No clients; 100% commission.

As banks and financial institutions are moving away from the collection business generally beyond 120 days of contractual delinquency, there has been an increased availability of so called "distressed receivables" for sale at pennies on the dollar. This trend has caused agencies, that traditionally have been in the business of third-party collections for many years, to consider purchasing debt. There are two immediate benefits to debt purchasing over third-party collections: no clients, 100% commissions.

As established agencies already have all the systems in place (i.e.: debt-management software, personnel, etc.), the assimilation of the business of purchasing receivables is almost seamless, the exposure is minimal (you can start purchasing small portfolios) and the revenues can be rewarding. However, there are a few considerations when purchasing debt that do not exist in contingency collections: debt type and source, average account age, number of agency assignments, media availability, average out-of-statute date, geographical location, among others.

Distressed portfolios of receivables can be purchased through debt brokerage houses. These are companies that purchase accounts directly from the source for resale or sometimes they do the marketing of the accounts in behalf of the seller. Some brokers stratify debt by state and sometimes even by zip code range within a state. Others can customize portfolios based on several combination of criteria such a balance ranges, zip codes ranges, etc. Some even offer portfolios where contact information, employment information and home-ownership information is guaranteed. Obviously prices will depend on the combination of several of these factors.

Once you are committed to purchasing debt, three factors must be considered:

1. Your budget: This is simply how much are you willing to invest for the purchase,
    
2. The formula that aligns with your current agency structure: This formula is established by the combination of variables that are best suited to your existing operation such as what type of accounts you will purchase (credit card, consumer debt, judgments, etc), what average balance, what geographical domain, etc.,
    
3. Your collection strategy:  Your strategy should include considerations such as how many individuals will you allocate to work your portfolio and most importantly the implementation of the legal process, which will become a fundamental part of your recovery campaign.

If you wish to have an assessment of your current structure, please fill out this form and I will contact you to discuss your particular situation or simply contact me by telephone at 650.244.9999. The consultation is free of charge.  

Related Articles.

Debt Purchasing: A Conversation with Some of the Industry’s Major Players

A Lot More Portfolios and a Lot More Buyers – Debt Purchasing Leaders Say

Debt Buying Swims into Mainstream

Contact Information

Sergio Seplovich

Telephone: 650-244-9999

E-facsmile:  650-244-9279

Electronic mail: sergio@seplovich.com  

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