Even though defaulted consumer debt is much harder to recover during a recession, there are some debt collectors that have found some news ways to draw more revenue from bad debt and increase the value of their shares.
A good case in point is the performances of two debt collection firms. Compared with the previous year, the Encore Capital Group Inc. and Portfolio Recovery Associates Inc. collected 10% and 13% more consumer debt, respectively. These figures are for the most recent quarter.
According to analysts at IBISWorld, industry revenue levels are forecasted to drop $200 million by the end of 2009, to approximately $14.2 billion
The companies have accomplished so much by employing a number of methods. They have bought debt from distressed creditors and banking institutions for little more than 5 cents on the dollar, increasing call frequency to the indebted, and kept a closer eye on even the smallest fluctuations of credit scores.
The fact is that even the tiniest collection increase can yield big returns for debt collectors.
Shares in Encore have nearly quadrupled since early March and have traded in the $12-$13 range. For Portfolio Recovery, the same periods yielded share values on the trade floor of between $37 and $39 for most of June
The major source of this growth is the supply of bad debt. When banks and other issuers of credit wrote off literally billions of dollar in bad debt both in 2008 and this year, the prices dropped.
Debt recovery firms use a number of approaches for fund recovery: phone calls, mailings, and, sometimes, lawsuits. The Lawyers of Portfolio Recovery managed to recoup $3.5 million in the first quarter through suits.
Both Portfolio Recovery and Encore also noted that their basic productivity has gone up as well. The average collection agent at Encore may recover as much as $49,000 each month. This is up from $38,000 a month the previous year. Portfolio Recovery, which tracks productivity on a dollars collected per hour basis, said that the average number is $147 per hour, an eleven-year high.
Tags: debt consolidation, debt collectors
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