Interview: Bud Reitzel, Founder of Asset Acceptance

A. At one time, you made 50 percent of contingency collections, but beginning in the mid- '70s the recovery percentages began to drop. We ran models with decreasing recovery percentages and came to the conclusion that it would be difficult to make a suitable profit below a 30 percent fee on contingency collections. Once the recovery percentage rates dipped below 35 percent, we decided to sell the contingency collections division and focus solely on portfolio purchase collections, where the profit margin would be greater and more stable over the long-term. Also, I always liked collecting my own accounts over collecting for someone else.

A. Until the mid-'70s, there were not enough portfolios for sale to sustain an independent company like Asset Acceptance. At that time, many companies were unwilling to sell debt. We would go to banks to purchase their charged-off accounts and they would tell us they didn't have any. We knew full well, reviewing their financial statements that they were taking reserves against charged-off accounts - it was like they were admitting defeat somehow. Well, we would scan the papers for companies in bankruptcy proceedings and then offer to purchase their charged-off accounts. We would be able to make four to five major purchases a year. The opportunities to purchase large portfolios started to begin in earnest in 1991, when the FDIC and FSLIC started closing banks with bad debt and selling off their charged-off portfolios.

A. I would say the availability of documentation to substantiate the debt. Consumers are sharp. They ask for verification, so the more documentation that's available, the more valuable the portfolio is to purchase.

A. The industry has experienced tremendous growth, as new companies have entered the scene, coupled with technological advances to help manage the business and increase collection efficiency.