DVF2 FAQ
Q1: What is Wedge DVF II (and how does it relate to OCG Debt Validation Fund II)?
A: Wedge DVF II is a fund-of-funds that invests 100% of its capital into OCG Debt Validation Fund II (OCG DVF II). OCG DVF II is a fund specializing in accounts receivable financing, collateralized by pools of receivables. Through Wedge DVF II, investors indirectly lend money to Resolution Processing, which uses legal processes to invalidate consumer debts—especially high-interest credit card debt.
Q2: How does the fund generate returns?
A: Wedge DVF II (via OCG DVF II) provides a 20% annualized return, paid quarterly over a 36-month term. Resolution Processing’s debt invalidation and accounts receivable collections generate the cash flow necessary to pay these returns.
Q3: What is the minimum investment amount?
A: The minimum investment to participate in Wedge DVF II is $50,000, with an average investment of about $100,000.
Q4: How is the investment collateralized?
A: The investment is collateralized through OCG DVF II’s UCC (Uniform Commercial Code) filing on accounts receivable. Each receivable typically has a face value of $6,000 but is acquired for about $1,500, resulting in a loan-to-value ratio near 25%.
Q5: What is debt invalidation?
A: Debt invalidation is the legal process by which Resolution Processing helps consumers void or “invalidate” their credit card debt, often when creditors or collection agencies have failed to comply with the Fair Credit Practices Act or other consumer protection laws.
Q6: What is the role of Resolution Processing?
A: Resolution Processing specializes in invalidating consumer debt, managing the required legal processes to reduce or eliminate clients’ high-interest obligations. They use the capital (provided by OCG DVF II, in which Wedge DVF II invests) to cover attorney fees, retainers, and administrative services necessary for debt relief.
Q7: How often will I receive payments, and are they guaranteed?
A: You will receive payments quarterly (5% each quarter, or 20% annualized). While the structure is designed to provide consistent returns, no investment can be entirely guaranteed.
Q8: How are investors in Wedge DVF II paid?
A: You will receive quarterly interest distributions starting after your first quarter of investment (5% per quarter, i.e., 20% annualized). At the end of the 36-month term, you receive a balloon payment for your original principal.
Q9: Is there an early payoff option?
A: Yes. Although the term is 36 months, Resolution Processing may choose to repay early to reduce its overall interest burden.
Q10: What is the collection ratio?
A: Historically, about 80% of these receivables have been successfully collected, which provides a strong cushion given the diversified pool of contracts and the low cost basis ($1,500) relative to the receivable value ($6,000).
Q11: Has a full forensic audit been conducted on Resolution Processing?
A: While no exhaustive forensic audit has been conducted, OCG DVF II (and by extension Wedge DVF II) has examined Resolution Processing’s financials and processes. Attorneys confirm contract purchases, and monthly reporting plus UCC filings allow full transparency. So far, nothing problematic has been observed.
Q12: How do the payments from receivables work?
A: Clients typically pay around $300 per month toward their account. Roughly $250 of this goes to administrative costs, and about $50 is allocated to legal services.
Q13: How does the fund provide social impact?
A: By investing in OCG DVF II, Wedge DVF II supports a process that helps consumers deeply in debt. Many see their credit card balances reduced by 50% or more and benefit from lower monthly payments, alleviating the burden of high-interest debt.
Q14: What is the expected term of the investment?
A: The investment has a 36-month term, with interest-only quarterly payments and a final balloon payment at maturity. Early repayment is possible but not guaranteed.
Q15: What are the benefits for large investors?
A: Those investing $1 million or more become Class A1 members and receive a 25% preferred return. Investors with less than $1 million receive a 20% return as Class A2 members.
Q16: Are there any upfront fees for investors?
A: No. There are no upfront or management fees charged to Wedge DVF II’s investors. The fund’s legal and overhead costs are paid by the borrower (Resolution Processing) at 2%.
Q17: How are contracts purchased and allocated?
A: Marketing partners identify clients with $20,000 or more of credit card debt. Once the clients sign up for Resolution Processing’s debt invalidation program and make their first two payments, those contracts are then allocated to OCG DVF II (and therefore indirectly to Wedge DVF II), secured by a UCC filing.
Q18: How is the fund diversified?
A: OCG DVF II (into which Wedge DVF II invests) acquires thousands of contracts across many borrowers, significantly reducing risk through broad diversification.
Q19: What is the investor's tax liability? Why not a 1099-INT?
A: You will receive a K-1, and the income is reported as interest income. Structuring as a 1099-INT would collateralize fewer assets, increasing risk. By holding units in a fund, the risk and performance are shared across all contracts and investors.
Q20: Is there depreciation for this investment?
A: No. This investment does not hold real estate, so it does not offer depreciation benefits. You hold equity in a fund that lends to Resolution Processing for debt invalidation, not real property.
Q21: How can investors subscribe to the fund?
A: You can subscribe through the OCG Properties investment portal. All necessary documentation and commitments are handled there.
Q22: Why is UCC filing important?
A: A UCC filing publicly records the lender’s secured interest in the receivables, granting priority over other creditors if the borrower defaults or declares bankruptcy. It also prevents unauthorized transfer or sale of the collateral. This is crucial for protecting investors’ capital in OCG DVF II and, by extension, Wedge DVF II.
Q23: Do you spot check the clients when they are added to the pool?
A: We receive full contract data from the attorneys, though personal details (name, tax ID) must be redacted for legal reasons. We see the monthly payments posted to the contracts, review UCC filings, and confirm with attorneys that the allocations match up. So far, no problems have been detected.
Q24: What is the risk associated with this type of investment?
A: While the strategy relies on collateralized receivables and proven legal processes, risks include collection-rate declines, defaults, or changing consumer behavior. Historically, however, 80% of receivables are collected, and the $1,500 cost vs. $6,000 value creates a wide margin of safety.
Q25: What happens if Resolution Processing defaults or goes bankrupt?
A: The UCC filing ensures the fund (OCG DVF II and therefore Wedge DVF II) has a first-priority claim on the receivables. Even in default, the fund could step in to collect the assets, preserving investors’ interests.
Q26: How can I monitor the performance of my investment?
A: You’ll receive regular performance updates, including reporting on receivable acquisitions, collection results, and overall fund metrics.
Q27: Why is the fund interest-only with a balloon payment at the end of the 12th quarter?
A: This setup allows Resolution Processing to reinvest cash flows in new receivables throughout the 36-month term, creating a “snowball effect” that increases the collateral pool and enhances returns while keeping risk lower for the same capital.
Q28: Has Resolution Processing’s operational system been audited?
A: Yes. Its systems, collection processes, and client sign-up procedures have been reviewed. They demonstrated strong compliance and efficiency.
Q29: Why are the interest payments structured quarterly instead of monthly?
A: Quarterly payments offer a more stable and less burdensome schedule for both investors and Resolution Processing. This approach also facilitates reinvestment, which helps maintain consistent returns.
Q30: How are Resolution Processing’s interests aligned with investors?
A: Resolution Processing only profits after investors receive their preferred return (20%–25%). This structure incentivizes them to maximize collections and manage contracts effectively.
Q31: How can I learn more or meet the Resolution Processing team?
A: We can coordinate meetings or calls with the Resolution Processing team to address any questions you may have.
Q32: What if consumer protection laws (e.g., Fair Credit Practices Act) change?
A: Legal and regulatory changes are always a possibility. However, Resolution Processing works closely with legal counsel to stay compliant. If major changes occur, they will adapt strategies to preserve the fund’s performance.
Q33: What is the biggest operational challenge for Resolution Processing, and how is it addressed?
A: The main challenge is handling the increasing volume of contracts and ensuring timely collection. Resolution Processing addresses this via a state-specific attorney network and operational oversight to prevent backlogs or administrative delays.
Q34: What is the recourse if a marketing partner fails to deliver quality clients?
A: There is a clawback mechanism for the $1,500 marketing cost if clients fail to make their initial payments, so non-performing contracts don’t burden the fund.
Q35: What safeguards exist if an economic downturn affects consumer payments?
A: The fund is broadly diversified across thousands of contracts, so a few defaults won’t significantly impact performance. The monthly payments are already reduced for many clients, making them more manageable even under economic stress. The historical 80% collection ratio supports this resilience.
Q36: Was OCG DVF I structured the same way as DVF II, and how did it perform?
A: OCG Debt Validation Fund I began in May 2023 and performed well, but under a different repayment structure. DVF II uses a 36-month interest-only schedule with a balloon payment, enabling more contract purchases and a strong 20% annualized return.
Q37: Do overhead expenses for OCG DVF II come from interest and investor payments?
A: Yes. About 20% of receivable inflows cover overhead. For example, on a $250 monthly payment, $50 might go to overhead, $25 to investor interest, and $175 to purchasing new contracts. A $5M fund could add nearly 389 new contracts monthly using this model.
Q38: How long will OCG DVF II operate, and why show a 2-year pro forma for a 3-year investment?
A: The investment runs for 36 months, but the pro forma focuses on the typical 24-month payment schedule of most contracts. After the first round, new contracts can be purchased, effectively layering additional cycles to boost returns.
Q39: What happens if OCG DVF II misses or stops paying quarterly distributions or cannot return principal?
A: If Resolution Processing halts payments, the fund (through its UCC filings) could take direct control of the receivables or use a new servicer. Given the receivables’ monthly cash flow (~$833k) and overhead (~20%), there remains ample coverage ($666k) to pay back investors.
Q40: In the OCG DVF II Overview (p.9), the $5M investment pro forma shows 3,333 contracts at $250/month for 24 months. Does the $250 include $100/month for attorneys?
A: The $250 is separate from legal fees. The consumer’s total monthly payment includes both the legal fee component and the $250 portion.
Q41: What are the primary risks for Members of this investment?
A: The main operational risk is Resolution Processing’s ability to purchase and service contracts. If they fail, capital can be returned, and Wedge DVF II would stop investing. In a worst-case scenario, Wedge DVF II or its manager can step in, but the low 25% cost-to-value ratio and strong collateral mitigate these risks significantly.
Q42: Under what conditions would you require a capital call?
A: A capital call might occur if Resolution Processing stops paying, and legal fees are needed to assume or manage contracts. Because there is no leverage and minimal overhead, the likelihood of a capital call is small.
Q43: Has any past syndication failed to return 100% of investor capital?
A: No. All our prior deals have returned the full principal to investors. Even in difficult situations, we have taken steps to protect investors.
Q44: Has an investor ever had their principal returned without receiving any return?
A: No, there has never been a case where investors got only their principal back with zero returns.
Q45: Have you or any of your managed deals ever been sued by investors?
A: No. We have never been sued by investors. If needed, we can provide references from previous investors.
Q46: Would Trump’s proposed 10% credit card interest cap affect this fund if he were elected?
A: If enacted, it could reduce the number of new high-interest debts in the future, but the existing high-interest credit card market is substantial, and our model focuses on legally invalidating debt rather than issuing new credit. Therefore, any short-term impact should be limited, especially since we acquire most contracts at the start of the investment.
Q47: What was the actual performance of Fund I, from how much capital and over what duration?
A: We initially deployed $2.4M into OCG DVF I, observed performance for about 6 months, and then raised an additional $2.6M. Returns and communication have been strong. Prior to Fund I, we also tested the process with $250k of our own capital before raising external funds.
Q48: The term is 36 months. Could it be shorter or longer?
A: The note matures at 36 months, but early payoff is possible (though not guaranteed). It is unlikely to extend beyond 36 months. The returns are fixed, independent of market volatility, and no management fees reduce the 20–25% annual payout.
Q49: There are many debt funds out there. How is this different?
A: Wedge DVF II invests in OCG DVF II, which acquires receivables at around 25% of face value. This high collateral margin and the 20%+ annual returns over three years differ from typical debt funds. Furthermore, extra profits earned by the borrower are reinvested in more receivables, enlarging collateral and reducing risk.
Q50: Do you accept funds from SDIRA or Solo 401k? Are there any tax implications?
A: Yes. You can invest through a self-directed IRA or Solo 401k. Because the fund does not employ leverage, there are generally no UBIT or UDFI tax implications on the interest income.
Q51: Is DVF2 considered a security, and if so, does it have a prospectus?
A: Yes. You are investing in LLC interests (shares) that hold promissory notes, so it is deemed a security. The prospectus and offering documents are accessible in our online portal.
Q52: How do we invest via an IRA?
A: First, open a self-directed IRA. If you currently use Fidelity or Schwab, you can roll those funds into a provider like uDirect IRA. After the self-directed account is ready, you create a profile in our Syndication Pro software, finalize the subscription, and instruct the new custodian to fund your investment. The process typically takes about two weeks.
Q53: Will Shield Fund 2 have any direct or indirect involvement with public or private corporations?
A: Not as far as we know. The underlying loans go to Resolution Processing, which is privately held.
Q54: Is DVF2 a real estate fund or a debt consolidation fund?
A: Neither. Debt invalidation is a legal service, not debt consolidation. DVF2 is structured as a lending entity collecting interest on notes, rather than owning real estate assets.
Q55: Are there SEC restrictions on who can invest in DVF2?
A: Yes. Wedge DVF II is offered under a 506(c) exemption and therefore may accept only Accredited Investors. Non-accredited investors cannot participate.
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