Let’s start with a hypothetical scenario:
A person signs a contract with Company A to borrow some cash (an unsecured loan). Company A later sells that debt to Company B.
The person now gets a bill from Company B, but refuses to pay telling their agent, “I never signed a contract with you, piss off!” or something like that.
It seems to me that Company B should have some recourse to take action, but what of the fact that the person never actually did contract with Company B?
I believe the contract-law concept is “Assignment”.
Most loan contracts contain specific provisions to allow sale and transfer of the instrument, or a catchall phrase about “all heirs, successors and assigns.”
A loan document is just a financial instrument like a fancy dollar bill.
Assignment is right. Not all contracts are easily assignable, but assignment of loans (secured and not) is a pretty well-developed area of law.
Nearly all contracts are assignable unless otherwise written.
Not all contracts are delegable (transfer of the duty owed under the contract rather than the benefit) because the other party may have bargained specifically for the other party’s services - for example, if I sign AC/DC to play at my birthday party, they can’t delegate the job to a cover band - but it makes no difference to you if you pay a debt to Bank X versus Bank Y.
You can probably even extend the idea to things like accounts receivable, which I believe is how most debts end up in the hands of collection agents. They pay a certain percent on the dollar for a batch of delinquent accounts and then make whatever profit they can over what they’ve shelled out.
You will sometimes see it written, especially on a check or endorsement, as Company Name ISAOA. It stands for “It’s Successors and/or Assigns”.
If you read a typical Fannie Mae approved promissory note, it will say “I understand that the Lender may transfer this note. A party who takes the note by transfer and who is entitled to receive payments under the Note is called the Note Holder.” Then, if you read the rest, you’ll see that the provisions are actually enforced by the “note holder.”
This alludes to a very well developed area of “negotiable instrument” law, where the physical holder of a debt (essentially, an IOU) can enforce it. This type of commerce (the selling of promises to pay) is a concept that predates uniform currency, and is fairly mundane.