Knowing whether a Chain of Title is valid or a fake is equal parts art and science, according to a panel of debt-buying industry participants, who spoke during a webinar hosted by AccountsRecovery.net.
Buyers, sellers, and brokers should develop their own process for evaluating COTs, according to the panelists, but the steps within that process will vary, based on the parties involved in the transaction, the companies named in the chain, and the amount of additional information included in the deal. It is also becoming more and more important — almost required in many cases — to link the chains of title to the account level information in the portfolios being bought or sold, to try and provide as much assurance as possible that the portfolios are legitimate.
One of the first steps when evaluating a COT is to examine the names of the companies on it, said Marko Galic, director of business development for New Century Financial Services. If the name on the chain is ABC IV, LLC and the portfolio is actually being acquired from ABC, LLC, that is a discrepancy that should be addressed, Galic said.
As well, the language on the chain is incredibly important. For example, whether the chain says that what is being bought or sold is a “receivable” or an “account.” There is a difference and lawyers have begun pointing it out in court, Galic said. When a COT refers to a “receivable” being purchased or sold, lawyers will ask if the “account” is being bought or sold as well. It is important for the chain to say that the “account” is being sold, Galic said.
If something smells or looks weird or the answers coming back from the other participants in the transaction are not sufficient, walk away from the deal, said Chris Runci of The Runci Group. There is a level of self-discipline is required in this industry that can keep people from making bad mistakes, he added.
“Don’t compromise your standards, whatever they are,” Runci said. “The people who remain in this space and are successful are the ones who are disciplined.”
It is ultimately up to each participant to decide what information they can live without getting, said Jason Pratt of Portfolio Management Group.
“There are certain things you can live with and certain things that you can’t,” Pratt said. “You’re buying a product that nobody else wants.”
When buying directly from a seller, the most important aspect of the deal is maintaining a productive and professional relationship, Pratt said.
Other resources that were mentioned as possible sources of helping validate the legitimacy of a COT or an individual or company included using the databases of DBA International, ACA International, and the Better Business Bureau. Galic also includes reaching out to his contacts in the industry and asking for their perspectives before making a purchase.
