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
Aug 5, 2024 - Consumer Debt Rises
- By most indications, the US economy has remained resilient despite high interest rates and inflation, but many consumers are struggling to make ends meet as the costs of borrowing have increased, according to The Wall Street Journal. The amount of mortgage interest that consumers paid in 2023 increased by 14% over 2022, and interest paid has risen 50% for car loans and credit cards, according to the US Bureau of Economic Analysis. The amount of debt on US consumers’ credit cards rose to a record high $1.1 billion in the first quarter of 2024 and was up by about a third compared to 2022. The average credit-card balance in the first quarter of 2024 was $6,000, up nearly 25% from 2022, according to TransUnion.
- The collection agency industry is expected to experience slower but steady sales growth in the coming years. The industry’s year-over-year sales increased by 4.2% in 2022 and 3.9% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to drop to 2.3% in 2024, then rise to nearly 3% in 2025. The industry will then see flat but steady average annual growth of about 3.6% through 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- In July, the Consumer Financial Protection Bureau published the summer edition of its report, Supervisory Highlights: Servicing and Collection of Consumer Debt. The report found that some debt collectors – including collectors of student loan debt - did not provide validation notices to borrowers within five days of initial contact. Some debt collectors were found to have used false or misleading statements, including misleading borrowers about their right to dispute debts. The report also uncovered instances where collectors used aggressive or abusive language, and failed to stop communicating via specific mediums when asked to do so by consumers. To remedy the issues uncovered by the report, debt collectors are required to enhance their training and oversight efforts.
- The Conference Board’s Consumer Confidence Index increased in July 2024 to 100.3 compared to June’s downwardly revised 97.8. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions— fell to 133.6 from 135.3 in June. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— increased to 78.2 from 72.8. However, the Expectations Index was still below 80, the threshold which typically suggests future recession. Dana M. Peterson, Chief Economist at The Conference Board, said, “Confidence increased in July, but not enough to break free of the narrow range that has prevailed over the past two years. Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates, and uncertainty about the future; things that may not improve until next year.”
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