188.8.131.52 Mechanics of Debt Sales
A debt buyer typically purchases thousands of accounts per sale from a creditor or another debt buyer. This group of accounts is called a “portfolio.” Debt may be grouped into portfolios based on type of accounts, length of time since default, or the number of prior collection placements.292 Sellers typically market portfolios of debt for sale and prospective buyers bid on those portfolios.293 Average amounts paid to purchase debts are discussed at § 184.108.40.206, supra.
Once a price is agreed upon, the parties enter into a purchase and sale agreement that outlines the terms of debt sale between the creditor and debt buyer, including details about the accounts being sold, a description of prior collection placements, any representations and warranties, any limits on resale, and details about information that will be provided at sale or after sale.294 The purchase and sale agreement will also spell out what if any right the debt buyer has to go back to the debt seller to obtain additional information about an account.295
Debt sales can involve either “spot” or “forward flow” portfolio sales.296 A “spot” sale is a one-time purchase of a portfolio of debt while a “forward flow” sale involves multiple sales of debts at regular intervals and pre-arranged prices.297 The purchase and sale agreement for a forward flow sale is often called the forward flow agreement.
When a particular portfolio of thousands of accounts is sold, the parties execute a bill of sale or other short assignment document. That document simply references the portfolio and the purchase and sale agreement. This one page document says that, “Seller, for value received and pursuant to the terms and conditions of the Purchase & Sale Agreement, hereby assigns all rights, title and interest of Seller to those receivables identified in the Sale File.”298
At the time of sale, the debt buyer also receives a data file, which is an electronic spreadsheet that lists the thousands of specific consumer accounts being transferred, as well as any additional documentation that is being transferred.299 The sale data file will have information about each account.
Once the purchase is complete, debt buyers may choose to collect debts in-house or to place accounts with third-party debt collectors or collection law firms.
292 See Fed. Trade Comm’n, The Structure and Practices of the Debt Buying Industry 17 (Jan. 2013).
293 See id. at 20–22.
294 See, e.g., id. at 17, 24–27.
295 Id. at 39–40.
296 See id. at C-2.
297 See id.
298 Dalié Jiménez, Dirty Debts Sold Dirt Cheap, 52 Harv. J. on Legis. 41 (2015).
299 See, e.g., Fed. Trade Comm’n, The Structure and Practices of the Debt Buying Industry 35 (Jan. 2013).