FutureGen Capital operates a private equity fund that is targeting multi-family properties, commercial bridge loans, tax lien investments and distressed debt assets within the United States. "This new fund was created to diversify some of our investment away from commercial real estate." According to Lawrence Schmidt, President of FGC. "Starting July 15th, 2010 we have created FGC Distressed Assets Investment #1, LLC, based in Delaware, so that accredited investor can have the opportunity to invest in this fund and see potential returns of 30% or higher."
Specifically, FGC purchases assets called DDA which stands for Demand Deposit Account Debt and payday advances from national lenders and banks. This debt is typically over-drawn checking accounts or accounts that have on-line bill pay capabilities. The banking institutions are ill equipped to collect such debt as the average balance is very small. However, many small accounts create a large loss for the bank.
After investing $969,000 of their own funds over the past seven months to test this new business model, they have seen their first returns to be projected at over 40% on the first batch purchased in December 2009. Currently they have revenues from this fund of $155,000 on a $734,000 investment for a six month period.
According to Richard Carter, Senior Vice President, with FGC "Banking institutions are more interested in expending resources to collect credit card, automobile and car loans versus this seemingly insignificant over draft. DDA losses worth just a few hundred dollars per account often fall through the cracks. Although, each DDA charge-off may not be a lot of money, the combined amount can be significant."
FutureGen Capital’s business model is to capitalize on the banking inefficiencies and utilize specialty collection efforts that only collect such debt.
With recovery scoring tools that determine the best collection method, FutrueGen Capital collection agencies maximizes its recovery efforts by utilizing customized letter campaigns, targeted phone campaigns using a state -of-the-art dialer, and a unique check-blocking system that encourages payment.
When an individual’s account is closed in overdraft, the collection team limits that person’s ability to write checks and open new accounts at 375,000 participating TeleCheck merchant locations. Then collectors use all the resources necessary to recover DDA debt. Its collection agents are experts and specialize only in DDA collections. This process focuses resources to collect more accounts and resolve problems more quickly to meet the needs of FutureGen Capital.
The collection process is literally plug and play. The accounts are delivered on disks in a format that is seamlessly integrated into collection efforts. The fees earned by collectors are strictly contingency based and heavily incentive to make the process as efficient as possible.