Debt buyers usually purchase charged off debt from credit granters for pennies on the dollar of the actual amounts owed. Profit is made by going after the debtors, either actively (collecting it themselves), or passively (hiring a collection agency to collect for them).
Debt buyers are usually large purchasers, like private equity or hedge fund investors, since they have both the means to purchase, as well as understanding the potential profits that can be gained. Debt portfolios usually consist of defaulted credit card accounts, cash advance loans, utilities, student loans, telecom or medical debt.
Purchasers then either do the debt collection themselves, calling the debtors to pay. Or they might turn around and sell the debt, at a profit, to collection agencies that purchase charged off debt.
While debt buyers might not have the same interest in maintaining good customer relations with the debtor, still they need to take precautions in the manner by which they try to collect this bad debt.
Because we live in the age of the Internet, businesses can easily get a bad image if they engage in harassing, threatening or verbally abusive tactics.
The debt buying industry is increasingly coming under closer scrutiny, as they are regulated by the same fair debt collection laws as collection agencies. Original creditors are somewhat exempt from many of these regulations. Violating these laws can result in legal problems, such as fines.
The debt buyer must also consider the ramifications of time invested into the debt collection process and should carefully weigh the cost of such services against the potential for profit. Either way, debt buying typically results in high margins for the investor today than chancing a purchase in the stock market.
Debt buyers can expect a market that is volatile, and there is the risk of losing money that is invested. It is more probable, however, that investors at least recoup the money they invested, with a greater likelihood of making some profit.
Furthermore, explore more helpful details about how to increase revenue for debt buyers, as well as collection agency and debt buyers services.