Coach CFE Practice Exam

Which statement describes factoring groups' practice in relation to telemarketing operations?

Asian/European charge more Factoring groups buy credit card receipts at a discount They approach banks for processing Factoring illegal in all jurisdictions

Correct Answer:

Factoring groups buy credit card receipts at a discount

Explanation:

Factoring groups finance telemarketing by purchasing the right to collect future credit-card receipts at a discount. They advance cash to the telemarketer up front and then take over the responsibility (and the timing) of collecting those card payments. The factor earns money from the discount and any fees for handling the collection, which is why this arrangement is appealing for campaigns needing quick cash. It’s different from banks—factoring is not about banks processing payments, but about a third-party financer buying receivables. It’s also not tied to a geographic price difference, and factoring isn’t illegal in all jurisdictions, though it does involve regulatory considerations.

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