For the first time, the ARM industry has a defined process when buying and selling judgments. The Receivables Management Association last month released an update to its Receivables Management Certification Program (RMCP) that covers the sale of assets secured by a judgment.
Judgments are legally binding documents that give creditors and others the right to collect on unpaid debts using more rigorous means, such as by taking money from the bank accounts of the individuals for whom the judgment was entered against, garnishing the paychecks of those individuals, or placing a lien on any property that is owned by the individuals. The statute of limitations on collecting on a judgment varies on a state-by-state basis. Judgments are usually awarded when a creditor or owner of an asset, such as an unpaid debt, files a lawsuit against an individual seeking repayment of the debt. If the creditor or asset owner wins the lawsuit, a judgment is entered in their favor, which gives them the opportunity to collect on the unpaid debt.
The RMA noticed that the process and criteria for selling judgments was different than the process for selling pre-judgment receivables, so it updated its certification program to include the selling of judgments.
“Judgments are a unique animal,” said Jan Stieger, the executive director of RMA. “When you have a judgment, it stands on its own.”
When purchasing a judgment, certified companies must obtain the following information:
- A copy of the judgment, certificate of judgment, or such other court documentation evidencing the judgment;
- The name and address of the attorney and/or law firm of record for the judgment creditor, if applicable;
- A complete post-judgment financial transaction history, which shall include, but not limited to the post-judgment principal, interest, costs/fees, and payments/credits;
- The post-judgment interest rate that was awarded by the court;
- The judgment debtor’s Social Security number or other government issued identification number, if retained by the judgment holder; and
- The judgment debtor’s address on record with the court and, if different, the last known address.
“We believe we are first to set best practice for purchasing judgments.,” said David Reid, RMA’s director of government affairs and policy. “As far as we can tell, no state or federal entity has adopted any criteria for purchase of judgments.”
The process for updating the Certification Process is comprehensive. Prospective changes are vetted and discussed by two separate committees within RMA and then are put to the entire membership of the association before being adopted, Reid said. That includes the step of giving debt buyers of all sizes the chance to comment, as well as creditors and a representative from the consumer side of the transaction.
“At that level of review, all stakeholders in the process have input on the standard.,” Stieger said “That’s a great consumer protection.“