Profiting from Debt Portfolio Purchases: A Comprehensive Multi-Agency Strategy
The debt buying industry allows investors to buy debts for a fraction of the original value and recover more than the purchase price. Investors often buy charged off debt at a reduced price from lenders, capitalizing on the financial market dynamics. This guide outlines a multi-agency strategy to increase debt collection efficiency and get the most out of debt portfolios.
Step 1: Buying Debt Portfolios for sale
Debt Buying - Debt Buyer
Debt buyers buy large portfolios of debts, including credit card debt, medical bills and utility bills. These debts are often acquired from original creditors who have written off these amounts as bad debt. By buying these debts at fair market value, often for pennies on the dollar, debt buyers can send these debts to specialized collection agencies.
Step 2: Initial Data Collection and Credit Reporting
Agency A - Advanced Data Tactics
Send the newly acquired debt portfolio to a collection agency that specializes in advanced data collection and credit reporting. This agency will use deep skip tracing to update the contact information and use credit reporting to encourage debtors to pay their debts to improve their credit scores.
Step 3: AI Driven Collections
Agency B - AI Technology
After the data is updated, send the portfolio to an AI driven debt collection agency. This agency will use artificial intelligence to analyze debtor behavior and optimize the contact strategy to increase the recovery rate on the delinquent accounts.
Step 4: Traditional Collections
Agency C - Manual Collection
Next, send the portfolio to a third party collection agency that focuses on traditional collections. This agency will communicate directly with debtors, negotiate payment plans and settlements. They operate under the same rules as the Fair Debt Collection Practices Act to protect consumers from false statements and abusive practices.
Step 5: Legal Assessment and Action
Agency D - Legal
Introduce a legal model collection agency as the fourth step. This agency will assess the legal viability of suing debtors. Filing lawsuits against suit worthy debtors can be necessary to collect the full amount owed especially when dealing with large portfolios of delinquent debts such as auto loans and high value credit card debt.
Step 6: Reselling Debt Portfolios
Getting the Most Value
After you’ve extracted value through these collection phases, prepare the remaining debt portfolio for resale. This portfolio now with updated debtor information and a history of collections is attractive to other debt buyers. You can sell these portfolios for a return on investment of 75% to 50% of the original purchase price.
Debt Buying Market
When reselling debt portfolios, understanding the debt buying industry and the biggest debt buyers like Encore Capital Group and Receivables Management Association RMAi members is key. These entities look for portfolios that have had substantial pre-collection work done and have potential for further recovery.
Summary
This multi-agency approach to debt buying and collections allows for the best handling of each account based on its individual characteristics. By using AI and manual collections with strategic legal and updated data, a debt buyer can increase the profitability of their business. The combination of different types of collection agencies will increase the recovery rate and the value of the debt portfolios, this is a winning strategy in the debt buying space.