Collection Agencies


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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 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

                                Recent Developments

                                Feb 27, 2023 - Collections Tradelines Drop
                                • According to a new report by the US Consumer Financial Protection Bureau (CFPB), the total number of collections tradelines on consumer credit reports fell 33% between Q1 2018 and Q1 2022. A collections tradeline is an item on a consumer’s credit report that includes information about an individual’s allegedly unpaid bills. The report also showed that between Q1 2018 and Q1 2022, the percentage of US consumers with a collection tradeline on their credit report fell by 20%. The drop was primarily due to contingency-fee-based debt collectors (excluding firms that buy debt) reporting 38% fewer collection tradelines. However, the number of collections reported by debt buyers increased by 9% over the same period. The CFPB indicated that some debt collectors and debt buyers may have stopped furnishing data to consumer credit reporting agencies due to concerns about data integrity and compliance with the Fair Credit Reporting Act.
                                • Consumers may be pulling back on spending amid high inflation and economic uncertainty. In a recent survey by PwC, 69% of consumers said they plan to cut back on nonessential spending over the next six months. About 15% of consumers said they plan to eliminate nonessential spending. About half of those surveyed said they were “extremely or very concerned” about their financial situation.
                                • US household debt rose to a record $16.9 trillion in the fourth quarter of 2022, up 2.4% from Q3 2022, according to a recent report released by the Federal Reserve Bank of New York. While the largest share of consumer debt stems from mortgages, the report showed ballooning credit card debts and rising delinquencies. Consumers’ credit card balances rose nearly 6.6% to $986 billion, marking the largest quarterly rise since the New York Fed began tracking the data in 1999. Credit card and auto loan delinquencies rose 0.6 and 0.4 percentage points, respectively. However, the total percentage of outstanding debt that’s in some stage of delinquency was 2.5% at the end of 2022, well below the 4.7% in December 2019.
                                • There is a wide disparity between the channels used by large and small collections firms to contact consumers, according to an annual collections industry report by TransUnion and Aite-Novarica. Overall, 37% of collections firms use text/SMS messaging to reach consumers. However, while 56% of large companies (100,000 accounts or more) use text/SMS messaging, only 17% of small firms (fewer than 100,00 accounts) do so. Firms are investing in text/SMS messaging partly because it increases efficiency and cost savings. It also makes compliance with Consumer Financial Protection Bureau regulations that place limitations on outbound collection calls. Consumers also prefer text/SMS messaging communications, according to TransUnion.
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