KBS Prism is the Managing Member of the investor fund called Torus Fund which was started to expand the opportunity that was identified and tested in the distressed credit card debt industry with KBS Enterprises. Kenneth Feyl, President and co-founder of KBS Enterprises is the Managing Member of KBS Prism. He believes we provide:
- A Portfolio Diversification option in an Alternative Asset
- A Less Volatile investment to Global Economic Concerns and Market “emotional” reactions
- A Socially Responsible Impact Investment
- Access to the underlying assets of a large $51+ Billion and growing industry
With the industry oversight by the Consumer Financial Protection Bureau, we see the future of the industry changing in 2013 and beyond. It will be much more difficult and costly to use litigation as a major collection strategy. It will be very hard for the litigious corporate culture of industry to change. With change comes opportunity. We are positioned to be one of THE debt buyers to sell to as the track record of doing things the right way has already been established .
The acquisition and collection of charged-off credit card debt is a big business. During 2011, the fifteen largest debt buyers alone purchased $51 billion face value of charged-off credit card debt directly from card issuers. Further, there are a large number of companies devoted solely to the collection of distressed debts but who do not purchase the assets for their own portfolios. The debt buying industry has a high rate of revenue growth, is highly profitable, and is one of the most attractive segments of the Asset Recovery Management industry.
We believe that the debt collection industry has been largely characterized by abusive debt collection practices and litigation. We see that the debt collection industry is experiencing a consumer revolution of unfair practices, such as robo-suing and robo-signing. Investors, consumer advocates, and banks are seeking agencies that treat consumers the “right” way while a growing number of judges, federal agencies, and consumer attorneys are targeting agencies that may be liable for these unfair practices. The market opportunity is to be able to readily purchase these assets because the card issuers selling the charged-off debt are narrowing their selection of “preferred” agencies due to the increasing number of penalties and fines for collection agency violations. Of even more concern to the card issuers are the number of debt buyer/collection agencies finding themselves in hot water with the various state Attorneys General. The turmoil in the industry offers opportunities for debt buyers who adhere strictly to state and federal laws and treat consumers with dignity and respect.
Within the industry, the current universe of illegal and unethical “confrontational” collection practices, robo-signing of affidavits and regular use of litigation are causing banks to seek debt buyers that can preserve their reputations and their brand. The Managing Member believes that the Fund’s Applied Psychology strategy to collections is the value added differentiator in the industry.
There are many highly qualified collection agencies from which to choose. Third party collection agencies work purely on a contingency fee, which is a percentage of the money collected from debtors. The Managing Member expects to utilize third party collection agencies to manage and collect purchased assets for The Fund.
We believe the opportunity in the near term is to purchase these assets at prices that we believe are below their intrinsic value. Over the long term, as the economy slowly improves and the acquired customers’ ability to pay their obligations also improves, the potential for a larger margin increases.