Forward Flow Agreements

How they work

• The agreement sets the type of receivables, the eligibility criteria, the pricing method, the delivery schedule, and the term of the arrangement.
• Each periodic sale is usually documented with a bill of sale and a data file identifying the accounts sold.
• The agreement typically includes the seller’s representations and warranties about the accounts and remedies such as repurchase or “put-back” of ineligible accounts.

Where they appear

Forward flow agreements are common in consumer credit — for example, sales of charged-off credit card or other consumer debts to debt buyers — and in other markets where originators sell newly created receivables to investors on an ongoing basis.

What law applies

A forward flow agreement is a commercial contract, so its own terms and the contract law chosen in it matter most. Sales of accounts and other receivables are also governed by UCC Article 9 (see receivables and the sale of accounts). If the buyer collects the debts, federal and state collection laws may apply. In Henson v. Santander Consumer USA Inc., 582 U.S. 79 (2017), the Supreme Court held that a company that purchases debts and collects them for its own account is not a “debt collector” under the part of the Fair Debt Collection Practices Act’s definition covering those who regularly collect debts owed another. The Court expressly did not decide whether such a company can be a debt collector under the definition’s separate “principal purpose” prong (15 U.S.C. § 1692a(6)).

Questions to research in a dispute

• Is there documentation tying the specific account to the sale (bill of sale and account-level data)?
• What does the agreement say about the documents the buyer receives?
• Which state’s law governs, and what proof do that state’s courts require from a debt buyer?

Researching forward flow agreements in your state

To research forward flow agreements for a real matter, start with the primary sources. For example, read the statute, the rule and the documents in your own file. Then look for recent appellate decisions from your state, because they control how local courts read the law. After that, compare what you found with the federal rules that may also apply. Our state procedures guide and the Research Center can help you find and check each source.

Sources and further reading

Official sources used on this page:

• law.cornell.edu
• law.cornell.edu
• supreme.justia.com

Related reading on Lawtopolis:

• Receivables and the Sale of Accounts (UCC Article 9)
• Assignments of Notes, Mortgages and Receivables
• Securities and Securitization