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
Jun 4, 2024 - Steady but Slower Industry Growth
- 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.
- US household debt and credit card delinquencies were up in the first quarter of 2024, according to a report released in mid-May by the Federal Reserve Bank of New York. Household debt rose by $184 billion in Q1 compared to Q4 of 2023. Credit card balances in the first quarter fell by $18 billion. However, first-quarter credit card balance declines are typical, and the number of borrowers behind on their credit card payments is rising. In Q1, 18% of consumers carrying credit card balances were so-called “maxed-out borrowers” using at least 90% of their available credit. Not counting student loans, debt delinquency has been rising since the fourth quarter of 2021, and credit card delinquencies have increased beyond pre-pandemic levels. For credit card delinquencies to improve, the NY Fed believes that the number of maxed-out borrowers falling into delinquency must decline and/or the share of maxed-out borrowers as a percentage of all borrowers needs to fall. The NY Fed notes that there’s no sign either metric is improving, so credit card delinquencies will likely continue to rise.
- The Conference Board’s Consumer Confidence Index increased in May 2024 to 102.0 compared to April’s upwardly revised 97.5. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions— rose to 143.1 from 140.6 in April. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions— increased to 74.6 from 68.8. Dana M. Peterson, Chief Economist at The Conference Board, said, “Consumers’ assessment of current business conditions was slightly less positive than last month. However, the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get,’ which outweighed a slight decline in the number who said jobs were ‘plentiful.’ Looking ahead, fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index. Nonetheless, the overall confidence gauge remained within the relatively narrow range it has been hovering in for more than two years.”
- Credit reporting is the leading consumer complaint topic to the Consumer Financial Protection Bureau (CFPB), according to a recent report by the nonpartisan Congressional Research Service. The report showed that more than 80% of consumer complaints to the CFPB in 2023 were related to credit reporting. Other leading sources of complaints included debt collections (5.5% of complaints), credit or prepaid cards (4.5%), checking and savings accounts (4.1%), and mortgages (1.9%).
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