Following the results of the third quarter, there was a surge in sales of secondary overdue debt on the assignment market. The total amount of debt offered for sale in the segment exceeded RUB 8.98 billion, or approximately a fifth of the market. “Secondary” is of interest to small regional collectors, as it allows them to save on the initial processing of the portfolio. But these debts are not very promising for collection.
As follows from the materials of the online auction for the sale of overdue debt Debex, at the end of the third quarter, the total amount of debt offered for sale a second time exceeded 8.98 billion rubles. Secondary debts include overdue debts that collectors bought from creditors, were unable or unwilling to collect, and resold. In total, according to the results of the third quarter, all players put up for sale debts worth 48.5 billion rubles. Thus, secondary debt accounted for a fifth of the market.
Large amounts of secondary debt are put up for sale quite rarely. The previous record was set more than a year ago, in the second quarter of 2022, due to the departure of a number of large players from the market after the outbreak of hostilities in Ukraine. Then 13.2 billion rubles were offered. secondary arrears with an average age of 5.5 years for 1.81% of the principal amount, follows from Debex materials. The average age of secondary delinquencies offered for sale in the third quarter of 2023 was approximately 6.5 years, with a sales price of 2.2% of the total outstanding balance (TAO).
The head of the ETP “Debt Market” Denis Belkin explains the situation by the rise in prices for the assignment: “What cost 1% five to seven years ago can now be sold for 2–3%. The price of secondary portfolios increased following the increase in the cost of primary ones. The sellers also analyzed last year’s experience and significantly improved the quality of their secondary portfolios.” At the end of the third quarter, the price of primary overdue payments in the assignment market reached 10–15% of the total debt.
The average principal amount in re-sold portfolios is 90–100 thousand rubles, according to the National Association of Professional Collection Agencies (NAPKA).
According to her data, the payback period for portfolios is about three years, which is “comparable to the desired payback period in the primary assignment market.” “Such portfolios are potentially of interest primarily to third-tier agencies - small players who are just entering the market and do not have sufficient free funds to purchase other portfolios,” NAPCA believes.
The secondary cession market may also be of interest to those companies that know how to implement long-term schemes, for example, are ready to engage in pre-trial work with clients through a network of specialists in the regions, or simultaneously manage a large number of debt files, notes PKB Managing Director Pavel Mikhmel. “Moreover, the “secondary” has already been partially processed - dossiers have been inventoried, scanned, court decisions have been received, data have been enriched, etc., all this saves costs and reduces the time for accepting the portfolio for work and processing,” adds the founder of GC Financial services" Grigory Galitskikh.
But for the most part, portfolios of secondary overdue debt, now passing through online auctions, “can rather be characterized as anti-selection, that is, there is a consolidation of the least promising debts in the portfolio for collection,” warns Pavel Mikhmel. Sometimes, confirms Tatyana Volegova, commercial director of the ID Collect overdue debt collection service, sellers even “add younger debts to the pool” for a successful sale.