Debt Collector is Charged Up Over Trends

Americans aren’t afraid of leverage.

Consumer debt balances have more than doubled in the last 10 years. Debt payments eat up about 18% of disposable income, according to Federal Reserve data.

Add rising rates to the mix, and stretched-thin borrowers with heavy credit card balances are likely to find it even harder to pay the bills.

Portfolio Recovery Associates (PRAA) steps in when these borrowers default on their loans.

The firm pays two to three cents on the dollar for portfolios of unpaid consumer loans sold by lenders that have given up on recouping payments. Its 600-plus collectors then start coaxing debtors ? who typically have already rebuffed several collection agencies ? to pay up.

Portfolio Recovery expects to earn three to four times what it paid for the portfolio over several years.

It tries to differentiate itself from competitors such as Encore Capital Group, (ECPG) Asset Acceptance Corp. (AACC) and Asta Funding (ASFI) by employing more experienced collectors and pricing the debt it buys more accurately.

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