The debt market is fragmented and has many participants (the number of debt buyers, including collection agencies that buy debt, is almost 5,000 companies). And things get even worse when companies realize that each participant specializes in a particular type of debt and geography. It will take a lot of time to independently select potential debt buyers of the debt portfolio, conduct their due diligence, collect offers, and close the transaction safely. It will take a lot of time. Therefore, debt brokers play an essential role in the market, helping sellers navigate and make the right decision. This article will tell you how to choose a debt broker so that your sales, be it auto notes, consumer accounts, judgments, or bankruptcies, sell well, stay in the black, eliminate legal risks and start working with a responsible partner.
As a rule, debt brokers specialize in a particular type of debt, mortgage notes brokers, consumer accounts brokers, bankruptcy brokers, and auto loans and BHPH brokers are distinguished. Each of these types of brokers has a specific set of buyers. A broker offering your debt to a specialized buyer will be able to collect higher price offers, but the number of such buyers and their budgets are limited. Therefore, loan marketplaces have appeared on the market, which combine all types of buyers on one site with different levels of funding on one site.
Not all brokers use the same methods of checking debt buyers, and we recommend choosing a debt broker whose due diligence standards match your methods of selecting suppliers. But there is CFPB regulation in debt selling, and debt buyers will have to work with the personal data of suppliers and the laws of each state. Therefore, we recommend focusing on whether the broker is a member of professional bodies and applies their standards. The most common is RMAI membership (Receivables Management Association International). Ask the broker to provide a certificate of membership in this organization.
Information security is vital because debt sales involve sensitive consumer data. You must be careful here because many brokers still use email and phone calls for debt selling. The security of email servers is very often compromised, so we recommend choosing brokers that use end-to-end encryption and digital platforms for placing portfolio data, communication between the buyer and seller of debt, and closing the transaction.
Buyers of debt portfolios are very often at meetings with sellers and attend specialized conferences, so mobile applications for debt trading have become widespread. We also recommend checking if the debt broker you selected has such features.
We hope that the debt broker selection methods described above will help you choose the best broker, and you will conduct a safe transaction at a reasonable price.
Good Luck and Happy Bidding!