Collection Agencies
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 2,700 collection agencies in the US collect and remit payments to clients. Major revenue categories include individual debt collection and commercial debt collection. Other services include factoring accounts receivables, bankruptcy assistance, and collateral recovery. Large firms may also be debt buyers. Companies involved in mortgage collections may also provide lending services.
Uncertainty in Collections
Defaulted receivables are difficult to collect.
Highly Regulated
The collection industry is heavily regulated by federal, state, and local laws.
Industry size & Structure
The average collection agency operates out of a single location, employs about 34-35 workers, and generates $5 million annually.
- The collection agency industry consists of about 2,700 firms that employ 93,000 workers and generate about $12.6 billion annually.
- The industry is concentrated at the top and fragmented at the bottom; the top 50 companies account for about 52% of industry sales.
- Large companies with debt collection operations include Ocwen Financial, Alorica (formerly Expert Global Solutions), iQor, and Portfolio Recovery Associates. Large firms may have operations in foreign countries.
- The census definition of collection agencies excludes debt buyers, although some large agencies also purchase debt. The debt buying market is concentrated.
- The main sources of debt include health care, credit card/financial, utilities/telecommunications, student loans, and commercial and government debt.
Industry Forecast
Collection Agencies Industry Growth
Recent Developments
Dec 4, 2024 - Credit Card Delinquencies Hit 13-Year High
- Credit card delinquencies held steady at 3.11% in the third quarter of 2024, according to the Federal Reserve. While delinquencies seem to have plateaued, they remained at a 13-year high. Credit card delinquencies tend to be a six-to-nine-month early indicator of credit card charge-offs. Credit card charge-offs – when a credit card company writes off an unpaid loan as a loss and reports it to a credit agency – reached an 11-year high in the third quarter of 2024. Charge-offs in Q3 2024 reached 4.65%, up from 4.36% in Q2 2024. As charge-off placements lag by 9-12 months, they are expected to continue rising through at least mid-2025.
- The Conference Board’s Consumer Confidence Index increased to 111.7 in November from 109.6 in October. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions— rose by 4.8 points to 140.9 over October. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— increased 0.4 points to 92.3. The Conference Board’s Chief Economist, Dana M. Peterson, said, “Consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years. November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market. Compared to October, consumers were also substantially more optimistic about future job availability, which reached its highest level in almost three years. Meanwhile, consumers’ expectations about future business conditions were unchanged and they were slightly less positive about future income.”
- Most Americans, 58%, are optimistic about their household finances even amid inflationary pressures, according to TransUnion’s Q4 2024 Consumer Pulse Study. However, while inflation was a top three concern for 80% of consumers surveyed, worries about inflation are down. In Q4 2024, 58% of consumers said they were extremely or very concerned about the current rate of inflation, down from 64% in Q4 2023. Of survey respondents who said they were concerned about higher prices, 80% ranked groceries as their top category of concern; at 57%, gasoline was the second highest concern. Despite widespread worries about inflation, 57% of consumers said they planned to spend more on the holidays in 2024 than last year; 38% said they plan to spend less.
- In September 2024, the Consumer Financial Protection Bureau’s (CFPB) annual report to Congress outlined key trends in consumer debt collection complaints. In all, the CFPB received 109,900 debt collection complaints in 2023. In the case of 63% of the complaints, the CFPB contacted the company for a review and response, 28% were referred to other regulatory agencies, and 9% were not actionable. Nearly all (97%) of the debt collection complaints sent to companies by the CFPB for review and response received a response. Among those, 80% were closed with an explanation, and 15% were closed with non-monetary compensation. About 23% of debt collections complaints were about credit card debt, followed by medical debt (11%), auto debt (5%), telecommunications debt (3%), rental debt (3%), payday loan debt (2%), mortgage debt (1%), private student loan debt (0.7%), and public student loan debt (0.6%). A quarter of consumer debt collection complaints were classified as “other debt,” and for 27% of debt complaints, consumers were not sure about the type of debt. At 53% of all complaints, attempts to collect debt not owed was the most common complaint issue, followed by written notification about debt (19%), threats of negative or legal action (10%), false statements (8%), and communication tactics (7%).
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