Lessons Learned in Debt Purchasing

Share Post

Always Be Learning

It may be easy for my colleagues to think that since our receivables management industry focuses largely on debt buying, a webinar on lessons learned would simply be typical, common day-to-day information; however, I found this Receivables Management Association International webinar highly informative, nuanced, and helpful. In fact, Willey and Dreifuerst (the webinar presenters) both acknowledged that even they, as industry veterans, are still learning. 

The main focus of this information-packed one-hour webinar is secondary debt buying for small and medium debt buyers including the process of transacting, the vetting process, the fundamentals, what to be aware of during a purchase and sale, common challenges and misconceptions, and what the future looks like. Since buying different asset classes involves different procedure sets, the presenters made frequent allusions to the certification standards for each asset class, which I’ve included in this table for reference as a way to ensure that purchasing a debt is done within these certification standards and requirements.

Buying and Selling Best Practices

As debt buyers, it is our job to perform all the due diligence required prior to buying any debt. All aspects of the table above include aspects of due diligence, vetting, and finding out all crucial parts of the transaction. 

One way of performing due diligence is ensuring open communication with the seller. Both presenters emphasized that direct buyer and seller communication is crucial in brokering an open transaction. This communication is the best way to get questions answered and ensure that the debt you’re buying is above board, properly documented, and all aspects of the purchase agreement are considered. Communication helps buyers get an overview of the offering and the seller’s expectations; it helps buyers decide if the product type and the seller’s requirements fit within your strategies.

Buyers will want to ensure that all documentation is part of the deal: the NDA, any certifications/licenses, the data security, any needed financials, errors and omissions, and all compliance tracking. Especially in today’s regulatory climate, it is crucial for buyers to audit sample documents in accounts from the data file, review data files for completeness, and negotiate Purchase Agreement terms, including post-sale support provisions.

Best practices for buying and selling all start with constructing the proper purchase agreement with the client. Additional standards can include Better Business Bureau reports, Dun numbers, and Consumer Financial Protection Bureau portal and information. Checking for all oversight on accounts is also a crucial step in all aspects of debt buying and selling. It is especially relevant, for instance, in any judgment file, to validate all debits and credits.

Future Directions

There is a large trend in the industry toward online transactions and lenders. Checking your state’s policies on e-signatures and internet transactions is crucial prior to undertaking buying or selling of this asset class. There are additional trends towards seeing other alternative asset classes (apartment leases, debt settlement, etc.) and as a result, our industry needs to pay extra attention to leveraging technology, watching for CFPB proposed rule changes, and, perhaps more so for new asset classes but crucial for all, always demanding all relevant documents for your transactions. 

In Summary

Both Dreifuerst and Willey emphasized throughout the presentation, largely from their own errors during their careers, that documents can never be validated enough; there can never be enough questions asked; and, due diligence is almost never over. All transactions must be thoroughly vetted whether you are the buyer or the seller. Luckily, we at Tag Process are compliance professionals, and our focus on quality and developing strong relationships with our clients instills trust and proves that we are an excellent candidate for ensuring receivables management compliance and documentation, due diligence in our transactions, and the needed information and assurance to ensure smooth, problem-free transactions. 

Disclaimer 

This information is not legal advice and may not be used as legal advice. The information discussed or contained is not an explanation of the law and is presented for educational purposes only.  

 

Share Post

You May Also Like…