How does debt collection work?
Debt servicing costs are only taken from the cash flow that is recovered from a delinquent loan; investors never pay these fees up front. These payments are used to cover the costs related to the collection of loans in a delinquent portfolio, in particular, the following fees are included:
- State fees
- Court fees
- Success fees paid to debt collection agencies
- Fees for the lawyers and any other costs related to the collection.
If no cash is recovered then no deductions are made.