Debt Buyer

A debt buyer is a company or individual that purchases delinquent or charged-off debt from creditors, such as banks or credit card companies, at a discounted price. Debt buyers acquire these debts with the intention of collecting the full amount from the original borrower, often making a profit by recovering more than they paid for the debt. Debt buyers are common in the collections industry, and they may either collect the debt themselves or hire third-party collection agencies.

Example

A debt buyer purchases a portfolio of delinquent credit card debts for 20% of the total owed and then seeks to recover the full amount from the borrowers, keeping the difference as profit.

Key points

• A debt buyer purchases delinquent or charged-off debts from creditors at a discount.

• They aim to collect the full amount from borrowers, making a profit on the difference.

• Debt buyers are key players in the collections industry.

Quick Answers to Curious Questions

Why do creditors sell debt to debt buyers?

Creditors sell delinquent debt to recover a portion of the amount owed, transferring the collection responsibility to the debt buyer.

How do debt buyers make money?

Debt buyers profit by purchasing debt at a discount and collecting more from the borrower than they paid for the debt.

What is the role of debt buyers in the collections industry?

Debt buyers play a major role in the collections industry by purchasing and attempting to collect on delinquent accounts that creditors no longer wish to manage.