Bad debt buyers purchase delinquent debts at a discount and attempt to collect the full amount plus interest and penalties from the debtor. They specialize in different types of debt, including credit card debt, business debt, and loan debt, and are different from debt collection agencies as they become the new owners of the debt.
Also known as junk debt buyers, bad debt buyers are companies that buy bad debts from different types of creditors at rates that are below the actual face value of the debts, then attempt to collect the full amount plus interest and penalties from the debtor. . Bad debt buyers sometimes specialize in insuring and collecting specific types of debt, including credit card debt, business debt, or loan debt.
Credit card bad debt buyers are one of the most common types of junk debt buyers. Here, the buyer buys up old credit card accounts with outstanding balances that the originator was unable to collect. Typically, the buyer offers the originator up to 50% of the face value of the debt, with the amount of the offer depending on the degree of risk associated with eventual collection of the entire debt. In many cases, the purchase can be as low as 10% of the actual debt if the risk level is deemed somewhat higher. The creator can then close the account and write off a partial loss. When successful, the buyer can collect not only the face amount, but also any penalties or interest that apply during the repayment period.
A similar approach is used when dealing with bad debt buyers who are focused on taking care of outstanding business debt. As with unpaid credit card debt, the originator sells the delinquent account to the buyer for less than the actual amount of the debt. The buyer, in turn, tries to agree repayment terms with the debtor, often making a significant profit in the meantime.
Bad debt buyers sometimes specialize in buying outstanding loans that have defaulted for one reason or another. This includes delinquent mortgages that may currently be held by investment companies. Debts can be sold in blocks sometimes identified as a debt pool, with a negotiated discount price for bad debt collection. Once the buyer is in control of the debts, the debt collection process begins, with the expectation that enough of the face value of those debts will be recovered to make the effort profitable.
It is important to note that bad debt buyers are different from debt collection agencies. When an agency is involved, the original owner of the debt still retains control and ultimately receives the funds recovered by the collection agency, less a percentage retained by the agency for services rendered. In contrast, bad debt buyers buy the debt outright, becoming the new owners of that debt. When this is the case, the debtor no longer has the opportunity to work with the originator and must work directly with the bad debt buyer to pay off the delinquent account balance.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
