Accounts receivable management firm Asset Acceptance Capital Corp. reported late Thursday that earnings in the first quarter of 2010 dropped under $1 million as a slowdown in cash collections weighed on revenue.
Warren, Mich.-based Asset Acceptance (Nasdaq: AACC) reported net income of $356,500 – or $0.01 per share – for the first three months of 2010, down sharply from the $4.6 million the company earned in the first quarter of 2009. Total revenues declined 9.5 percent to $51.6 million.
Analysts polled by Thomson Reuters had expected the company to earn $0.02 per share on revenues of $53.6 million.
The debt buyer’s cash collections fell 5.2 percent in the quarter ended March 31, 2010 to $89.2 million. The company said that call center collections declined 3.4 percent to $50.5 million while legal collections fell 7.4 percent to $38.7 million. Asset Acceptance noted in its earnings press release that cash collections on a year over year basis continued to be negatively impacted by the reduced purchasing in 2009.
Asset Acceptance invested $29.8 million in the first quarter of 2010 to purchase charged-off consumer debt portfolios with a face value of $823.3 million, up 37 percent from debt buying activity in the first quarter last year.
The company also disclosed that, beginning in February 2006, the Federal Trade Commission (FTC) commenced an investigation into its debt collection practices under the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA) and the Federal Trade Commission Act. On April 6, 2010, the FTC delivered a letter to the company which stated its view that Asset Acceptance may have engaged in certain violations of those laws, offered the company an opportunity to resolve the matter through consent negotiations, and forwarded a proposed consent decree. The proposed consent decree includes certain monitoring and reporting obligations and customer disclosures, as well as a civil monetary penalty. Asset Acceptance is currently reviewing the proposal with counsel and has begun to discuss the matter with the FTC. The company indicated that it believes that the resolution of this matter will not have a material adverse effect on its business.