TBF Financial, a commercial debt-buying company, announced it closed on a $125 million deal, purchasing non-performing commercial bank loans and lines of credit on the books of a major U.S. bank.

The bank cannot be named, but its managing executives were motivated to engage TBF Financial because, like many other banks of its size, there is intense federal regulatory scrutiny, including oversight on collections practices. It was prudent to sell off debt, rather than outsource it to third-party collectors, said Brett Boehm, TBF Financial principal. “It reduces their risks,” he said, “and it frees their staff to focus on other business processes and relationships.”

Big banks are cleaning up their books and reducing their liabilities; and, in this case, TBF’s client also has arranged for a continuing engagement to sell write-offs bi-annually. He said this strategy enables bank personnel to focus on more productive 30-day collections and also on new business growth.

“There are significant liabilities associated with hiring third-party collectors to attempt recovery. That, plus monetary advantages, is why lenders are turning to selling their debt as an integral part of their annual business plans,” said Boehm.

TBF’s relationship with the bank started several years ago, and the first assignment was to purchase non-performing real estate secured loan portfolios. Since then, Boehm explained, other areas of this financial institution are appreciating the wisdom in such a simple and efficient approach.