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Key takeaways:
Selling charged-off accounts involves transferring the ownership of delinquent debts that a creditor has written off as uncollectible to a third-party debt buyer. The debt buyer will attempt to recover some or all of the owed funds, often at a reduced price compared to the original debt amount.
Sooner or later, the question of charged-off accounts selling will arise for every lender. In this article, we will help you navigate and understand how to find and choose the right companies that buy debt, what risks there are when selling and how to ensure maximum profitability.
Here goes:
There are more than 2,000 companies in the US that buy debt. Their size, working methods, and geography vary greatly. So, what kind of buyers are there:
These are professional funds that invest in debts. They often attract capital and then invest in the purchase of debts. They give the collection process itself to the outsourced collection agency. Some of these companies even have a listing on the stock exchange - PRO and Encore. But, mostly, these are private companies, such as:
It is most often safe to work with such buyers; they have robust compliance and risk management, and they carefully monitor that the collection will take place per the State Regulations and those of the FDCPA. But, since the capital of these companies is most often borrowed, they can give a lower price offer than companies that work on their capital. Also, these companies most often buy all types of debts, and you can sell debts - consumer accounts, auto loans, MCA debt, PDL, medical portfolios, and residential and commercial notes.
Often, law firms that prepare judgments for institutional debt buyers also buy judgments by investing their capital.
Features of working with such debt buyers:
As a rule, law firms buy only judgments (auto loan portfolio, MCA portfolio) and only in the state where they have a license. They understand pricing on the debt market very well, so most often, they give reasonable prices that are above the market.
Similarly, with law firms, the collection agency buys those debts with which they work as an outsourced vendor.
Features of working with such debt buyers: as a rule, the collection agency buys only consumer accounts for calls collection. It gives higher prices again because they do not have overhead costs for the maintenance of the headquarters. They understand the state's specifics well and own collection facilities.
There are two ways to find and establish connection with buyers - contact the buyer yourself (the lists above, or look at the lists of members of professional associations - RMAI, ASA or Attorney's Bar Associations) or contact debt brokers.
We especially recommend contacting debt brokers, because brokers work with each of the buyers on a daily basis and know which group is best to market your product to, and also know which of the buyers are currently in the active purchase stage and are ready to invest. Also, the broker will help to avoid mistakes that can lower the price of your portfolio or start working with an improper buyer. In our next article, we will tell you which brokers there are in the USA and what their specialization is.
Good luck and Happy Bidding!
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With thirty years of experience in banking, debt collections, compliance, audit, and governance, I have supported strategic plans and improved customer experiences. I possess hands-on knowledge in crucial C-Suite areas, including developing new policies and procedures, optimizing their models, and exploring new tools to help institutions achieve their goals more effectively.
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