Credit junkies, beware: Encore Capital Group has your number. The firm and its Midland Credit Management subsidiary purchase at a discount defaulted consumer receivables that banks, credit unions, consumer and auto finance companies, credit card issuers, telecommunications firms, retailers, and other lenders have given up on. The group then does its best to collect the money via phone, direct mail, third-party collection agencies, and legal action; it employs skip-tracing to track down stubborn debtors. Subsidiary Ascension Capital Group provides bankruptcy support services to the financial services industry. Encore Capital acquired Propel Financial Services, which specializes in tax lien transfers, in 2012.
Encore Capital has ramped up its acquisition of new portfolios of card, telecom, and consumer bankruptcy charge-offs amid continued stagnant job growth in the aftermath of the recession. As Encore grew its portfolio, its gross collections also increased (by more than 25% in 2011 alone); not coincidentally, its revenue and income were up as well.
The company's consumer database comprises more than 25 million accounts. Volume is important for Encore Capital, as the company pursues collections on only a fraction of accounts and generates payments from less than 1% of them. Practicing a "friendly, but firm approach" its account managers evaluate customers' ability to pay, then develop tailored payment programs. The company utilizes proprietary statistical and behavioral models, account-level valuation methods, customized software applications, and purchased credit bureau information to determine its collection strategies.
Encore Capital operates call centers in California, Arizona, Minnesota, Texas and another in India. The company considers its operations in India, where the annual attrition rate for experienced account managers is well the below industry average in the US, key to its future growth. It is building its software development, IT infrastructure, analytics operations, and back-office functions there. Encore Capital opened a call center in Costa Rica in 2012 and may consider business acquisitions to expand its geographic presence in other parts of the world.
In 2011 Encore Capital agreed to pay up to $5.7 million to settle several class-action lawsuits that accused the company of using falsified affidavits to collect money. Later that year Encore Capital resolved litigation initiated by the Texas Attorney General's office, which had investigated the company's collection methods. – less