A debt acquisition firm or debt buyer is a company or person that buys a discounted debt from a creditor. A debt buyer can be a private debt collector or a collection agency. They buy the debt at a lower cost than its value. The debt buyer will then collect the owed debt either by themselves or by hiring a collection agency. They sometimes resell amounts of the debt too.
Understanding debt acquisition firms and debt buyers
In general, a debt buyer will pay a small percentage of what the debt is actually worth. There are lots of different debt buyers and debt acquisition firms. They can be private, small business or a big publicly traded company. A debt buyer is addressed as ‘active’ if they attempt to collect the money owed themselves. They are ‘passive’ if they get a collection agency to try to recover debts. Debt buyers mainly buy debts that have come from car loans, credit cards, mortgages, medical bills, utilities, and retail accounts.
Why debt buyers exist
When a lender, like a financial institution or mortgage company, can’t get payment for a debt, they might seek to recover some of their loss. Sometimes a lender might think the chances of recovering the funds are limited or impossible in the time frame. Instead of waiting for the debtor, to make repayments, the lender can go to a debt buyer to transfer ownership of the debt for a small return. This is a way lenders can at least have some money back.
What do debt buyers and debt acquisition firms do?
Debt acquisition firms become the owners of the accounts and then seek to reclaim some of the money. This might mean they write a new set of repayment terms for the debtor of the might apply recuperation tactics using a collection agency.
The debt buyer’s approach is to see a return on investment by getting some of the money owed from the debtor. Often, debt buyers have more flexibility in the ways in which they can try to get funds back. Moreover, since the debt buyer got the debt at a discount that might have even been worth pennies, any repayment on the debtor account can help the company to make a profit.
Debt buyers in Canada
In Canada, debt collection agencies and debt buyers are regulated by the OCA (Office of Consumer Affairs). There are also laws that regulate their practice including the Collection Agencies Act, the Financial Administration Act, and Consumer Protection Regulation.
Why you might be interested in debt buyers
If you’re in debt, understanding the process of debt buying and collection agencies can really help you get to grips with managing and sorting out your debt. Knowing facts about debt collection can help you know what to expect and what you can do about your debt. Companies like National Credit Help are a great first port of call to answer any questions you may have about debt buyers in Canada or debt acquisition firms.