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After coming back to this game and having to deal with looters again I thought I would just post a note on the subject here.

The first time I got this quest was probably one of the most frustrating game experiences of my life as I ran around the countryside blindly. However it doesn't need to be this way.

As soon as you exit the city after receiving this quest have a look around before moving anywhere. Bandits that you are meant to be hunting will show their numbers in blue so they are easy to spot. You may see up to three different bands from town when you exit. How you approach them is up to you but keep in mind that the smaller bands are faster and while you are chasing one the others will most likely run off in different directions and out of your view.

This can make things seem impossible at first as they all scatter around the countryside and you need to chase them all down without much direction. Having someone with a good tracking ability can make this easier if you saw a second band run out of your line of sight while dealing with another band - just follow the tracks to locate them again.

Another way to handle it can just be to wait in town and keep an eye as time fast tracks. This can actually be very effective for this one simple reason:

You don't have to catch them all.

If they stop showing up in the area that is enough to complete the quest, so whether you are chasing them down or just camping in a city check in every now and then with the guild master to claim your bounty and you may find that he is doubly happy with you as the remaining looters have run away thus relieving you of your post and settling up for a job well done.

Happy hunting.
Post edited November 25, 2014 by Marbel
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Marbel: You don't have to catch them all.

If they stop showing up in the area that is enough to complete the quest,
Sure about that? I thought it's maybe enough if some other lord or group kills them, but not that it'd simply be enough to run them off. And yea, this with the "find a specific group of bandits" are the most frustrating ones.
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Marbel: You don't have to catch them all.

If they stop showing up in the area that is enough to complete the quest,
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Jarmo: Sure about that? I thought it's maybe enough if some other lord or group kills them, but not that it'd simply be enough to run them off. And yea, this with the "find a specific group of bandits" are the most frustrating ones.
The last few times I completed this quest the guild master told me that "any remaining bands must have run off and aren't bothering us any more" or something like that.

Other Lords may attack them but the looter bands are small and likely quicker than a large army so they might also be getting run-off and scattered by larger forces. The quest would need some sort of threshold for looter proximity otherwise you would end up chasing looters from one end of Calradia to the other.
One thing worth noting is, after you've dealt with those initial "blue" groups of looters, every other looter group you take out will increase reward you get from Guild Master for the quest. Of course, once you cash in once the quest ends and you get no such reward from the looters.