KBRA Releases Research – Unearned to Earned: Converting Debt Settlement Fees Into ABS Cash Flows

NEW YORK–(BUSINESS WIRE)–#creditratingagency–KBRA releases research examining securitizations backed by debt settlement fees, a newly emerging ABS subsector that builds on the established debt settlement ecosystem. This report analyzes the structure and life cycle of debt settlement fees, the distinction between earned and unearned fee cash flows, and the credit, operational, and regulatory risks associated with securitizing these assets. The report also explores how acceleration loans can affect the timing and realization of fee collections and the implications for transaction performance.

This publication builds on prior KBRA research analyzing the debt settlement industry’s size, processes, participants, and post-enrollment outcomes (see Navigating Distress: The Role of Debt Settlement in Consumer Credit and Securitization).

Key Takeaways

• DS fees are earned only after performance, i.e., a settlement is negotiated, the consumer approves, and at least one payment is made, thereby creating a “pay‑for‑performance” cash flow.
• Securitizations relate to new ABS collateral, which typically includes a mix of unearned fees (subject to performance risk and cancellation risk) and earned‑but‑uncollected fees (subject to consumer credit risk).
• Primary risk drivers include settlement success rates, servicing quality, consumer cancellation, and the macroeconomic backdrop influencing consumer repayment capacity.
• Acceleration loans can advance program completion and pull forward fee realization, improving collections on both earned and previously unearned fees.

Click here to view the report.

Recent Publications

• Navigating Distress: The Role of Debt Settlement in Consumer Credit and Securitization
• 2026 U.S. ABS Sector Outlook: Growing Issuance Amid Diverging Sector Trends
• Unpacking Small Business ABS: Essential Insights for a Maturing Asset Class
• Federal Student Loan Defaults and Securitized Consumer Credit
• OBBBA Casts Shadow on the Solar ABS Industry
• Private Credit SF: How KBRA Ratings Stack Up

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1012827

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Dan DePaulo, Associate

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Maxim Berger, Senior Director

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Jack Kahan, Senior Managing Director, Global Head of ABS & RMBS

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Business Development Contact

Arielle Smelkinson, Senior Director

+1 646-731-2369

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