New to selling?
We work with all kinds of portfolio managers and companies, large and small as well as those with years of experience or who have never sold accounts before. If you are new to the process or simply want to learn more about considerations before selling, we hope you find this information helpful.
The traditional method for creditors with distressed accounts has been to assign their accounts to one or more collection agencies, continuously monitor their account handling and collections performance, trust that they will follow all legal laws, rules and regulations, and (most importantly) wait and hope for recoveries to occur sometime in the future.
Operating under a contingent fee arrangement, the collection agency would keep their fees as a portion of any recovery. You would eventually receive your remaining fraction of the balance.
Today a different option is available: You can sell your distressed accounts. The benefits are significant.
Most importantly, you increase your cash flow in an immediate, effective, and debt-free (compared to accounts receivable loans or factoring) manner.
You also benefit by significantly reducing the possibility of liability from a Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), or similar claim or lawsuit. These types of legal claims might arise from you owning, reporting to credit bureaus, and seeking to collect upon your distressed accounts while they age. By selling, you can typically transfer the risk for any claims that might arise from post-sale collections to the buyer.
Another important consideration is the avoidance of additional collections costs. To the extent your accounts have been heavily worked, legal action may be your only remaining avenue for recovery. The costs to retain and manage law firms, effect service of process, and pay court filing fees can be large. Likewise, continued collections efforts can oftentimes result in the consumer seeking bankruptcy protection. The costs for you to manage bankruptcy filings can be large.
It’s a fact: Your accounts continuously lose value as they age. They eventually become essentially worthless. This means further loss in value to you as the creditor.
A quick sale to a debt buyer stops the clock and - - more importantly - - your eventual total loss.
Due to the nature of distressed accounts, it is critically important that any buyer have significant collections and debt buying experience and solid financial backing. There are several reasons why this matters:
•COMPLIANCE IS CRITICAL. When you sell your accounts you want to ensure that all laws, rules and regulations will be met or exceeded after the sale. You also want to safeguard your account holders so that they are treated fairly and with respect and your reputation remains protected.
•SKILLED RECOVERY METHODS AND MODELS. Buyers with the best recovery processes, models and systems can afford to pay you the highest price for your accounts.
•SOLID COLLECTIONS EXPERIENCE. Buyers with years of collections experience can avoid disfavored collections techniques and minimize the possibility of post-sale consumer claims on your accounts.
•FINANCIAL STRENGTH. Buyers with significant capital and strong financials are able to provide faster and guaranteed closing so that sales happen and you get paid promptly.
•DEBT BUYING EXPERTISE. Expert debt buyers have better management processes, personnel, and resources to support post-closing operations and to professionally manage any post-closing matters that could arise.
Before conducting a purchase and sale some of the account characteristics that buyers will typically want to examine include:
•Seller’s compliance, accounting, and operational standards – Compliance is critical for buyers, as they need to have confidence that the accounts were correctly and lawfully originated and collected upon prior to purchase, and that the account holders were fairly treated. This information will typically be gathered in a pre-purchase due diligence examination of any seller.
•Age of accounts – When the debt was incurred and when payment was last made
•Sources of accounts – How and where the debt was incurred
•Types of accounts – The type of credit product, such as credit card, automobile, bankruptcy, etc.
•Proof of debt – Some form of proof that the debtor owes the money is required
•Location of account holders
•History of work on the accounts
•Information contained in the accounts
The typical purchase will include some standard terms of the transaction in the form of a purchase agreement. These terms may include:
•Assurance of available documentation
•Assurance that the balances are correct
•Mutual assurance of compliance with all laws, rules and regulations
•Any payment terms
Take the next step.
Contact our team today.