Buying Bad Debt
On The Rise For U.S. Investors

Buying bad debt is a rapidly growing business enterprise for investors. A bad economy and rising unemployment, resulting in growing consumer debt and increasing credit defaults has left creditors with lots of unresolved debt.

As these credit granters are looking for much-needed cash flow, many are selling portfolios of charged off debt.

Buying debt portfolios at greatly reduced discount rates, usually for pennies on the dollar, can potentially reap great returns.

Entities buying debt are usually companies, such as hedge fund investors, private equity firms, smaller companies and/or individuals, or sometimes collection agencies or private debt collection law firms.

They purchase these delinquent or charged-off debts from a creditor for a fraction of the face value of the debt. The debt buyer can then collect on its own (called "active debt buyers"), utilize the services of another collection agency (called "passive debt buyers"), repackage and resell portions of the purchased portfolio or any combination of these options.

Purchased debt portfolios usually consist of charged off consumer credit card accounts, telecom, pay day loans, medical, or utility debt. Banks also sell their loans that have been charged off, as well as charged off checking and ATM/debit accounts, called demand deposit accounts.

NOTE: Discover a largely untapped market, with little competition...for now...and how and why some debt buyers are netting HUGE double digit returns.

History of Buying Bad Debt

Once the FDIC, and in the end the Resolution Trust Corporation (RTC) took charge of the assets they had to find institutions, organizations and private investors interested in purchasing debt, and that would be willing to buy the assets of closed banks as well as both performing and non-performing (delinquent or charged-off) accounts.

The RTC held auctions across the country enabling various organizations to bid for portfolios of mixed assets. At these auctions the bidders weren't allowed to evaluate the assets before biddingand most buyers had no idea what they had purchased until they'd left the auction.

The availability of these assets for the general public was the catalyst that launched buying bad debt as an industry.

Some Challenges With Buying Debt

Buying debt has increased, and so has reporting of abusive debt collection practices on the part of some debt buyers, which are illegal according to The Fair Debt Collection Practices Act (FDCPA). Such abuses include the following:

• Verbally abusing, harassing, threatening, and/or using obscene language with a consumer.
• Failing and/or refusing to state the name of the collection entity pursuing the delinquent debt.
• Failure to validate, when requested to do so, proof of the debt in writing.
• Attempting to collect, sue, or threaten to sue for debts that are past the statute of limitations.
• Reporting inaccurate information to the credit bureaus.
• Contacting the wrong party in attempting to collect.
• Impersonating an attorney or other law enforcement, threatening suit, arrest, wage garnishment, property seizures, etc.
• Refusing to cease telephone contact after cease-and-desist notices to do so.

While original creditors are usually exempt from fair debt collection laws, the courts have usually adopted the position that any party buying bad debt, as well as collection agencies, are subject to these laws. Those who engage in illegal debt collection practices are subject to legal action under The Fair Debt Collection Practices Act (FDCPA), The Fair Credit Reporting Act (FCRA), in addition to other federal and state laws.

If your company or organization is considering contingency collection agency placement for your debt portfolio, please fill out the brief quote form below. One of our consultants will contact you within 24-48 hours.