures that had begun in Oklahoma rolled through the rest of the country, it occurred to Bartmann that he might be sitting on an opportunity the size of the Glenn Pool Strike, the massive oil reserve discovered near Tulsa in 1905. So he did the obvious: he decided to shut down the business and start it all over again.

The way Bartmann figured it, if he were to really make a killing, he'd have to move the business from Muskogee to Tulsa, with its more sophisticated capital sources and workforce. He'd also have to stop buying the "double-ugly" loans in favor of less delinquent ones, which, though more expensive, afforded better net margins. The solution: he sold off the company's entire inventory of loans, summoned his 71 employees to a staff meeting, and summarily fired 54 of them.

This from the man who'd become emotionally unhinged by his workers' farewells at Hawkeye Pipe? "I refer to it as the lifeboat theory," says Bartmann. "If you're the senior person on the lifeboat with a capacity of 10 people, and an 11th person swims up to the boat, what do you do? Do you let that 11th person climb in and therefore put everyone at risk? Or do you mercifully execute the person--reach over the side of the boat and shoot 'em? That's what I had to do to 54 people. I made it as merciful as I could."

However calculated it was, the near-liquidation of the company left Bartmann, in splendid symmetry to his starting point, with $1 million in his bank account. And then he was confronted with an unexpected last temptation. He knew he'd burn through that start-up capital quickly in Tulsa. Why not simply return home to Iowa a millionaire? Why tempt failure so soon after escaping its clutches?

To weigh the question, Bill and Kathy Bartmann retreated to Delhi, Iowa, where Kathy's family kept a summer cottage. Bill, the teenage drifter, had spent the summer of his 14th year there, living in a barn and working odd jobs. It's where he'd met then-11-year-old Kathy for the first time. Now, after two days of intense debate, the two of them headed down to a favorite fishing dock at dusk and watched the sun settle into a lagoon on the far side of Lake Delhi. "Do we bet $1 million, everything we own," Bartmann recalls asking, "that we can make this thing work, differently, in the next six months?"


And in that instant, both the Bartmann family and the multitrillion-dollar collection industry were changed forever.

"Two-thousand-dollar settlement! It's raining money!" Amid applause, the employee excitedly runs to the board and draws another gold bar on top of the existing pile.

Here, on CFS's floor of operations, there's little hint of the unsavory, low-tech, vaguely scary world that is the collection business. If anything, the atmosphere feels like a PBS telethon. There are the silly games to track progress, the raucous self-congratulation as goals are met. But the most striking thing, here inside the beating heart of the most effective collection machine in history, is that the collectors are, well, nice.

"You currently owe $5,500 on your MasterCard account," Marty Moore is saying in a voice worthy of a flight attendant. "Are you able to pay that today?" She's careful to follow Bartmann's cardinal rule: that debtors are "customers" and must be referred to as such. "They're not deadbeats, not derelicts, not pond scum," Bartmann says. "I know it sounds Pollyanna-ish, but I believe that 90% are good people who ran into a bad problem. Just like me: I found myself in a hole one morning, and I wanted to dig myself out, but I didn't know how. Having been broke, I understand the customer."

So Marty Moore--leading her team this month with just over $100,000 in collections--assumes the tone of a firm but empathetic counselor, offering the promise of a second chance. "Are you working right now?" she asks her customer. "How much money are you bringing home after taxes? If I were to go over your budget with you, could I ask for a $25 payment?" Because CFS does not sue customers or confront them in person (the balances are too small to make it economically logical), the leverage it applies is purely psychological. Wayne Learned, managing director of operations, puts it best. "I don't want you to feel afraid of me," he says, leaning forward in his chair as his voice descends to a gravelly whisper. "But I want you to feel guilty."

Even when Moore gets an earful of abuse, she's to treat it as part of the customer's healing process. You lose your temper, she's been told, you lose your job. "I want to get in your heart and your mind," says Bartmann. "If I can get you to like me and trust me, I'm probably going to get more out of you than the guy who's yelling and screaming." Some debtors--sorry, customers--have even sent Moore thank-you notes for the unexpectedly cordial treatment.

Then, too, Marty Moore and her fellow employees are armed to the teeth with technology, starting with the nation's largest installation of predictive dialers. These contraptions systematically telephone customers and, upon finding one who answers, summon that customer's vital information to a collector's computer monitor. Quickly, Moore can scope out whom she's dealing with: if the customer is represented by a lawyer, a "shark" warning appears. If the customer lives in a state that requires the reading of the so-called "mini-Miranda" upon every call, her screen flashes red.

Of particular interest is the window in the bottom right corner of the screen. It reads like a catalog of the woes of the American debtor: "Cust called. Said he's disputing this debt. He bought an edge cutter and returned it same day, it broke." "Cust said fell behind when bro died of AIDS." "He stated that the IRS is threatening to seize property and bank accounts." "Mrs. said that cust had been employed for 4 years and then got hurt, said they have nothing." And every so often, the breakthrough: "Cust proposes settlement for $425 in two payments."

When a tentative bargain of that sort is struck, Moore moves to her "justification" window and writes why she believes the deal is a good one for CFS. It's then reviewed by an approval manager elsewhere in the building, who sends an electronic thumbs-up or thumbs-down within two hours.

All of this is part of an effort to bring to the collection business what it has traditionally lacked: a measure of scientific certainty and predictability. That's also the purpose of the credit-grading model CFS has developed. The document looks like a pyramid of boxes. Each bad debt is figuratively dropped into the uppermost box. Then, depending on each debt's particular "chemical composition"--the size of the balance, the amount of information available about how to contact the debtor--it sifts through eight levels until it winds up in one of 161 boxes at the base of the pyramid. Each of those boxes has a number affixed to it. A 28 means that CFS thinks it can collect 28% of the debt's face value.

Robbin Conner, an analyst at Moody's Investors Service, says the accuracy of Bartmann's collection projections to date has been "fairly astonishing." Of course, the company's extraordinary rate of growth now threatens to undermine that operational predictability. Then again, Bartmann had already thought of that.

In 1991, with the cockiness and foresight that are the hallmark of bona fide visionaries, Bartmann assembled the 17 survivors of his Muskogee massacre in their new Tulsa offices for a two-week summit. The first order of business was to draw up a mission statement. No nebulous, platitudinous aspirations here: with almost laughable bluntness, the document stated that CFS would "achieve net earnings each year equal to at least 200% of the previous year." Then, said Bartmann, because the company would be growing so quickly, it would be hard to inculcate new hires with the vital procedural minutiae. So the group drew up 200 pages of step-by-step process rules, right down to how the phones should be answered--an entire Napoleonic Code for a nation of only 17 citizens.

What Bartmann knew was that every aspiration he had for CFS depended on one thing: the ability to collect debts at a rate no one had dreamed of. "People still see CFS's performance as a sort of alchemy," says Bartmann watcher Sean Sheerin of Duff & Phelps Credit Rating Co. "How do you take straw and weave it into gold?" Mainly, Bartmann divined, by turning collecting from art into science.

The exhaustive systematizing now looks prescient: with the company expanding by 50 employees a week, its three-volume procedures manual, which is continually updated, serves as the centerboard of what by all accounts remains an extremely tight ship. The militaristic principles are also hammered home at CFS University, the seven-week boot camp for newly hired collectors. Credit-card guru H. Spencer Nilson calls CFS "the largest, best-trained, and most efficient debt-collection operation in the world."

And Bartmann has managed to assemble this "elite corps of collectors"--as one analyst calls it--despite a 2.8% local unemployment rate. How? For starters, he pays salaries that are 150% of the industry norm. Then there are the lavish junkets. CFS is making plans to rent two 100-car trains to transport employees and their guests to a Kansas City Royals game--possibly the largest U.S. rail movement of personnel ever. There was the all-company trip to Las Vegas (each person received $500 in gambling money), and the Caribbean cruise, on which four couples were married. (Bartmann gave away the brides.) Oh, and then there's the CFS summer camp--free for the children of employees (500 of whom attended this past summer). Suddenly, many employees are gung-ho on careers in collection: turnover after six months is a slim 5%, set against an industry average of close to 100%. Lately, Bartmann has been catching heat for driving up salaries in Tulsa.

Not that he has created a workers' paradise. The work, those involved concede, is repetitive and grueling. And Bartmann, preternaturally hard-driving even by entrepreneurial standards, can turn apoplectic when CFS's performance is subpar. "There's an incongruity between Bill's vision and what he reverts to when the going gets tough," says one former employee who asked to remain anonymous. "His management style has been characterized as management by intimidation. One day he's very friendly; the next he's chewing your ass like it's never been chewed."

The pressure-cooker atmosphere wears on many, but operations director Learned is unapologetic. "We position ourselves like the Marine Corps," he says. "It's hard to get in, and it's very demanding once you're here, but if you're good enough, boy, what a ride."

The Next, Bigger Thing.
New Year's Day, 1994. The Mirage hotel, in Las Vegas, where Bartmann holds an annual planning session with his top officers. (Bartmann loves the blackjack tables.) "This year," he announced to them, "we're going to do a securitization."

The small audience sat stone-faced. "We didn't even know how to spell the word," recalls Learned, much less grasp what a far-fetched notion Bartmann was proposing.

The problem with their business, Bartmann proceeded to explain, was the extended time lag between the purchase of millions of dollars in bad debts and their actual collection. To get through the interval, CFS had to take on expensive bank financing. Not only were the interest costs a drain on the bottom line, but the perennial shortage of cash was a major speed bump for growth because it prevented CFS from buying yet more debt.

So Bartmann proposed to do what had never been done before: take thousands of nonperforming debts, bundle them together, and serve up the package to investors as a bond. By turning the bad debts into a security--"securitizing" them, in Wall Street parlance--CFS could generate immediate cash and then use the liberated money to buy more bad debts. It would be a slingshot for growth. That is, if Bartmann could get Wall Street to swallow the idea.

The ensuing trip to Manhattan was even more harrowing than that initial visit to the Muskogee bank. Sitting white-knuckled in the imposing lobby of a gold-plated investment bank, Bartmann suddenly and acutely felt like a high school dropout from Dubuque. "It was like going to a foreign country," says Bartmann, who, for all his scrappy assertiveness, still gets overawed by titles and pedigrees. "These were guys with M.B.A.'s, the elite of the world, the rocket scientists, brighter than the sun."

Once Bartmann was inside the banker's office, the meeting was depressingly short. Plenty of small assets, such as home mortgages, had been bundled and securitized before, the banker noted. But those debts were both performing and collateralized. The debts Bartmann was talking about had the doubly unpalatable distinction of being nonperforming and unsecured. How could they provide a predictable payment stream to investors? "This can't be done," the banker told Bartmann bluntly. "It will never be done." The next six banks sent Bartmann packing as well. But the seventh, Banc One Capital Corp., of Columbus, Ohio, listened. It could be done, the bankers believed, because Bartmann's systematizing had yielded a collection-industry miracle: margins that were not only huge but also predictable.

It took more than a year to pull off, but in May 1995, CFS completed its first bond issue, selling it to two institutional investors in a private-placement deal. Today the company has done 10 such securitizations, totaling more than $1 billion, which have consistently received "A" ratings from Standard & Poor's. (The issues bear average returns of a modest 8%.) The effect on the balance sheet is immediately evident. "See that? That's cash on hand," says Bartmann, repeatedly tapping a blue pen on a line that reads a stunning $147,054,045.

Securitizing paved the way for a second, crucial masterstroke. Ever since the FDIC's inventory had dried up in the early 1990s, Bartmann had been buying bad loans from the Resolution Trust Corp., the entity responsible for sifting through the rubble of the savings-and-loan debacle. But by 1995 that source, too, was a dwindling pool. So Bartmann began spending millions to research an untapped reservoir: consumer debt. "Nobody else," says Sheerin of Duff & Phelps, "had deep-enough pockets to do that." Bartmann had observed that banks were issuing credit cards to just about anyone with a mailing address, creating a huge volume of charge-offs--bad accounts that had to be written off banks' balance sheets after 180 days of nonpayment. Occupied with managing assets, not recovering them, bankers suddenly found themselves overwhelmed by the blitzkrieg of charge-offs.

Bartmann moved with the land-grabbing urgency of a Sooner. He'd found little data to suggest how collectible those credit-card debts were--and at $3,500, the average balance was much smaller than what CFS was used to--but Bartmann went with his best guess. Raising the money through securitizations, he bought billions' worth. "It was a very bold, very brilliant move," says Manny Occiano of West Capital Financial Services Corp., a smaller competitor based in San Diego.

"We're here first," Bartmann declared, "the market is terribly inefficient, and there's a giant spread to be made." He was correct: CFS typically collects more than three times what it pays for a bad loan, pocketing an average of 35¢ on every dollar of debt. "Those numbers have never been hit in the history of the industry," notes Eric Woldoff, vice-president of Account Portfolios Inc., a competitor in suburban Atlanta. Another industry insider states flatly, "I don't believe his collection rates." But by now, Bartmann is accustomed to such skepticism. "CFS is such an anomaly that people have a hard time believing in it," says Sheerin.

So far, though, the rates are holding up. And adding to CFS's system and strategy breakthroughs are three other factors: First, CFS benefits from enormous economies of scale. It owns so much of the charged-off credit-card market (about 43%, or 2.2 million accounts), that it sometimes ends up owning three separate credit-card accounts for one debtor. Second, while banks must press debtors for nothing less than full payment for fear of earning a reputation for being too lenient, CFS can offer debtors deep discounts. Finally, while traditional, commission-based collection shops are given six months to squeeze a pool of loans before the bank recalls them, CFS can set up long-term payment plans over a period of years. That provides the time and the incentive to analyze the loans in depth.

But aren't new entrants eating away at the gargantuan spreads as we speak? Maybe not. Bartmann promises to keep the industry "as inefficient as possible for as long as I can." He's gotten 15 of America's 25 largest card issuers--the very banks that would reap higher prices if there were more competition for their charge-offs--to collude in his monopolistic design. Persuading them to forgo the extra income in exchange for CFS's reliability and squeaky-clean image, Bartmann has locked many of them into exclusive, forward-flowing contracts. "Working with CFS is a very professional, very smooth process," confirms Robert J. Frame, senior vice-president at Wells Fargo, a major supplier. CFS still has few competitors worthy of the name.

Nevertheless, skeptics exist. Some in the industry whisper that CFS, in its zeal to become the biggest and the baddest, might end up overpaying for inventory. "You make one mistake on that," says Occiano of West Capital, "and it'll eat up your profits real fast." If the economy takes a downturn and debtors become more stubborn--and experts stress that there are myriad variables that can affect the collectibility of debt--CFS might find it can't recoup as much as it had hoped. That could lead, theoretically, to a default on its bonds. Investors would scream loudly. The securitization window would close. "I'm wary about what he can bring down on the industry," says one industry expert, who goes so far as to suggest that CFS "is bringing on the next S&L crisis."

Bartmann just smiles. After all, everything's working. More than working, actually. "The asset type is still in its infancy," says Robbin Conner of Moody's, acknowledging that none of the CFS bonds have yet reached maturity, "but CFS is performing above what it had projected." And 48% net margins provide a fellow with plenty of room for error. Besides, the skeptics are badly outnumbered. "Bartmann was there first with the most troops," says Cristopher Donnelly of Duff & Phelps. "He just blew it out to a scale that no one else had ever dreamed of. Nobody else is in the same weight class as he is." So CFS continues to reap what Bartmann calls the "pioneer's profits, the obscene profits" that economics textbooks say are supposed to be quickly competed away.

"In'nat cool?" says Bartmann, grinning.

Patron Saint of the Second Chance.
The story of Bartmann's early failure has receded into the haze of personal mythology, taught to all incoming employees at CFS University. Yet when you listen to him talk about the undoing of Hawkeye Pipe, 12 years ago, it's as if the wounds are still fresh. "No matter how much money I make or how many good things the newspapers say about me, there will always be a scar," he says. "You never forget how one time, somewhere, something happened that you couldn't control." Though Muskogee is only an hour's ride away, the Bartmanns haven't returned there for more than five years.

Ask Bartmann to pinpoint when he felt he'd finally made it all the way back from the Muskogee collapse--when he'd finally "arrived"--and he'll describe a moment in 1994. His general counsel was summarizing the terms of a line of credit CFS was about to finalize with Nomura Bank, reviewing the bullet points, when it struck Bartmann that something was missing.

"Where's the personal guarantee?" he interjected.

"They haven't asked for it," said the lawyer.

Bartmann figured it was a case of accidental omission. The counsel assured him it wasn't. Bartmann called Kathy. "We've made it, hon," he said. "I think this is how you tell."

This story of Bartmann's "arrival," though, isn't very convincing. It leaves something out, something hard to define but obvious nonetheless. Call it ambition or obsession. Call it hunger. Call it the idea that, despite what Bartmann says, he's nowhere near feeling that he's arrived.

There's a story Bartmann likes to tell about his wayward youth. He was in a teenage gang known as the Manor Boys, and as the gang's smallest member (he says he weighed the proverbial 98 pounds; even now, he's a tight-strung 150), it was his job to serve as bait on Friday nights. The script varied little: Raging drunk, Bartmann would saunter into a dance hall while the beefier gang members lurked in the shadows. He'd order a beer. "I'd walk up to the biggest guy in the room," he recounts, "hold it up in front of him, and say, 'I'll make you a bet that you hit the floor before this beer does.' Then I'd drop the beer and punch him." It mattered not who the victim was; the ensuing brawl was more recreational than personal. It was sport. It was the white-hot, macho thrill of taking on a challenge that seemed impossibly big.

When will the Bartmann who's still dropping beers in the marketplace really feel he's arrived? Wayne Learned thinks he knows. He once asked Bartmann what his ultimate goal was. "I know I will have made it," Bartmann responded unblinkingly, "when I am subpoenaed to testify before Congress on monopolies."

Of course, even Bartmann admits that CFS can't maintain its hammerlock on the market forever. Aware that the publication of his numbers could launch a thousand business plans--"this article will create competition," he declares--he figures there's little to be lost in blowing his low profile. The challengers, he knows, are already coming. "We get calls every day," says Kim Betancourt of Standard & Poor's, "saying, 'Hi, we're XYZ company, and we want to be like Commercial Financial." Says Sheerin of Duff & Phelps, "The gravy train has to end."

By that time, though, Bartmann the ever-moving target will have taken CFS to some other place--some other market, some other line of business. Because for all the plaudits he receives for having "downloaded his brain" into the company's rule books and software, for having made himself, as some analysts claim, remarkably unnecessary to the company's continuing success, it is not what Bartmann has already imagined that sets him and his enterprise apart. It is, rather, what he will imagine still. That's what can never be "downloaded": the things he hasn't thought of yet.

"If we had to make a move today, we'd go into student loans," he says. "That's the next most inefficient marketplace." Already, Bartmann is plotting a 1998 expansion into Europe. And at a recent all-company rally (where a tent full of 2,000 pumped-up employees chanted, "We are not normal, we are not average, we are different"), he announced that CFS is getting into the business of issuing credit cards to its customers, whom no ordinary bank would touch. Debtors who start meeting their payment plans diligently will become eligible for one. If they continue to prove creditworthy, they'll soon become eligible for auto loans. Then mortgages. "We want to take people who are in debt by the hand," says Bartmann, "and show them the ladder to recovery."

A second chance. Who better to offer one than Bill Bartmann?

Jerry Useem is an associate editor at Inc.


Looking to get up to speed on the buying and selling of bad debt? Or to sell off some of your own tardy accounts receivable? Here are some useful contacts:

  • American Collectors Association, in Minneapolis (612-926-6547). Carissa Hoffman ( is the resident expert on the purchasing of receivables.
  • Faulkner & Grey (800-535-8403), in New York City. It publishes two monthlies, Collections and Credit Risk magazine ($79 a year) and Credit Collections News ($295 a year).
  • The Debt Marketplace (562-903-7220), in Santa Fe Springs, Calif. Founders Dennis and Judy Hammond educate both buyers and sellers about how to value bad debt properly.
  • First Financial Network (405-748-4100), in Oklahoma City. Founder Bliss Morris serves as a broker and portfolio adviser to institutions that want to sell their delinquent debts. Working on commission, she stratifies, bundles, and prices the portfolios of debt, and then markets them.
  • Heritage Financial Services (405-722-1409), also in Oklahoma City. This is another repackager, only it works as a reseller of nonperforming debt rather than as a commission-based broker. It buys debt wholesale from the source and cuts it into smaller fillets for sale to collection agencies and lawyers.
  • Unifund CCR Partners (513-489-8877), in Cincinnati. David Rosenberg's operation buys and collects on various forms of bad debt, including credit-card debt.
  • The Nilson Report (805-983-0448), published out of Oxnard, Calif. H. Spencer Nilson's bimonthly journal is a good source of information on credit-card debt; a subscription costs $745 a year. For more information on that topic, also visit on the Web.

ACCOUNT PORTFOLIOS, Eric Woldoff, 500 Chastain Center, Suite 515, Kennesaw, GA 30144; 770-420-1070; fax, 770-420-1085 42

BILL BARTMANN, Commercial Financial Services, 2448 E. 81st St., 55th floor, Tulsa, OK 74137-4248; 918-492-5555; fax, 918-488-9139 42

KIM BETANCOURT, Standard & Poor's, 26 Broadway, New York, NY 10004; 212-208-8000 42

ROBBIN CONNER, Moody's Investors Service, 99 Church St., New York, NY 10007; 212-553-0300; fax, 212-553-3856 42

DUFF & PHELPS CREDIT RATING, Sean Sheerin, 17 State St., 12th floor, New York, NY 10004; 212-908-0200; fax, 212-908-0222 42

WEST CAPITAL FINANCIAL SERVICES, Manny Occiano, 5775 Roscoe Ct., San Diego, CA 92123; 619-560-2600; fax, 619-569-4694 42