ACA International Releases Due Diligence Guidelines for Debt Buyers

MINNEAPOLIS – Caveat Emptor: or to use the vernacular, “Buyer Beware.” These words describing a fundamental rule of commerce may never have been more meaningful than in the fast-growing world of debt purchasing.

It appeared in the mid-90s that the new phenomenon’s prominence in the accounts receivable management industry would rise unabated for the foreseeable future. But with increasing pressure on portfolio prices felt by industry veterans and newcomers alike in recent years, the need for debt buyers to “do their homework” has become clear. To that end a new handbook, “Due Diligence Guidelines,” has been developed for asset buyers by ACA International, the Association of Credit and Collection Professionals (ACA).

“These are what we believe will become standard practices for the debt buying industry,” said Carol Freeland, chair of ACA’s Asset Buyers Division and coordinator of the guidelines handbook. “The book lays out the steps that should be taken by buyers, sellers and brokers alike, in order to make a transaction of debt that is beneficial to everyone involved.”

Freeland explained that the high-profile successes of debt buying companies has led many new entrants to invest in debt portfolios, and for good reason. “It’s a great opportunity?for those that do it wisely. But with portfolio prices on the rise, the increased risk of buyers overpaying for debt and overestimating the collectibility of accounts also occurs. We’ve outlined the practices that can minimize this risk, and increase compliance with the laws, so that debt buying continues to be a valuable option to creditors and their partners in the collection industry.”

The release of “Due Diligence Guidelines” comes at an opportune time for players in the debt buying industry, as ACA has recently made changes to its membership structure that will allow access to companies vital to the debt buying process that previously were not eligible for ACA membership.

ACA’s former Asset Buyers Program was only open to companies or individuals that were already ACA members through another membership division. However, the new division now offers access to ACA membership for companies that did not qualify for membership in any of the other divisions. But by establishing a new Asset Buyers Division in July 2005, the association can now provide its extensive compliance, education and business services to organizations that did not fall within the traditional definition of a credit and collection company.

“Collectors and credit grantors aren’t the only people involved in asset buying anymore,” said Freeland. “Private equity firms, Wall Street investors, professional brokers and technology providers play important roles in the market. Now, all can be brought together in the credit and collection industry’s largest international association.”

The handbook is available to both members and nonmembers of ACA, at rates of $90 and $180, respectively. The special price of $45 is offered for ACA members who also belong to the association’s Asset Buyers Division. For more information on ACA’s Asset Buyers Division or to order “Due Diligence Guidelines,” contact the ABD staff at (952) 928-8000, ext. 118 or abd@acainternational.org.