You may not think it, but your debt is worth a lot of money to some Debt Collection Companies.
Your Debt Has Been Sold to Another Company
Essentially, it means that the creditor to whom you owed the original debt has decided to sell your outstanding balance to a third party, who will now become the new owner and collector of the debt. The new creditor may employ different tactics to recover the outstanding balance, which can include phone calls, letters, or legal action. As they do want to make a profit from purchasing your debt.
How Much Was My Debt Sold For
The sale of debt is a complex process, and understanding the specific details of how much your debt was sold for can be challenging. Typically, this information is considered commercially sensitive, and as such, the creditor is under no obligation to disclose this information to the debtor. While it may be frustrating not to know the exact amount for which your debt was sold, it is important to bear in mind that this is a standard practice within the industry. The debt industry is very keen to NOT tell you how little they actually paid for your debt.
Debt is Usually Sold as a Portfolio
Debt can be sold in portfolios to third-party debt collectors or buyers. These portfolios consist of a group of debts owed by various individuals or entities that share common characteristics such as the type of debt or the credit score of the debtor. Typically, the debts in the portfolio are classified into various categories based on the likelihood of repayment. For instance, a portfolio can consist of a percentage of payers, who are individuals that are current on their payments, a percentage of non-payers, who are individuals that have defaulted on their payments, a percentage of missing debtors, who are individuals that cannot be located, and a percentage of homeowners, who are individuals that own their own property. The debt buyers then use a variety of strategies to collect on the debts, such as phone calls, letters, or legal action, with the ultimate goal of generating a profit from the investment.
When debt is sold in portfolios, the total amount of debt owed by the individuals in the portfolio is usually sold for a significantly lower price than the face value of the debt. This means that debt buyers can purchase the debt for mere pennies in the pound, such as 5p for every £1 owed. The reason for this is that the debt buyers take on the risk of collecting on the debt, which can be challenging and time-consuming. Moreover, the debt buyers may not be able to recover the entire amount owed, especially for debts that are in default or owed by individuals with a poor credit history. Therefore, they purchase the debt at a discount to reflect the risk involved and their potential costs of collection. In this way, the debt buyers can still make a profit by collecting on the debt or reselling it to other debt buyers. It is worth noting that the sale of debt in this manner is regulated by the Financial Conduct Authority (FCA) to ensure that consumers are treated fairly and are not subject to unfair practices or harassment by debt collectors.
Website Debt Collection Pitch
“The sale of overdue debt has long been a part of the credit and debt management process in the US. In the UK, debt purchase is a relatively young market that has grown rapidly.
1st Credit has played a major role in the growth of this market in the UK. Since 2002, we have spent more than £300 million buying portfolios with a face value in excess of £3 billion. We purchase various types of consumer debt from a range of lenders, including banks, credit card companies, telecoms, retailers and utility companies.
How Much Was My Debt Sold For
Looking at the figures above:
£3,000,000,000 (3 Billion) Face Value
£300,000,000 (300 Million) Purchase Price
They paid approximately £0.10 in the Pound for the debt.
So, huge profits can be made from your debt when sold on. You may also find this information that was originally on The Bankruptcy Association website and interesting read.