The debt buying market has grown more diverse in recent years, involving the purchase and sale of alternative asset classes such as bankruptcy receivables, telecommunications receivables, automobile deficiencies, and healthcare debts, as well as considerable debt buying in countries such as the United Kingdom, Germany, and Australia. Still, the purchase and sale of credit card paper in the United States remains the mainstay of the global debt buying market.
A review of the total volume of purchased paper within these segments demonstrates the ongoing importance of credit card debt to debt buyers. In the United States, alternative asset classes saw an estimated $10 billion in face value purchased in 2005. In markets other than the U.S., debt buyers purchased an estimated $48 billion in face value of delinquent receivables in 2005. The U.S. credit card sector of the debt buying market saw an estimated $100 billion in face value of delinquent receivables changing hands in 2005, taking into account primary sales from credit issuers as well as subsequent reselling on the secondary market – demonstrating that this is by far the largest and most important part of the global debt buying market.
Kaulkin Ginsberg’s Global Debt Buying Report includes an extensive review of this sector of the debt buying market, detailing portfolio sizes, expected returns, volume, pricing, resales, and globalization trends for U.S. credit card paper. The results of this research are sure to interest both established market players and those considering the purchase of debt for the first time.
Pricing: Many suggest that the prices of credit card debt have reached a plateau or have even decreased since the fourth quarter of 2005, given the consolidation of credit card issuers and an increased volume of paper on the market.
Expected Returns: Recent pricing increases have led many debt buyers to contract their expected returns from 3X to 2.5X purchase price, or lower, five years after purchasing a debt portfolio. Just a few years ago, 3X over 3 years was the debt buying market’s standard expected return.
Resale Market: Many suggest that the resale market has contributed considerably to the development and maturity of the debt buying market. Many also suggest that limitless reselling of the same portfolio presents considerable risks to debt buyers and credit issuers alike.
These and other subjects make debt buying and credit card portfolios in particular a fascinating subject for research – and, potentially, a basis for company growth as well.
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