$12 Billion Collection Agencies Industry Flush with Accounts

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Student loan debts especially lucrative, says Marketdata.

"Business is plentiful, but the industry still hits bumps with lots of consumer complaints."

Marketdata Enterprises, Inc., a leading independent market research publisher of “off-the-shelf” studies about service industries since 1979, has released a 186-page report entitled: U.S. Debt Collection Agencies: An Industry Analysis. This 8th edition best-selling study contains the latest survey highlights, facts, and forecasts from the: US Census Bureau, American Collectors Association, FTC, Federal Reserve, consultants and more.

According to Research Director, John LaRosa: “Heading into the Fall of another difficult year for many consumers, the recovery is still fragile. Unemployment remains high by historical standards and is likely to improve slowly. Consumers are still strapped by high gas prices. Although the number of placements at collection agencies has increased, their collectibility has fallen. Agencies have to work much harder to collect, making more calls, using more aggressive tactics. But, this is backfiring, as the number of consumer complaints hit record levels and the FTC imposes fines and actions on agencies that violate the Fair Debt Collection Practices Act. While this is good news for consumers, it affects the top-line revenue growth of collections firms.”

Major Findings:

  • Industry Size … Marketdata estimates that U.S. Collection agency revenues grew just 3.9% to $12.2 billion in 2011. 2012 will see 4.6% gains to $12.8 billion. To 2013, we forecast 3.3% annual growth. Some analysts claim the industry is worth as much as $17 billion.
  • Average annual receipts per collection agency are about $2.3 million. There are 140,000+ workers in this sector, each of which collects $245,000 in debts. These people are working harder to collect – making more phone calls, getting partial payments, etc. Some have resorted to illegal or overly aggressive tactics, drawing the attention of State Attorneys General, the FTC, and the public.
  • Competition is fierce, based on recovery rates and service fees. Profitability has fallen.
  • The bulk of accounts are consumer credit card debt, but this is changing, as more success may lie with medical debt, IRS taxes, student loans, utility and cell phone bills.
  • Most collection agencies do most of their work on a contingency basis. Rates obtained for collecting debts vary, but generally average 25-30%. Commercial debts are generally larger and have a higher rate of recovery.
  • There is no doubt that some collectors are playing dirty, as the FTC and the National Association of Attorneys General recently reported that debt collection topped the list of consumer complaints in state offices during 2011. The FTC recently shut down two companies that used a call center in India to defraud Americans out of more than $5 million over the past two years. According to the FTC, these collectors made more than 8 million calls to consumers since 2010.
  • As household wealth has declined in the downturn,and the middle class has shrunk, more American families are facing financial distress due to high debt burdens. A growing share of consumers’ disposable income is being diverted to service credit card debt rather than to help an economic recovery.
  • NCO Financial Systems is the leading collections firm by far, with 2011 revenues of $1.54 billion. It is a public company.
  • Student loan debt: ECMC, a Minnesota-based non-profit group, owes its success to an 18-year-old agreement with the U.S. government. The company charges fees to borrowers and earns commissions from taxpayers — as much as 31% when it collects on defaulted student loans. Those rich rewards, which are approved by Congress, are sparking criticism that ECMC and similar collection agencies are collecting a bonanza from former students. Under government rules, such “guaranty agencies” add collection costs, as much as 25% — to a borrower’s loan balance. They also keep 16% of any money recovered.

ECMC and USA Funds are two of 32 little-known “guaranty agencies” that play a key role in higher-education finance. They oversee student loans for the U.S. Education Dept., which began its lending program in 1965. The groups guarantee loans made by banks and other private lenders. By law, the organizations can receive as much as 37% of a borrower’s entire loan amount, half in collection costs and half in taxpayer-funded commissions. ECMC says it typically collects 31% or $7,750 on a $25,000 loan. That’s 31 times what it can make for preventing the default through counseling.

ABOUT THE STUDY

U.S. Debt Collection Agencies: An Industry Analysis, published in April 2012, is an independently researched study. It contains 49 tables and is 186 pages long. It costs $1,895, but is sold by individual chapters at lower cost. Buy 2 chapters, get one Free. A free brochure is available by mail, Fax, or email: Contact: Marketdata Enterprises, Inc., 8903 Regents Park Dr., Suite 120, Tampa, FL 33647, or http://www.marketdataenterprises.com. Marketdata studies are available via distributors such as: Marketresearch.com, Global Information, Mindbranch, Bharat Book Bureau, and the Profound database. A 28 pp. Overview of report highlights is available to the general public, students, investors for $79.

Other Financial Reports:

  • The U.S.Pawn Shops Industry, May 2012, 11 pp.
  • Check Cashing, Money Transfer & Payday Loan Services, June 2008, 143 pp.

ABOUT MARKETDATA

Marketdata Enterprises, Inc., is a 33-year old independent market research firm that publishes market and industry studies covering a wide range of service businesses. It has tracked the collection agencies industry since 1995. Custom Research Projects & Consulting also available.

Contact Information:

John LaRosa,
Marketdata Enterprises, Inc., Tampa, FL
Phone: 813-907-9090
Fax: 813-907-3606

http://www.marketdataenterprises.com

email: john(at)marketdataenterprises(dot)com

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John LaRosa
Marketdata Enterprises Inc.
813-907-9090
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