Recourse

Recourse + Buybacks

Part of our relationship with clients is having a strategic plan in place for the ‘what ifs’. The following article will give you a high level perspective of buybacks and recourse, what they mean and what to expect.

Definitions

Buyback

Buybacks occur when contracts are either canceled/refunded or when required to be repurchased by the Retail Seller due to reasons that fall within the parameters of the recourse defined in their client agreement. In simple terms, the Retail Seller has to buyback the contract from the entity that owned/purchased the contract. The Financial Program Services (FPS) team manages the buyback lifecycle process from buyback origination to legal department handoff. The performance of buyer and client portfolios is dependent on the ability to identify and resolve all unpaid buybacks in a timely and satisfactory manner.

Recourse is a legal agreement that gives UAS or the Funding Participant the right to pledged collateral if the borrower is unable to satisfy the debt obligation.

What Is Recourse? A recourse is a legal agreement that gives the lender the right to pledged collateral if the borrower is unable to satisfy the debt obligation. Recourse refers to the lender’s legal right to collect. Recourse lending provides protection to lenders, as they are assured of having some repayment, either in cash or liquid assets. Companies that use recourse debt have a lower cost of capital, as there is less underlying risk in lending to that firm. Investopedia - Recourse

Reserve Fund

A Client Reserve Fund is an amount of money that is held back from the proceeds of the Assignment. If the reserve is client-owned, then the client has uPortal360 reports to give them access to all information on the reserve. Client Reserves are essentially a supplement to the Merchant Discount. This allows a Retail Seller to still recieve the amount held back provided the program’s delinquency is better than expected.

Recourse Roles

Title	Role
Funding Participant	Entity that purchases contracts from Retail Sellers (Clients). E.g. Universal Guardian Acceptance, Silver Leaf Acceptance, JCAP, SIMS, etc.)
Servicing Company	Universal Account Servicing it the Third-Party Servicing Company
Client or Merchant	Retail Seller that originates contracts to consumers
Consumer	Customer receiving financing and agrees to repayment terms and conditions

Buyback Terms Agreement

The arranagement for buybacks is defined in the client agreement. Please review your companies agreement for details.

Unpaid Buyback

Customized arrangements will be made between client & Financial Program Services (FPS) on how to resolve unpaid buybacks and determine actions. Unpaid balances will be assigned to the client. The following statuses are used to identify unpaid buybacks

Status	Definitions
New Placement	Apply proceeds from new assignments to buybacks that will show up on the Assignment invoice
ACH Pull	Needs client Authorization – We can initiate ACH payment request
Client-Initiated – Check/ACH	ACH Payment initiated by the client. Checks should be avoided if possible
Offset to Reserve	value is moved into the reserve account
Sent to Legal, Demand Letter	Indicates that we have sent the client to commercial collections. The client still needs to pay us if reserve amounts are deemed bad debt and anything outside of recourse would be covered by reserve
Servicing Proceeds	We take servicing proceeds to cover their buyback This is reflected on client invoices

Client Communication

This is the type of communication a client can expect with buybacks.

When	Format	Communication	Purpose
Every Monday	Email from FPS	Client Summary Reports	includes Delinquency, Chargebacks, Autopay Removals, and Open Support Tickets
Every Thursday	Email from FPS	Buyback Invoices	Shows all Buybacks that have already been initiated
After Launch	Reporting / Recourse Training	PDF Document	Buyback Resolution Form will be signed that indicates the client understands recourse and unpaid buyback arrangements.
As Requested	Custom Requests	Varies	If the client has a request, it’s asked to create a case to be reviewed
When First Contract Hits Recourseable Event	Phone Call	Verbal Notice of Obligation to Repurchase	Client will be informed that their contract has gone in to a recourseable status, and how you can resolve delinquency to prevent the contract from progressing into a buyback.
10 Days Before Buyback Will Occur	Email	Notice of Obligation to Repurchase	Client will be informed that they will be “repurchasing” or buying the contract back, with a 10 day notice to resolve delinquency before the buyback is executed.

Consumer Communication

This is the type of communication a consumer can expect to receive

When	Format	Communication	Purpose
Once weekly, When consumer account hits 90+ Days Delinquent	Sent by uSupport	Right to Cure Notice	allows one party in a contract, who has defaulted under a contract provision, to remedy their default by taking steps to ensure compliance or otherwise, cure the default

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Recourse

Recourse + Buybacks

Definitions

Buyback

Recourse

Reserve Fund

Recourse Roles

Buyback Terms Agreement

Unpaid Buyback

Client Communication

Consumer Communication

​Recourse + Buybacks

​Definitions

​Buyback

​Recourse

​Reserve Fund

​Recourse Roles

​Buyback Terms Agreement

​Unpaid Buyback

​Client Communication

​Consumer Communication

​Related Articles

Recourse + Buybacks

Definitions

Buyback

Recourse

Reserve Fund

Recourse Roles

Buyback Terms Agreement

Unpaid Buyback

Client Communication

Consumer Communication

Related Articles