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
Recent Developments
Apr 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 7.4% in 2021, 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 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.
- 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%).
- Amid inflation and high interest rates, consumers are relying more on credit cards as they pay more to maintain their lifestyles and burn through savings built up during the pandemic, according to The Wall Street Journal. In a conference call in December, the co-chief executive of JPMorgan Chase’s consumer bank said that, on average, the bank’s lowest-income customers had 12 days’ worth of cash before the pandemic. Today, those customers have about 15 days’ worth of cash, indicating they have spent nearly all their savings accumulated during the health crisis. In the third quarter, several of the largest banks - including JPMorgan, Wells Fargo, and Citigroup – reported increased unpaid balances on credit card accounts.
- Higher interest rates, inflation, and the lingering effects of the pandemic led to an increase in bankruptcy filings in 2023, according to law firm Maurice Wutscher LLP. A mix of business and consumer cases, Chapter 7 filings rose 17% in 2023 from the previous year. Chapter 11 cases were up in 2023 by 19%, and Chapter 13 consumer bankruptcies increased 18%. Interest rate hikes by the Federal Reserve have pushed up the costs of credit card interest, variable-rate loans, and home mortgages, which is challenging some consumers’ and businesses’ ability to meet their financial obligations. The ceasing of state and federal COVID-related stimulus has compounded the effects of inflation and higher interest rates.
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