Why do debt collectors buy debts from banks?

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Sometimes banks are contacted by companies that offer to pay them the debts of delinquent people, at a discount rate. This may seem meaningless, but this has turned into a very lucrative business for Vulture Funds. Ever wondered why those nasty debt collectors are so anxious yet consistent in pursuing your hard-earned money? We’ve got you covered in this article.

Learn how companies buy debts from banks and why banks sell these customer debts.

Why do debt companies buy debts from banks?

Suppose a person has a debt of 10 thousand dollars with the bank going into default. The payment of interest or principal is so much that the bank considers him a high-risk client.

Vulture Company

Faced with this eventuality, the bank decides to get rid of this client by selling the right to collect the debt to another company, a “vulture” fund, it’s called because it is responsible for the collection of arrears from customers with a bad payment history.

What do Vulture funds gain by buying the debts from banks?

Companies or private professionals take care of the purchase of bank debts for one reason only: they see it as a perfect business model to earn a very good commission for each successful debt collected. Banks, being limited according to their policies to the collection of debts from long-delinquent customers, decide to sell the collection rights of the same to these vulture funds.

Vulture funds are hedge funds that seek to invest in debt or distressed securities. When a person defaults on a debt owed, vulture funds purchase this debt at a discount price.

Vulture companies usually pay 50% or less of the total amount owed by the client, which makes these, if they manage to collect the debt satisfactorily, earn an excellent commission. However, they do not always manage to collect them or they do not manage to collect the entire debt, so it is a risky investment. This risk is studied by the “vulture” fund before buying it in any case.

How do debt buying companies work?

Vulture Fund Debt Collector

There are several ways a debt buying company works. The main way is to manage the collections of banks, companies that allow the sale on credit of movable or immovable property among other companies that work with clients who can assume a debt.

The vulture fund can be engaged in the collection of debt on behalf of an institution, buy the right to collect a debt or seize assets for late payments. Companies of this type charge a monthly payment or a total percentage of all debts collected.

Of course, recovery companies or vultures are experts in instilling fear in the client of the company where the debtor is located, which usually decides to pay before the possibility of retaliation against him, such as being included in a list of delinquent people, which would make it impossible or very difficult to obtain future credits from any company that grants them.

Can you sue vulture funds’ excessive collections for debt?

Fortunately, the client who has been unpunctual with a payment has the protection of the law, so vulture companies must stop when the legal limit is reached.

The common method of collecting a debt using fear is to give specific personal data about the creditor of the debt, which is only legal if the collection company is duly registered as a customer of the company to which you owe and, in addition, you have given permission to the main company where you have your debt to use your data.

Now, the customer must demand to enforce their rights at the time when a collection company performs the following actions:

  1. Demand the payment of a debt which has no legal evidence (they have not shown you receipts that certify that you have not paid and therefore you are late with it).
  2. They have not notified you of the debt and have included you in a list of defaulters (all people with debts have the right to be notified of it and, in addition, be notified one month before that in case of not paying you will be included in a list of defaulters).
  3. Be notified that you have been included in a list of defaulters by the collection agency or the company with which the debt is presented. This, without first being notified that this action will be carried out.

If you notice that your rights have been violated in any of these scenarios, or you notice how the threats of the vulture fund rise, it is necessary that you go to the Courts to raise the case personally.


Vulture funds buy the debts of millions of people every year who go into default. Credit repair companies have found a fortune helping creditors to repair their credit after going into default. Are you a credit repair specialist? Comment below.

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