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 2,800 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 2,800 firms that employ 100,000 workers and generate about $14 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

                                Sep 26, 2023 - Industry Pushes Back on CFPB Inquiry
                                • Several industry organizations – including the Association of Credit and Collections Professionals (ACA International), the American Bankers Association (ABA), and the US Chamber of Commerce - are pushing back on the Consumer Financial Protection Bureau’s (CFPB) inquiry into medical credit cards and other lending products consumers use to pay for health care, according to insideARM. In July, the CFPB, along with the US Department of Human Services, issued a request for information (RFI) regarding various medical payment products. The ACA argued that the CFPB lacks the statutory authority to regulate healthcare, and expressed concerns about the CFPB’s prior move to remove medical debt from credit reporting.
                                • Americans’ average financial well-being score held steady at 50.28 in August compared to a reading of 50.58 in July, according to Morning Consult. However, while most generations’ financial well-being scores stayed steady in August, Millennials are feeling increased financial strain as their average score slipped to 45.73 from 48.1 in July. Just over 25% of Millennials said they feel like they can enjoy life because their finances are in order. Morning Consult said pinning down an exact cause for the decline was a challenge but that it was reasonable to assume Millennials may feel increased financial pressure as student loan payments are set to resume.
                                • Some industry insiders suggest the power of artificial intelligence (AI) systems will revolutionize how companies assess credit risks and resolve past-due accounts, according to CFO Magazine. Future potential applications for AI-enabled collections may include automated touchpoints through multiple digital channels that are triggered by failure to pay on time. Such touchpoints could include options to view a current balance, payment options, or connect to customer support. Applications for AI in collections may also include monitoring client responses and modifying the message content, tone, and timing that yields the best results. Such systems could continuously improve and get better and more efficient over time.
                                • Fewer consumers complained about debt collections in 2022 compared to the prior year, according to a report by the US PIRG Education Fund (PIRG). The PIRG analyzed consumer complaints to the Consumer Financial Protection Bureau (CFPB), and while the total number of all types of complaints rose more than 60% in 2022, complaints about debt collection fell 15%. Complaints involving debt collections accounted for 7.4% of all consumer complaints to the CFPB. Issues regarding credit reporting, credit repair services, or other personal consumer reports accounted for more than three-quarters of all complaints to the CFPB in 2022.
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