Consumer Receivables

Types of Consumer Receivables

Consumer receivables span a wide range of credit products:

• Revolving credit. Credit card balances and lines of credit where the borrower can draw, repay, and redraw up to a limit.
• Installment loans. Fixed-term obligations with scheduled payments, including personal loans and consumer financing agreements.
• Deficiency balances. Remaining amounts owed after a secured asset (such as a vehicle) is repossessed and sold for less than the outstanding loan balance.
• Utility and service arrears. Outstanding balances owed to telecommunications providers, utilities, and other service companies.

Each category has different characteristics in terms of average balance, documentation quality, and recovery potential, which directly affects pricing on the secondary market.

Consumer Receivables on the Secondary Market

When consumer receivables become delinquent and are eventually charged off, the original creditor may sell them as portfolios to specialized buyers. The Canadian secondary market for consumer receivables has grown steadily, driven by increasing consumer debt levels and the ongoing need for creditors to manage their balance sheets efficiently.

Portfolio buyers evaluate consumer receivables based on the data tape, which provides account-level detail. Key factors include the age of the receivables since charge-off, the average account balance, geographic concentration, and the completeness of supporting documentation such as original agreements and account statements.

Regulatory Considerations in Canada

Consumer receivables are subject to provincial consumer protection regulations. In Ontario, collection activities must comply with the Collection and Debt Settlement Services Act. Portfolio buyers must ensure that their operations meet all applicable licensing requirements and that collection practices respect the rights of consumers throughout the recovery process.