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Credit Today: Debt purchaser’s plea for transparency over portfolios
Published on 01/12/2010

Creditors must be more transparent over the scoring performance of their debt portfolios when negotiating deals with debt buyers, according to the chief executive of Arrow Global.

Addressing delegates at the Credit Today Debt Sale and Purchase conference in Nottingham, Zach Lewy expressed concern about the way some creditors attempted to sell certain portfolios without revealing their scoring performance.

"We have seen more sellers selling on negatively scored accounts and we are deeply nervous about this. There were three portfolios we did not bid on this year because the sellers did not reveal scores but still wanted us to buy," he said.

"When you open the door to adverse selection and don't share scoring mechanisms it becomes a much more challenging pool of assets to value."

Lewy's argument was acknowledged by Jan Dlabola, senior collections manager at GE Money Bank, who said: "I can understand that one can get nervous but I don't think the scoring situation is all that bad."

Brian Jackson, senior vice-president, recovery and risk operations executive of MBNA, also acknowledged the concerns of debt buyers, but added that the issue was around a wider discussion of data presentation.

He said: "I think the issue with scoring and transparency is that it is more important to have a discussion around the information rather than just presenting it, but I don't think there has been any such issue between us and the debt purchasers."

Chairing the debate Leigh Berkley, chief executive of Tessera, said: "I suppose the answer to this issue is more transparency and trust, which we have talked about in great detail."

Lewy also expressed concern over the potential knock-on effects that public sector cuts could have on the market, arguing that there was a potential for this to have an adverse effect on paying arrangements.

He added: "If we are worried about anything looking into 2011, it is the risk of paying arrangements which have been stable for years taking damage because of the government's spending cuts. It is difficult to figure out where the macro-economy is going."

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Arrow Global Limited is registered in England and Wales with company number 05606545. Its registered office is at Belvedere, 12 Booth Street, Manchester M2 4AW. Arrow Global Limited ("AGL") is authorised and regulated by the Financial Conduct Authority for certain credit-related regulated activities, and is part of the Arrow Global Group. AGL is registered on the Financial Services Register under registration number 718754.