Debt buyer

A debt buyer is a company, sometimes a collection agency or a private debt collection law firm, that purchases delinquent or charged-off debts from a creditor for a fraction of the face value of the debt. The debt buyer can then collect on its own, utilize the services of another collection agency, repackage and resell portions of the purchased portfolio or any combination of these options.

At the corporate level Encore Capital Group and subsidiaries form the largest debt buyer and collector in the United States and Portfolio Recovery Associates is the second largest.

History

The debt buying industry in the United States began as a result of the savings and loan crisis of the 1980s. During this time banks were closing at an alarming rate and the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to a certain amount, received the assets of the bank to cover the expenses associated with repaying the closed banks' depositors.

When the FDIC, and eventually the Resolution Trust Corporation (RTC) took control of the assets they had to find institutions, organizations and private investors that would be willing to purchase the assets of closed banks including both performing and non-performing (delinquent or charged-off) accounts.