Consumer debentures are a type of debentures that are made available to the general public. The consumer debenture is sold under the auspices of a financial institution, such as a bank or some other type of licensed financial enterprise. As with all types of transactions, financial institutions must be properly authorized to deal with debentures of this type.
In order to understand the nature of a consumer debenture, it is first necessary to define the general definition for any type of debenture. Broadly speaking, a debenture is unsecured debt. This means the debt in question is not obtained by the means of pledging collateral in exchange for the extension of the credit. The debenture is extended on the basis of good faith in the willingness of the borrower to repay the amount that is borrowed. Any form of debenture usually requires that the borrower sign an agreement that outlines the terms and conditions of the financial arrangement. In this case, the agreement is normally referred to as an indenture.
With a consumer debenture, the financial institution that currently holds the debenture in hand may choose to put up the debt for sale to the general public. In this manner, the institution is able to recoup part or all of the investment in the debt. The new owner will then attempt to interact with the debtor and come to terms of payment that will hopefully be acceptable to both parties.
The use of consumer debenture is relatively common. This is especially true when a borrower is behind or has defaulted on payments associated with the original agreement. A number of companies are willing to purchase these accounts and attempt to obtain the remainder of the balance due on the debenture. This can sometimes be arranged by offering the debtor a one-time discount on the total balance owed, or by offering new terms of payment, including an adjusted monthly installment plan. The new owner of the consumer debenture has the ability to make use of every legal means allowed by the country of jurisdiction in order to settle the remaining debt associated with the consumer debenture.
