- A transaction in which a creditor turns a bad debt over to a third party in exchange for a percentage of the total debt amount, and in which the third party is without means of redress or compensation if the debt remains uncollectible. In a recourse sale, the third party could try to sell back any uncollectible debts.
After purchasing bad debts for pennies on the dollar, debt collectors can keep as profit whatever portion of the debts they are able to collect. The original owner of the bad debt (e.g., a credit card company) gets a liability off its books and saves the time and expense of making further attempts to collect a stubborn debt. A non-recourse sale entails more risk for the purchaser of the bad debts, but usually means the seller is finished dealing with them once and for all.
Investment dictionary. Academic. 2012.
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