Financial Resolutions of America Corporation (“FRAC”) is a development stage company that engages in the judgment recovery business from its 2 offices located in California.
According to the Internet website www.judgmentcenter.com, 79% of court-awarded money judgments in the United States, amounting to approximately $200 billion dollars annually, remain unpaid. This situation increases the cost of doing business, raises consumer prices, lowers purchasing power and ultimately leads to higher rates of financial insolvency.
Businesses nationwide placed $150 billion worth of debt with collection agencies (in 2010). Agencies were able to collect about $40 billion of that total. The industry averages about 20 percent recovery on delinquent debt.
Our business focuses on enforcing unsatisfied judgments. In contrast, many companies in our industry have more diversified operations and work to collect unsecured and unproven bad debts as well as judgments. These companies often use tactics used for bad debt enforcement to collect on judgments. Unlike these businesses our strategies are specifically developed for judgment collections. Instead of relying on human resources to collect judgments we have streamlined the screening and enforcement process through the use of our Automated Proprietary Servicing Platform technology.
Judgments are distinguishable from bad debt or charged-off accounts in a number of ways.
A bad debt is the result of failure to pay an account or charge. A judgment is a court order. Typically, a bad debt or charged-off account will be turned over to a collection agency or collection department where it will be “worked” by debt collectors. These debt collectors will attempt to determine the debtor’s whereabouts and once ascertained will typically send letters and make telephone calls to the debtor’s home or place of employment in an attempt to talk the debtor into paying the bad debt. If the collectors are unable to persuade the debtor to pay the debt, the creditor has but one remedy – sue the debtor in civil court in an attempt to obtain a judgment. Suit must be initiated prior to the expiration of the Statute of Limitations which will vary from jurisdiction to jurisdiction and in some instances may be as little as 3 years from date of last payment or activity.
Judgments on the other hand are orders of the court and are the result of civil litigation previously adjudicated in favor of a party called the judgment creditor. The judgment creditor has multiple remedies available to it to enforce payment on the unsatisfied judgment that include, but are not limited to, wage garnishment, real property liens, bank seizures, real property foreclosure and personal property seizures, which are all actions taken under court authority. Unlike the debt collector who must locate the debtor and communicate directly with them in an attempt to collect, the judgment enforcer does not necessarily have to ascertain where the debtor is located. They need only know where the debtor’s assets are and how they can be retrieved to satisfy the judgment. Judgments, unlike charged-off accounts and other similar bad debt, depending upon the jurisdiction of the court, typically bear interest and have a lifespan of from 6-20 years. In many instances, judgments can be renewed for like periods.
Our strategy is to take advantage of the opportunity in the judgment enforcement industry by implementing our business model developed in conjunction with our Automated Proprietary Servicing Platform to achieve larger economies of scale. Instead of working on a contingency basis, where we share the collected judgment proceeds with the original judgment creditor, we believe we can increase our revenues and cash flow by purchasing judgment portfolios and selectively identifying and pursuing those debtors who can pay by using our Automated Proprietary Servicing Platform. Our automated proprietary solution quickly and efficiently locates where judgment debtors bank, work and own property. We then leverage the power of the legal system to garnish, lien and levy those assets to satisfy the judgments. We believe that given the inventory of unsatisfied judgments, economies of scale, and the margins in enforcing judgments in volume and with our business model we can be profitable.