Could anyone offer me their insight to the following; Sale of debt.
I may waffle on a bit here, but these are some points that have had me thinking recently and can't find the right information available on the internet.
Lets assume a service provider or similar credit provider has a number of debtors, if this said service provider wishes to sell their debt book on to a collection agency rather than manage the debt collection themselves;
1) Is the service provider allowed to distance themselves totally from the debt and allow a third party to now 'own' that debt and collect thereafter?
eg: ABC Books has a debt book to the value of R250,000. ABC sells the debt to a collector for R xxx.xxx and then ABC has in essence received a settlement for their existing debt.
2) Can the collector now pursue payment arrangement with debtors, if so what procedure or practise should be followed? LOD's etc...
3) What fee's costs may the Collector add to the debtors existing balance?
4) What interest rates may the collector set?
5) Would ABC Books be allowed to sell the debt to any bidder ("the baseball bat stereotypes") or only a legal entity such as an attorney firm?
6) Is ABC Books allowed to accept an offer that is higher than the value of the debt? Eg: a bidder offers ABC Books an amount of R275,000. R25,000 more than the amount ABC require... I am curious to know if the collector can offset this inflated cost to the debtors...
7) What are the legal requirements for ABC to sell their debt book? Do they need the debtors consent / acknowledgement or just notify debtor with a letter via mail(registered)?
8) Can anyone sell their debt book? Eg: a Vet that offered 'incidental credit'
9) Lastly, are there any considerations to make between the date of engagement... Eg: how does a credit agreement (or more specifically the sale of debt) differ between pre and post NCA Act?
I know I raise a range of questions and issues here, but please feel free to add your bit, no matter how detailed or complex the reply. Happy to learn more about this process and would appreciate the help.