Encore Reports Organization Changes and Announces an 81% Increase in Earnings

SAN DIEGO, CA – Encore Capital Group, Inc. (Nasdaq: ECPG), a leading accounts receivable management firm, today reported consolidated financial results for the third quarter ended September 30, 2004.

For the third quarter of 2004:

• Gross collections were $59.9 million, a 22% increase over the $49.1 million in the same period of the prior year.
• Total revenues were $46.5 million, a 58% increase compared with $29.5 million in the same period of the prior year.
• Net income was $5.9 million compared with $3.1 million in the same period of the prior year, an 90% increase.
• Earnings per fully diluted share were $0.25, a 67% increase over the $0.15 in the same period of the prior year.

“We are very pleased with our third quarter performance, which represents the highest level of net income for any third quarter in the history of the Company,” according to Carl C. Gregory, III, President and CEO of Encore Capital Group, Inc. “We are successfully ramping up our collection efforts on the more profitable non-credit card portfolios, which do not require contingent interest payments. In the third quarter, these portfolios represented 12.4% of our total collections. In the same period from the prior year, non-credit card portfolios represented 4.3% of our total collections. Our success in this area helped drive our largest percentage increase in earnings per share for any quarter this year.”

Financial Highlights
Gross collections for the third quarter 2004 were $59.9 million, an increase of 22.0% over $49.1 million in the third quarter of 2003.

Total revenue for the third quarter 2004 was $46.5 million, up 57.5% from the third quarter of 2003. Revenue recognized, as a percentage of collections, was 77.7% in the third quarter of 2004, compared to 60.2% in the third quarter of 2003.

Total operating expenses for the third quarter 2004 were $28.3 million, compared with $19.5 million in the third quarter of 2003. The increase in total operating expenses is largely volume driven and reflects growth in the costs of legal collections of $4.3 million, a $1.8 million increase in salaries and benefits, investment in the start-up of a new collection channel which amounted to $1.7 million, as well as growth of $0.7 million in insurance costs, compliance costs for Sarbanes-Oxley, SEC reporting fees, legal fees and settlements, and accounting fees.

Pretax cash flow from operations for the third quarter of 2004 was $12.1 million, an increase of 82.1% over the $6.6 million generated in the same period of 2003. (Adjustments to arrive at pre-tax cash flow from operations consisted of income tax payments of $951,000 in the third quarter of 2004 and $269,000 in the third quarter of 2003.) The Company exhausted its Federal net operating loss carry forward in the fourth quarter of 2003 and began to make income tax payments at the statutory rates in 2004.

The Company spent $21.0 million to purchase approximately $721 million in face value of portfolios during the third quarter of 2004, a blended purchase price of 2.91% of face value. Credit card portfolios represented 42.2% of total purchases in the third quarter, and non-credit card portfolios represented the remaining 57.8%. Included in the purchases for third quarter of 2004 is the $13.0 million acquisition of a portfolio representing approximately $421 million in face value that was closed shortly after the quarter started. Approximately 84.1% of this portfolio consists of non-credit card accounts.

The Company spent $19.4 million to purchase approximately $640 million in face value of portfolios during the third quarter of 2003, a blended purchase price of 3.02% of face value.

Organizational Changes
The Company announced the following important organizational changes to ensure that Encore continues to have the breadth of management talent necessary to capitalize on future opportunities.

On October 26, 2004, the Board of Directors elected Richard A. Mandell was elected to the post of Chairman of the Board of Directors. Mr. Mandell has served as a director of the Company and a member of the Audit Committee since 2001. He will continue to serve as Chairman of the Audit Committee.

Eric D. Kogan, who served as Chairman of the Board since May 1998, will continue to serve as a director of the Company.

J. Brandon Black was promoted to the position of President of the Company. Mr. Black will continue to serve as Chief Operating Officer; a position he has held since 2000. Carl C. Gregory, III, who had served as President prior to Mr. Black’s appointment, will continue to serve as Chief Executive Officer, a position he has held since May 2000. In addition, the Board of Directors elected Mr. Gregory to the newly created position of Vice Chairman of the Board.

Mr. Mandell has served as a director of the Company since June 2001. He currently is a private investor and financial consultant. Mr. Mandell was a Vice President – Private Investments of Clariden Asset Management (NY) Inc., a subsidiary of Clariden Bank, a private Swiss bank, from January 1996 until February 1998. From 1982 until June 1995, Mr. Mandell served as a Managing Director of Prudential Securities Incorporated, an investment banking firm. He also serves as a director of Sbarro, Inc. and The Smith & Wollensky Restaurant Group, Inc. Mr. Mandell holds a BSE degree from the Wharton School of the University of Pennsylvania and is a Certified Public Accountant.

Mr. Kogan served as Chairman of the Board of Directors of the Company from February 1998 to October 2004. Since April 2002, Mr. Kogan has been a Partner of Clarion Capital Partners, a private equity firm based in New York. From April 1993 to April 2002, Mr. Kogan was an officer of Triarc Companies, Inc., a holding company and, through its subsidiaries, the franchisor of the Arby’s restaurant system (“Triarc”), and certain of its subsidiaries, most recently serving as Triarc’s Executive Vice President of Corporate Development. Mr. Kogan received his undergraduate degree from the Wharton School of the University of Pennsylvania and an MBA from the University of Chicago.

Mr. Gregory has served as a director and Chief Executive Officer of the Company since May 2000 and served as President of the Company from May 2000 to October 2004. Prior to joining the Company, Mr. Gregory was Chairman, President and Chief Executive Officer of West Capital Financial Services Corp. for the period beginning January 1998. Prior to joining West Capital, Mr. Gregory was Managing Partner of American Western Partners, a private investment firm, from January 1996 through January 1998. From 1993 through 1995, Mr. Gregory was Chairman, President and Director of MIP Properties, Inc., a public real estate investment trust. Mr. Gregory received his undergraduate degree in Accounting from Southern Methodist University and an MBA from the University of Southern California.

Mr. Black joined the Company in May 2000 and serves as President and Chief Operating Officer. From March 1998 until joining the Company, Mr. Black was the Senior Vice President of Operations for West Capital Financial Services Corp. Prior to joining West Capital, Mr. Black worked for First Data Resources during the period of September 1997 through April 1998 and for Capital One Financial Corporation from June 1989 until August 1997. Mr. Black received a bachelor’s degree from the College of William and Mary in 1989 and an MBA from the University of Richmond in 1996.

Outlook
Commenting on the outlook for the Company, Mr. Gregory said, “In 2005, our earnings should benefit significantly, simply due to the lower interest costs associated with our recently announced new revolving credit facility. Our continued efforts to prudently scale the business should generate incremental benefits as well. Because of our management depth and unique analytical approach, we are a nimble company that can effectively implement a number of different operating strategies in order to succeed in a variety of purchasing environments.”

The Company also provided the following information to assist the investment community:

As a result of the new revolving credit facility, the Company anticipates that contingent interest expense will decline beginning in 2005. The Company has forecasted, subject to effects of actual purchases under the line through the end of this year, that its contingent interest expense could be approximately 60-65% of current levels in 2005; 25-30% of current levels in 2006; and will be reduced to minimal amounts beyond 2006.

GAAP Reconciliation
The table included in the attached supplemental financial information is a reconciliation of generally accepted accounting principles in the United States of America (“GAAP”) income before taxes, net income, fully diluted earnings per share and cash flows from operations to income before taxes, net income, fully diluted earnings per share, and cash flows from operations excluding one-time benefits, and the effects of income taxes with respect to cash flows from operations for the periods presented. We believe that these non-GAAP financial measures provide useful information to investors about our results of operations because the elimination of one-time benefits that are included in the GAAP financial measures results in a normalized comparison of certain key financial results between the periods presented.

Conference Call and Webcast
The Company will hold a conference call today at 2:00 PM Pacific time / 5:00 P.M. Eastern time to discuss the third quarter results. Members of the public are invited to listen to the live conference call via the Internet.

To hear the presentation and to access a slide presentation containing financial information that will be discussed in the conference call, log on at the Investor Relations page of the Company’s web site at www.encorecapitalgroup.com. For those who cannot listen to the live broadcast, a replay of the conference call will be available shortly after the call at the same location.

About Encore Capital Group, Inc.
Encore Capital Group, Inc. is an accounts receivable management firm that specializes in purchasing charged-off and defaulted consumer debt. More information on the company can be found at www.encorecapitalgroup.com.

Forward-Looking Statements – The statements in this press release that are not historical facts, including, most importantly, those statements preceded by, or that include, the words “may,” “believes,” “projects,” “expects,” “anticipates” or the negation thereof, or similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). These statements may include, but are not limited to, projections of revenues, income or loss; estimates of capital expenditures; plans for future operations, products or services; and financing needs or plans, as well as assumptions relating to those matters. For all “forward-looking statements,” the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the Company and our subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could affect the Company’s results and cause them to materially differ from those contained in the forward-looking statements include: the Company’s ability to purchase receivables portfolios on acceptable terms and in sufficient quantities; the availability and cost of financing; the Company’s ability to recover sufficient amounts on or with respect to receivables to fund operations; the Company’s continued servicing of receivables in its third party financing transactions; the Company’s ability to hire and retain qualified personnel to recover on its receivables efficiently; changes in, or failure to comply with, government regulations; the costs, uncertainties and other effects of legal and administrative proceedings; and risk factors and cautionary statements made in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2003. Forward-looking statements speak only as of the date the statement was made. They are inherently subject to risks and uncertainties, some of which the Company cannot predict or quantify. Future events and actual results could differ materially from the forward-looking statements. The Company will not undertake and specifically declines any obligation to publicly release the result of any revisions to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, whether as the result of new information, future events or for any other reason. In addition, it is the Company’s policy generally not to make any specific projections as to future earnings, and the Company does not endorse any projections regarding future performance that may be made by third parties.