Buyer Beware: A Word of Caution to Debt Purchasers

My company, Brown & Joseph, is involved in commercial sector of the ARM industry. We offer a wide range of services in the sector, including collections outsourcing, preferential payments, and — more to the point — commercial debt purchasing.

As anyone who deals with past-due receivables knows, there is a negative perception in the general public when it comes to collections and debt purchasing. Those of us that have been in the business for many years understand this, but we also realize we provide a valuable service to businesses that extend credit, putting billions of dollars on the bottom line of companies when it comes to past due and written-off receivables. We also understand there are a few “bad eggs” out there that give a false impression of our industry and fuel the negative press. In reality, the vast majority of creditors — as well as receivable management companies — are honest, hard working, tax paying citizens and companies. We understand the nature of what we do and realize collecting and/or buying receivables is not for the weak of heart. In the same breath we also know that there has to be trust among companies such as mine and in this instance the creditors that wish to sell receivables portfolios.

The business of buying and selling receivables is tricky and comes with inherent financial risk. That’s just the way it is as a buyer of these receivables: risk accepted with the possibility of a nice return on the investment. We don’t always get a return on the investment, but usually we do. In order to minimize the risk there has to be due diligence done on the portfolio for sale, as well as a trustworthy the seller that can deliver the data and information they say they can. This is a two way street for both the buyer and seller.

All sides must walk into the buying and selling of the receivables portfolio with both eyes open and must perform due diligence in order for the transaction to be profitable and trouble free.

Brown & Joseph entered the debt purchasing arena a few years ago. We have had many financial successes whereby we end up making money and the seller is happy with the purchase price — found money, so to speak, for the seller.

Recently, we were involved with CollectionIndustry.com to help foil a fraudulent commercial portfolio advertised for sale on the site’s Portfolios for Sale page. It showed $1.7 million of receivables spread out over 250 accounts with a charge-off date of June 2006. Additionally, the sellers comment indicated the portfolio was untouched — sounds too good to be true doesn’t it?