Figures from the New York Fed are balances outstanding, not sale prices. Bands cited from DebtMarket’s pricing study are conversation ranges, not offers. This note is education for operating companies and creditors. It is not legal advice.
After charge-off, a creditor has three ordinary paths. Work the account with its own team. Place it with a collection agency that remits what it collects. Or sell the account to a buyer. The paths are not flavors of the same contract. A placement keeps title with the creditor. A sale moves title.
What changes in a sale
| Path | Who owns the account | What the creditor receives |
|---|---|---|
| Collect | The creditor | Whatever its own team recovers, net of its cost. |
| Place | The creditor | A remittance, on the agency’s schedule, under the placement contract. |
| Sell | The buyer, at funding | A purchase price. The seller forwards the debtors and stops servicing them. |
Creditors sell when they want cash now and are ready to leave the collection work. They place when they want to keep ownership and pay for effort. They collect in-house when the book is still inside the team’s capacity. Doing all three on the same accounts, in the same month, is how consumers get two callers and the buyer gets a complaint.
A sale on this desk is the third row. Start with debt for sale or a portfolio submission. The 90-day warranty starts after closing and funding, not on the day you stopped calling.
Do not run two paths on the same account
If an agency is still calling, the account is not ready to fund to a buyer. Pull it from the placement, or exclude it, before the cut-off. Consumers who hear from the agency and the buyer in the same week generate the complaints creditors say they sold the paper to avoid. The sale agreement should say the placement has stopped.
Three paths, written side by side
| Collect in house | Place with an agency | Sell | |
|---|---|---|---|
| Who holds title | The creditor | The creditor | The buyer, at funding |
| Who may speak with the consumer | The creditor’s staff | The agency, under the placement | The buyer, or the collector the buyer hires |
| Who keeps recoveries | The creditor | The creditor, after the agency fee | The buyer |
| What the creditor receives | The payments | Remittances | The purchase price |
| When it ends | When the creditor stops | When the placement ends or the account is recalled | At funding. The seller then forwards |
A sale is the path that moves title. The cut-off date fixes the balances. Closing and funding are the moment title passes, and the moment the 90-day warranty starts. From that point the seller forwards debtor communications and does not service the accounts. If an agency is still calling, the account is still on the placement path. Pull it, or exclude it, before the cut-off.
Pick one path per account
The same account should not be in a live placement and in a funded sale. The purchase agreement should say the placement has stopped. Creditors comparing the economics of the three paths can also read how buyers earn a spread and the creditor sequence in how to sell.
Put the creditor’s cash on one line
Take $2,000,000 of unpaid principal as an illustration, not as a market result. A placement that remits $80,000 over a year, after the agency fee, is $80,000 of recoveries and the accounts are still the creditor’s, including the complaints and the remaining work. A sale discussed at 4 percent of face is $80,000 at closing, the accounts transfer at funding, and later payments belong to the buyer. Four percent is an arithmetic example inside the bankcard conversation band. It is not an offer and not a prediction that a placement will remit that amount. The creditor is choosing between keeping the work and taking a price. The pricing study is the band. The file still has to be sampled.
Whichever path you pick, pick it per account. A placed account that is also in the sale file will be called twice. Pull the placement before the cut-off, or drop the account from the tape and say so in the exclusions.