Collection Agencies

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 3,100 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 33-34 workers, and generates $5 million annually.

    • The collection agency industry consists of about 3,100 firms that employ 104,500 workers and generate about $16 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
                                Source: Vertical IQ and Inforum

                                Coronavirus Update

                                May 20, 2022 - CFPB Issues Medical Debt Report
                                • In April 2022, the Consumer Financial Protection Bureau (CFPB) issued a report which estimated that as of June 30, 2021, there was $88 billion in medical debt on consumer credit reports. The report was issued in response to a rise in the number of medical billing and collection complaints reported to the bureau. In the report, CFPB director Rohit Chopra stated, “Many Americans feel forced to pay medical bills that they have already paid or never owed to begin with. The credit reporting system should not be used as a weapon to coerce patients into paying medical bills they do not owe.”
                                • Government aid programs aimed at helping Americans weather the COVID-19 pandemic cut poverty nearly in half for 2021. It reduced the proportion of people in poverty to record low levels, according to the New York Times reporting of analysis by the Urban Institute. In mid-September 2021, the US Census Bureau reported that the number of Americans living below the poverty line dropped from 11.8% in 2019 to 9.1% in 2020, suggesting that government assistance programs helped stave off poverty during the pandemic and economic downturn. However, three key programs that helped put a dent in poverty - stimulus checks, supplementary federal unemployment benefits, and child tax credits – have run their course. Between December 2021, when the child tax credit payments expired, and February 2022, the number of children living in poverty rose by 3.4 million, according to the Center on Poverty and Social Policy at Columbia University.
                                • Early in the pandemic, several states and the District of Columbia issued limits on collections during the state of emergency. By early 2022, all states and The District of Columbia had ceased regulation of collections during the pandemic beyond collections related to stimulus payment garnishments. Stimulus payments under the American Rescue Plan were subject to collections because the bill passed using the reconciliation process, which prohibits provisions that do not impact the federal budget. The legislatures, judiciaries, or governors in several states established various collections regulations related to stimulus payments and federal child tax credits under the American Rescue Plan.
                                • Early in the pandemic, many consumers took financial hardship offers from lenders who allowed paused payments on auto loans. Some lenders worried an extended period of widespread economic hardship could lead to loan defaults. However, most consumers who took advantage of lenders’ financial hardship offers are either keeping up with their payments or have exited such programs. At the end of the fourth quarter, auto delinquencies of 60-plus days accounted for about 1.59% of the amount outstanding, up slightly from 1.45% a year earlier, according to TransUnion. Consumers resuming their loans and other debt payments may signal improved financial stability, reducing demand for collections.
                                • After the Supreme Court struck down the moratorium on evictions last summer, many expected a flood of evictions, but that never materialized, according to CBS News. Congress enacted the Emergency Rental Assistance (ERA) program in 2021 to prevent evictions during the coronavirus pandemic. Of the $46 billion allocated, as of the end of February 2022, the ERA program had paid out $30 billion to 4.7 million households. The remainder of the ERA funds is expected to be paid out by mid-2022. Once emergency funds run out, the US Treasury Department urges state and local governments to provide additional funding from the $350 billion they received through the American Rescue Plan Act. In 2020 and 2021, US evictions fell to their lowest levels on record, in part due to federal government interventions, according to an analysis released in March 2022 by Princeton University’s Eviction Lab.
                                Get A Demo

                                Vertical IQ’s Industry Intelligence Platform

                                See for yourself why nearly 40,000 users trust Vertical IQ for their industry research and call preparation needs. Our easy-to-digest industry insights save call preparation time and help differentiate you from the competition.

                                Build valuable, lasting relationships by having smarter conversations -
                                check out Vertical IQ today.

                                Request A Demo