Posted By Adam Lindheim
By Arthur Epstein
During these gloomy times for the U.S. economy, many businesses are suffering. But some are uniquely positioned to do well when times are tough for most others, namely debt collection agencies and related companies.
The U.S. now has more than 6,000 debt collection companies, according to Kaulkin Ginsberg, a Maryland-based market research firm. Most of them are small, privately held entities. However a few debt collection agencies are publicly traded, including Portfolio Recovery Associates (PRAA) and IDT (IDT).
Although the debt collection business may get a bad rap when depicted in the movies or on television shows, it is actually a heavily regulated industry. While debt collectors may be tempted to use any tactics that will pry owed money from debtors' hands, they must comply with the federal Fair Debt Collection Practices Act, which prohibits deceptive, unfair, and abusive practices by third-party collectors; requires debtors to be treated fairly; and forbids certain methods of debt collection, including threats, abusive language, or harassment, such as repeatedly calling.
According to the Federal Reserve, the consumer credit industry increased from $133.7 billion of consumer debt obligations in 1970 to $2.5 trillion of consumer debt obligations in November, 2007, a compound annual growth rate of 8.2%. The Kaulkin Ginsberg report states the amount of outstanding revolving and non-revolving consumer credit increased at a compound annual growth rate of 6.4% from $1.3 trillion in June, 1997, to $2.5 trillion in June, 2007.
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