Debexpert chief executive officer Ivan Korotaev has run financial services companies with presences throughout Europe and southeast Asia.

Korotaev then saw potential success for an online auction of the sale of bad debts here in the United States.

Debexpert not only continues to operate in the charge-off space, but will begin to offer online auctions of performing paper, too, the company said Tuesday.

Debexpert’s first auction of performing paper is Sept. 29 for Northwest Acceptance’s portfolio.

According to the company, the file includes the provision of secured subprime retail installment contracts originated in Indiana. The average balance is $4,800, and the average rate is 15.84%.

Korotaev also mentioned that vehicles are equipped with GPS trackers, and there is no reporting to credit bureaus.

“The sale of performing loans is a new direction for our company. We are confident that the auction mechanics, which were tested at numerous auctions for charged-off accounts, will make the market of performing loans in the United States more efficient, and will enable business development for both owners of such portfolios and their buyers,” Korotaev said in a news release.

Here is how Debexpert’s platform is designed to function.

To sell a package of performing paper, the owner publishes a portfolio with masked data on its online platform. Potential buyers can evaluate the portfolio before the start of trading to make a decision about participating in the auction.

Then, the winner of the auction is the company that offered the maximum price. Afterward, the portfolio is transferred to the new owner under the assignment agreement.

At the same time, all the terms of the retail installment contract are unchanged for the consumer.

“Debexpert made it incredibly easy for me to access a nationwide group of portfolio buyers to maximize the value of my performing loans. The whole process took me less than two hours,” Northwest Acceptance owner Bill Caan said in the news release.

Debexpert indicated only verified buyers registered on the auction platform have access to detailed information about the submitted masked file. Potential buyers can participate in the auction both through the desktop version and by using a mobile application.

The move into performing paper is continuing Debexpert’s evolution as an online debt trading platform established in 2019. In a separate message to SubPrime Auto Finance News, Korotaev explained why he brought his platform to the United States.

“An online sale is the most modern and civilized way to sell debt for which the borrower has stopped paying,” Korotaev said. “Our auctions also give the seller the best opportunity to maximize price as it opens their portfolio up to a nationwide network of buyers, not just a broker-selected handful. More buyers equal better prices and more money.

“To begin with, the lender must register on the site; it is no more difficult than to create an account on social networks,” he continued. “Then they publish a portfolio with masked personal data of debtors and indicates the starting price of their portfolio. We set the auction date for the portfolio, during which potential buyers can do their due diligence with the portfolio. The auction itself lasts for one hour, the buyer who made the winning bid wins. This is somewhat similar to car auctions, only in online mode. The lender can agree with the result of the auction, then we make a deal, after which the buyer will receive a portfolio with complete data. If the lender feels like the final price may be higher, we are ready to hold a second auction.

“In any case, Debexpert services for lenders are free; the commission is paid to us by the debt buyer. Our function is to make the sale of debt of any type simple and transparent. There are a lot of reviews on our website confirming this fact,” Korotaev went on to say.

Korotaev also mentioned other elements that can make Debexpert an option for finance companies with a notable amount of charged-off paper.

“The issue of personal data security is very important. All file exchange on our site takes place in encrypted form. We use end-to-end encryption; this is the most modern standard. This standard is used by the U.S. government. Even if the encrypted file is intercepted, it will take several decades to decrypt it,” Korotaev said.

“All debt buyers on our site are checked according to five dozen parameters,” he continued. “We collect a lot of information before allowing them to bid. Most of the debt buyers are members of the professional associations RMAi and ACA, and they very carefully monitor the reputation of their members. For two years, we have sold almost a thousand portfolios and there were no violations in the collection process for any of them.”

Korotaev offered these perspectives to finance company leaders who are unsure about to do about its charged-off paper.

“Unfortunately, a certain part of car loans will always be non-recovered. This is a given of the market,” Korotaev said. “But it is important to ask yourself two questions: which loans from among them can be collected independently, and which ones are better to sell?

“Based on our experience, the collection of delinquent debts goes along the bell curve. About three months after the start of the collection procedures, the income from the collection will drop dramatically — the debtor will give you the money that he was ready to give you,” he continued. “This is the point at which the loan is worth selling because all the remaining proceeds on the loan will be less than the amount that you can get right now when selling the debt.

“In addition, you will need much more time and effort to get it. Selling delinquent accounts gives you cash to reinvest in new loan or repay a line of credit. But most importantly, you will be able to make better use of the working time of the employees responsible for collecting payments; they will focus on working with more profitable accounts,” Korotaev went on to say.

While Debexpert provides the platform to host an online auction, Korotaev closed by mentioning another important element when dealing with charged-off paper.

“Communication between the seller and the buyer is also very important, including answers to seemingly simple questions,” Korotaev said. “Everything significantly increase the final value of the portfolio, but this is very briefly. Our employees will tell the car dealer about everything else that can increase the price of the portfolio.

“Today, for a profitable sale of accounts, a lender does not need to be a professional in the debt industry. IT technologies make this process simple and fast,” he went on to say. For a lender, this isn’t more difficult than working in standard computer applications. In conclusion, I will repeat what I started with — Debexpert services for lenders are free, so every auto lender can test our service and will not lose anything.”

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