You are here

Debt collectors' profits soar with people flush and easy to find

[NORFOLK] Bolstered cash collections helped profits more than triple at two of the largest publicly traded debt collectors, as stimulus checks and lockdowns left US borrowers stuck at home with extra cash on hand.

PRA Group said that cash collections jumped 8 per cent to a record, while Encore Capital Group said revenue got a US$66 million bump from better-than-expected collections. Operating expenses at both firms were also down significantly.

The results are another sign that an unprecedented wave of one-time cheques from Washington, extra unemployment benefits and generous loan forbearance programmes from lenders across the country have combined to help Americans stay afloat. Overall household debt fell for the first time in six years, the Federal Reserve Bank of New York said in a report this week.

"We attribute the strength in cash collections to a combination of stimulus in the US and the fact that people are easier to reach when locked down at home," analysts at William Blair wrote in a note on PRA's results.

Shares of PRA Group and Encore have both climbed 22 per cent this year.

Your feedback is important to us

Tell us what you think. Email us at btuserfeedback@sph.com.sg

"US consumers have additional discretionary funds, and many are taking this opportunity to voluntarily resolve their debts," Kevin Stevenson, PRA Group chief executive officer, said in a statement this week.

"It's just an overall really strong environment cash-wise," Mr Stevenson said in an earnings call Thursday.

BLOOMBERG

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes