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During the last decade, much attention has been paid to the Debt Purchasing industry. While buyers are often lumped together as synonymous businesses, it is important to note the industry is segmented much like the collection agency industry, for example: commercial, consumer, retail, medical, government, student loans, and so on.

Prior to the mid-1980s, few buyers of distressed assets existed. Promulgated by the now-defunct RTC (Resolution Trust Corporation) and FDIC sales beginning at the time, real estate became the distressed asset of choice for distressed portfolio buyers. Charged off unsecured loans lacked the underwriting qualities of a mature market like real estate. Moreover, loan portfolios previously worked by collection agencies were shunned by the collection industry in general and considered worthless. Indeed, when portfolio acquisitions of charged off loans were made, accountants required buyers to book the acquisition as a complete loss. Much has changed during that time. Numerous industry players have come and gone attempting to cannibalize the collection agency markets. More often, those companies have gone out of business. The common thought seems to be that those new buyers attempting to “roll up” the industry have concentrated too often on the economics of fundraising and critical mass to attempt to deliver value in a company or vehicle engaged in the purchasing industry. However, there are numerous successful survivors in the fallout of the past five years in the Debt Purchasing industry. Currently, more than 300 companies engage in the business of acquiring distressed consumer loan portfolios, most often in the form of credit card paper.

UNIFUND, consistently rated as one of the five largest in the industry, has been a player since 1986. Initially, the company entered into purchasing agreements to buy large volumes of returned checks from national retailers. The company focused primarily on using technology and information to screen check writers at point of sale and collect on the unpaid checks subsequently received. Most importantly, UNIFUND’s relationships have and do concentrate on maximizing the value of the collection accounts on a post collection basis. If you were in the collection business before the advent of secondary and tertiary placements, you knew these types of portfolios or “pools of accounts” as they were called, as “re-works.” In 1987, the company began acquiring bank loan portfolios.

Believing the collection agency industry is extremely efficient at soliciting payment from debtors, UNIFUND considers itself a researcher of debtor data for the benefit of the creditor: us. Only with this additional information does UNIFUND believe the collection opportunity is enhanced beyond its current “tertiary account” status. Moreover, the company has proven that certain post tertiary accounts are inherently more valuable than certain primary accounts. Indeed, it is with this focus and mind set that UNIFUND develops in-house solutions comprised of more than 7,000 computer programs to refurbish distressed post charge-off consumer loan portfolios. The company distributes portfolios to collection agencies and debt purchasers, according to the parameters of the buyer, most often determined by their specialty, i.e. state, legal status, bankruptcy, etc.

The company has acquired millions of accounts and billions of dollars in loan portfolios. In addition, numerous

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joint venture relationships exist whereby the company takes an ownership position in the Buyer’s Company or portfolio. Often, these buyers have entered the industry with the assistance and general guidance of UNIFUND and its team. Companies seeking to grow in this industry have engaged UNIFUND to source portfolios as well as provide ongoing talent support and date/information technology in forms usable to the buyer. Some of these “collection shops” have been born as a result of UNIFUND’s participation and promotion of the industry to various types of receivable liquidators. Often, new buyers of paper seek guidance on sources of information relevant to their business model and methods for insuring profitable predictable income streams from the acquired portfolios. Much of the value added by UNIFUND is geared toward debtor/asset information as well as behavioral and characteristics analysis at time of purchase and on an ongoing basis. Companies rely on the expertise provided by the company to deliver a meaningful improvement to the types of paper acquired as well as portfolio insight to maximize the long-term aspects of collection opportunity. Buyers are mindful of the fact that acquired portfolios have a much longer life than collection agency placements. Buyers use this time-enhancement to affect collection on a broader scope of accounts by incorporating a wider array of liquidation strategies. These strategies range from standard telephonic collections to legal departments, refinance departments, coordination with credit counselors and consolidators, to spending more money and time reviewing the nature of the debtors within a given portfolio. These principles of purchasing debt allow greater recovery than is otherwise attainable through normal collection channels by virtue of controlling the account. Debt purchasing allows the collector to become the creditor and act on all the ideas collectors would implement if they owned their accounts or were the original creditor.

UNIFUND also assists agencies in building value by supplementing existing collection agency paper with “owned” paper. This feature allows agencies to build actual asset value, as opposed to the service-fee model most agencies adopt. Inherent in the successful collection of portfolios is improvement to the value of the entity owning the accounts. Many agencies have adopted debt purchasing as a method to build value and fuel growth, layered over their existing shops and programs.

Currently, UNIFUND offers joint venture and purchase opportunities for various types of distressed consumer loan portfolios. Moreover, the company continues to deploy significant assets in the continuing development of systems, technologies and concepts for successful use in the bad debt collection community. The company has been actively supportive of the collection agency industry through its instrumental role in the formation of the AABA, the American Asset Buyers Association. AABA has merged with the ACA and has been renamed the Asset Buyers Program of the American  Collectors Association.

While many companies have entered the foray of purchased distressed receivables, some have failed and some have been successful. Most often, the successful buyers have determined that a national partner or knowledgeable, credible source is the most efficient, least costly method of successfully running a debt buying shop.••

 Unifund has been a CAC Vendor Member since1994.
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