The following Financial Services guidance note provides comprehensive and up to date legal information covering:
The debt sale and purchase market has for some time been very active throughout the UK. It is an important way for lenders and debt sellers to reduce balance sheet liability and the number of specialist debt purchase and collection entities in the UK has grown significantly over the last several years. It is often used as a way to obtain value for under-performing accounts but sales take place in relation to all types of debt: regulated mortgages, loan and card agreements regulated by the Consumer Credit Act 1974 (CCA 1974), specialist debt such as store card debt and distressed and insolvent debt. The type of debt will impact the detail of the sale documentation but the mechanics and risk of the sale are largely similar.
This Practice Note covers the basic structure of a commercial debt sale arrangement for consumer credit, the roles of the parties and the key issues within the sale documentation, including how both parties protect themselves from the relevant risks.
Many debt sales will begin as an auction process. A seller will often 'package-up' a tranche of debt to be sold and put it out to tender. Multiple bidders may then place bids during what is often
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