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Stadium Judo Club

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Luke Edwards
Luke Edwards

Buy Bad Debt Portfolios HOT!

Correction: August 19, 2014An earlier version of this article misstated the value of a package of debt that McKellar and Associates Group purchased for 12 basis points. That comes out to about one-eighth of a penny on the dollar, not one-twelfth of a penny on the dollar.

buy bad debt portfolios

As debt buyers, Encore and Portfolio Recovery Associates purchase delinquent or charged-off accounts for a fraction of the value of the debt. Although they pay only pennies on the dollar for the debt, they may attempt to collect the full amount claimed by the original lender. Together, these two companies have purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts.

The CFPB found that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes. The companies also filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves. These practices violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Encore and Portfolio Recovery Associates illegally attempted to collect debt that they knew, or should have known, may have been inaccurate or unenforceable. Specifically, the CFPB found that the companies:

Most people are familiar with debt collectors, but fewer are familiar with debt buyers. Debt buying happens in the background: very few people know about it. That said, there is a growing interest in debt buying, because investors acting alone or in companies know it can be an extremely profitable business.

If you are interested in this industry and want to learn how to become a debt buyer, this article is for you. Here we outline the crucial steps you need to take to become a debt buyer, from forming a business entity to doing the due diligence necessary to enter at times risky financial deals.

Typically, the longer a debt goes unpaid, the less a debt buyer will have to pay for it. Debt buyers may buy large portfolios of debt at a time, and when they purchase the debt, it is entirely theirs to deal with.

The primary difference between debt buyers and debt collectors is the ownership status of the debts. Debt collectors are agents acting on behalf of the debt owners. Debt buyers, in contrast, become the principals (and not the agents) vis-à-vis the debts, and can then hire agents to help them collect it.

A debt buyer is a type of debt collector who purchases a creditor's debt at a discount in order to collect on it. Creditors sometimes prefer selling their debts at a loss to debt buyers as a tax write-off.

Debt buying processes vary depending on the reasons for purchasing the debt and the type of debt you are interested in buying. For example, you may be interested in buying debt so that you can legally enforce repayment from the borrower.

In some states, it is legal to operate as a debt buyer without a license and without becoming a debt collection agency. Much more commonly, the state will require you to get licenses and permits prior to beginning any business activity (including setting up a marketing website). Some states (for example, Texas) may not require a license if you operate solely in that state but do require a license if you operate across state lines.

Ethics are important in debt buying. Depending on your location, you may find that professional and even state and federal regulatory bodies strictly enforce them. Membership in the following organizations is highly regarded when collecting or buying debt or otherwise seeking to do business in this industry (and could get you more business):

The CFPB is a federal government agency that seeks to protect consumers against predatory financial practices. With malpractice in the debt buying and debt collection industries being so prevalent, the CFPB has taken on a particular interest in this area of financial activity.

Anyone wanting to enter the debt buying business should take CFPB reports and recommendations seriously if they wish to avoid the litigative fate of so many buyers and collection agencies in this space (including Encore Capital Group, Midland Funding, Midland Credit Management, and Asset Acceptance Capital Corp., who (in)famously settled a lawsuit started by the CFPB in 2020).

The RMAI (Receivables Management Association International) advocates ethics and professionalism in debt buying and collection and has memberships for those involved in these industries. Memberships entitle individuals and agencies to:

In debt buying, you have access to a wide variety of borrower data points, from names and addresses to SSNs and bank details. The hardware and software your business uses must be secure and compliant with all legal and industry standards. This is a complex task that will require deeper research depending on the debt you are buying. Ask an attorney if you are not 100% sure about what protections you need to put in place for data security and privacy as a debt buyer.

Due diligence is critical in the debt buying realm. As a debt buyer, you have very few protections in place to protect your investments, meaning you are the sole person responsible for verifying the details and legitimacy of a debt purchase.

If you are an established debt buyer and are looking to buy a deal, consider the Debexpert marketplace. We have made data protection a priority and have safeguards in place for transparency throughout the process. With our platform, you can connect with debt sellers in the US and find deals that will work for you.

If you have a cabinet full of bad debt, it is likely you can sell it for cash! If not for cash, then you can possibly donate the debt to non-profit organizations for huge tax breaks! For legal assistance in understanding the best way to get bad debts off your books, for your organization, contact Marcadis Singer PA.

Having years of experience in the industry, Marcadis Singer PA understands the needs of businesses that are encumbered with bad debt owed to them and this knowledge enables our ability to turn bad debt into immediate cash for businesses. Our law firm is run with customer satisfaction in mind and aims at helping the client succeed, traits most other companies sincerely lack.

The objective is to buy your bad debt portfolios and provide your company with a fast return. There is much to gain by selling charged-off accounts and acquiring immediate cash for reinvestment and positive impact on stock values.

In recent decades, research on consumer debt and well-being is emerging. However, research on the potential effect of debt portfolios on family financial well-being is limited. The purpose of this study is to fill this research gap by examining the potential effect of debt portfolios on family financial well-being, measured by three indicators of progressive financial burdens. These indicators include debt pressure (debt payment to income ratio >40%), debt delinquency (60+ days late for debt payments) and insolvency (total liability > total asset). Debt portfolios refer to various combinations of mortgage, credit card, vehicle, education and other loans.

With data from the 2019 Survey of Consumer Finances in the USA, multivariate logistic regressions are used to identify specific debt types, consumer backgrounds and financial capability factors that are significantly associated with debt burden indicators. The findings are used to create a table demonstrating warning debt portfolios that may lead to undesirable financial outcomes.

Holdings of different types of debts are associated with different financial burdens. Specifically, holdings of three types of debts (mortgage, vehicle and other debts) tend to increase debt pressure; holdings of two types of debts (education and other debts) tend to increase debt delinquency; and holdings of four types of debts (mortgage, credit card, education and other debts) tend to increase insolvency. These results are used to construct warning debt portfolios that show greater chances of undesirable financial outcomes. Among them, the top warning portfolio for debt pressure is the combined holding of mortgage-vehicle-other debts; for debt delinquency is the holding of education-other debts; and for insolvency is the holding of mortgage-credit card-education-other debts.

This study is limited by using only cross-sectional survey data to examine associations between debt portfolios and financial burdens. To examine the causality of debt portfolios on financial burdens, appropriate panel data are necessary, which is a direction for future research. In addition, this study used data from only one developed country. In future research, data from more countries, including both developed and developing countries, should be analyzed to verify if similar relationships exist among families in other countries.

Results of this study have implications for practitioners in banking and other financial institutions. The study presents a comprehensive list of debt portfolios in the order from high risk to low risk in terms of financial burdens. Banking and other financial service professionals can use the information to help their clients make informed borrowing decisions, predict their debt burdens and offer early preventions based on their clients' debt portfolios. Marketing strategists can use the information for effective segmentation and promotion purposes.

This study utilizes a new concept, debt portfolios and examines its associations with family financial burdens. Financial burdens include three indicators that are seldom used together in previous research. These indicators conceptually indicate various severity levels of debt burdens. This study also presents a conceptual discussion on the association between debt portfolios and financial burdens and provides a better understanding of consumer debt behavior and its consequences. The warning debt portfolios constructed based on the findings have direct managerial implications for banking and other financial service professionals. 041b061a72


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