The Aging Process

We look at both the charge-off and last-pay dates. If the accounts have been through several agencies and all last-pay dates are prior to charge off.

Calculate average balance. This is self-explanatory. We also look for concentrations at either end of the range, which can distort the calculation.  

If after reviewing these preliminary factors, we have an interest in the portfolio, we examine what account data will be provided with the sale. Some of the key pieces needed to effectively collect the accounts are the obvious ones: social security numbers, charge-off dates, last pay dates, charge-off amount, current balance, and so forth.

An important question we ask is what constitutes the current balance: Does it contain post-charge-off interest or fees?

Our due diligence would be clearly provided for in the contract. The same would apply to the put-backs — the return of those accounts that are ineligible for collection due to those warranted conditions — bankruptcy, deceased, prior settlement, and so on. The time period, procedure to follow, and whether those accounts will be repurchased or replaced by the seller would be specified.

Direct pays

We would work with you, the client, in ensuring that there is some provision for the process of handling any payments that might be received directly by the seller post-sale through electronic processing. An interesting quirk that we have noticed is that immediately after receiving our first letter, some debtors send a payment to the originating creditor.

Who’s Responsible?

Mutual indemnification: A clean, simple, balanced mutual indemnification is another requirement in our purchase contracts. The seller should be responsible for all actions taken prior to sale, including the origination, servicing, and collection of the accounts and we, the buyer, should be responsible for all of our actions after the transaction is closed.