Debt collectors have made a fortune this year; now they’re coming for more

Debt collectors have made a fortune this year; now they’re coming for more

October 5, 2020 Off By administrator

Earlier
this year, the pandemic swept across the country, killing 100,000
Americans by the spring, shuttering businesses and schools, and forcing
people into their homes. It was a great time to be a debt collector.

In
August, Encore Capital, the largest debt buyer in the country,
announced that it had doubled its previous record for earnings in a
quarter. It primarily had the CARES Act to thank: The bill delivered
hundreds of billions of dollars worth of stimulus checks and bulked-up
unemployment benefits to Americans, while easing pressures on them by
halting foreclosures, evictions and student loan payments. There was no
ban on collections of old credit card bills, Encore’s specialty.

At
the same time, the pandemic compelled households to cut spending.
Finding themselves with enough money to settle old debts, people
responded to collectors’ calls and letters. Debt-buying executives
couldn’t help marveling at their good fortune. All this created “a
perfect storm from a cash perspective,” the CEO of Portfolio Recovery
Associates, Encore’s main competitor, told Wall Street analysts.

After
its record second quarter, analysts expect Encore to blow past $200
million in profit this year and reward stockholders with 40% earnings
growth compared with last year. Portfolio Recovery is set for similar
growth. The share prices of both have soared off their early April lows.

Investors didn’t even show much concern when, in early September, the Consumer Financial Protection Bureau sued
Encore, saying that it had broken the terms of a consent agreement
struck in 2015. The agency had previously charged the company with
“pressuring consumers with false statements and churning out lawsuits
using robo-signed court documents,” as it said at the time. (In a statement, Encore said the CFPB’s recent suit was unnecessary because it had fixed the alleged problems “years ago.”)

In
recent months, the only real bad news for debt buyers was that local
courts across the country temporarily shut down. Debt collection
lawsuits provide a key source of revenue for the companies, a way to
extract payment from consumers, typically low-income, who don’t offer it
up.

But
now even that hiccup is over. After a bit of a lull in the spring,
Encore and other debt buyers are back at it, filing suits by the
thousands every week, according to ProPublica’s analysis of state court
filings.

In
August alone, Encore filed about 1,000 suits in Indiana and over 2,000
suits in the metro Atlanta area. Other debt buyers jumped back in as
well. In Chicago, Portfolio Recovery filed over 3,000 suits in July,
while LVNV, a major debt buyer privately owned by Sherman Financial
Group, filed over 2,700 suits in Maryland in August. For all these
companies, ProPublica found, the volume was well above the number they’d
filed before the coronavirus arrived, in January or February of this
year. No…

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