Encore Capital: Growing Foreign Profits

A few years ago, Encore Capital, the parent of debt buyer Midland Funding, LLC started spreading money around overseas, mostly notably with the acquisition of Cabot, a debt-buyer in the United Kingdom. It’s most recent quarterly call with investors (transcript available here, signup required) paints an interesting picture of its ever-expanding global reach. The call mentions its participation in debt auctions in South America, the profitability of debts in Germany, France, Spain and the United Kingdom, and its attempts to obtain regulatory approval to purchase debts in India. In short, Encore seems on its way to becoming a global collection giant, on the same scale as some of the world’s largest banks and tech companies.

The call also indicated that Encore is increasing its “legal” (i.e. litigated) collections in the United Kingdom, which suggests that Encore’s business model will remain broadly the same as it enters new geographical areas: buy up consumer debt at a deep discount, and then sue the consumers for the full balance. Whether its new host countries will accept the kind of aggressive large scale litigation Encore uses in the US remains to be seen.

The Home Front

Encore had little to say about its continuing regulatory problems. It’s discussions with the CFPB are apparently “ongoing” and Encore could not be drawn further by investors’ questions.

A more interesting comment related to “internal” versus “external” litigated collections. Encore appears to be increasing its use of its own internal lawyers in collection litigation, rather than relying on third-party attorneys, as in the past. Encore noted that its use of “internal legal” was generally more efficient than external, but the use of internal collection varied by state.