Do any investment companies buy consumer debt portfolios?? I know its mostly collection agencys that take these things then harass the debters into paying but I was curious if anyones taken a debt portfolio, crunched some numbers and found hidden value within .
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CDO managers, I think, eventually purchase large portions of consumer debt. But breaking into CDO structuring wouldn't be an easy way, I think!
Yes companies buy them. I imagine there are '000s, but here is one I know of: http://www.squaretwofinancial.com/
Basically, like other debt sales, defaulted credit card debt comes to the market from a broker. It prices between 2-5% of outstanding value. There are '000s of borrowers and most of the work is sql and data mining to sort through and try to determine with statistics if there is any value.
Were you talking CC debt or consumer loans like a personal LOC or loan for an auto?
Collection agencies collect on a contingent fee basis, meaning they aren't actually purchasing the portfolios. CCs, banks, utilities will hire them to collect on bad debt and will pay them say 10% for every $1 that comes in.
Debt purchasers are what you are talking about. Those include publicly traded companies (PRAA, ECPG), dozens of private companies, and plenty of private investors or investment arms (hedge funds, DD/SS funds, PE funds, other SPVs).
You need to run a static pools analysis. There is no hidden value. You need a proven methodology for collection, otherwise, you are stuck holding paper. All of those debt purchasers either collect themselves or partner with collection agencies.
Any type of debt..credit to loans..healthcare..whatever.
I guess this isnt something like day trading stocks or currencies and not so much feasible. Thanks for the answers guys!
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