Agencies Working For Debtors?

I received an interesting call the other day from a private equity firm seeking market information about an interesting group of companies.  If you own or manage a collection agency or a debt buying company, this is not a partner for you – but I think its inquiry may interest you nonetheless.

Before I begin, I should say that it’s not our policy to base columns like these on specific inquiries.  But this investor was ultimately looking for good market information, and if you share your feedback with me, I’ll pass your opinions along to the investor, protecting your confidentiality of course in the process.

The group of companies in question here are debt settlement companies that operate largely like collection agencies, with the exception the these companies work for debtors instead of creditors.  Certain debtors hire these intermediaries to represent them in negotiations with collection agencies, and receive a percentage of debtors’ savings in the process.

It’s tempting to think of these companies in a legal context.  As collection law firms represent creditors in legal proceedings, debtors’ personal attorneys also represent their clients in hearings and proceedings that take place in the courtroom or before a mediator.  But that’s not what we’re talking about here.

Instead, these debt settlement companies use non-legal strategies to settle on behalf of their clients.   This is similar of course to the model of contingency collection agencies that use non-legal strategies and processes to collect debts as well.