Profile: Portfolio Recovery Associates Inc (PRAA.O)
11 Mar 2014
Portfolio Recovery Associates, Inc. (PRA) is engaged in the detection, collection and processing of both unpaid and normal-course accounts receivable originally owed to credit grantors, governments, retailers and others. The Company’s primary business is the purchase, collection and management of portfolios of defaulted consumer receivables. These are the unpaid obligations of individuals to credit originators, which include banks, credit unions, consumer and auto finance companies and retail merchants. It also provides fee-based services, including vehicle location, skip tracing and collateral recovery services for auto lenders, governments and law enforcement via PRA Location Services, LLC (PLS), revenue administration, audit and debt discovery/recovery services for local government entities through PRA Government Services, LLC and MuniServices, LLC (collectively PRA GS) and class action claims recovery services and related payment processing via Claims Compensation Bureau, LLC (CCB). On January 16, 2012, the Company acquired 100% interest in Mackenzie Hall Holdings, Limited, and its subsidiaries (MHH). In December 2012, the Company acquired certain assets from National Capital Management, LLC (NCM). In February 2014, the Company acquired certain operating assets from Pamplona Capital Management, LLP (PCM), which include PCM's IVA Master Servicing Platform, as well as other operating assets associated with PCM's IVA business.
The Company’s portfolio of defaulted consumer receivables includes a set of accounts that can be categorized by asset type, age and size of account, level of previous collection efforts and geography. It had acquired receivables of Visa, MasterCard and other credit cards, private label credit cards, installment loans, lines of credit, bankrupt accounts, deficiency balances of various types, legal judgments, and trade payables, all from a variety of debt owners. These debt owners include banks, credit unions, consumer finance companies, telecommunication providers, retailers, utilities, insurance companies, medical groups, hospitals, auto finance companies and other debt buyers. In addition, it makes periodic visits to the operating sites of debt sellers and attends industry events in an effort to develop account purchase opportunities. The Company also maintains relationships with brokers of defaulted consumer receivables.
During the year ended December 31, 2011, the Company had purchased accounts from approximately 150 debt owners. The age of a portfolio (the time since an account has been charged-off) is an important factor in determining the price at which it will purchase the portfolio.The accounts receivables management industry places portfolio receivables into categories depending on the number of collection agencies that have previously attempted to collect on the receivables. Fresh accounts are typically past due 120 to 270 days, charged-off by the credit originator and are either being sold prior to any post-charge-off collection activity or are placed with a third-party for the first time. Primary accounts are typically 360 to 450 days past due and charged-off, have been previously placed with one contingent fee servicer. Secondary and tertiary accounts are typically more than 660 days past due and charged-off, have been placed with two or three contingent fee servicers.
PRA purchases portfolios of accounts previously worked by four or more agencies and these are typically two to three years or more past due. In addition, it purchases portfolios of accounts that are included in consumer bankruptcies. These bankrupt accounts are typically filed under Chapter 13 of the United States Bankruptcy Code and have an associated payment plan that can range from 3 to 5 years in duration. The Company purchases portfolios of bankrupt accounts in both forward flow and spot transactions and, consequently, they can be at any age in the bankruptcy plan life cycle.
The Company acquires portfolios from debt owners through auctions and negotiated sales. In an auction process, the seller will assemble a portfolio of receivables and will either offer the portfolio to the market or seek purchase prices from specifically invited purchasers. In a privately negotiated sale process, the debt owner will contact known purchasers directly, take bids and negotiate the terms of sale. It also acquires accounts in forward flow contracts. Under a forward flow contract it agrees to purchase defaulted consumer receivables from a debt owner on a periodic basis, at a set percentage of face value of the receivables over a specified time period, generally from three to twelve months. These agreements often contain a provision requiring that the attributes and selection criteria of the receivables to be sold will not significantly change each month. If this provision is not adhered to, the contract will typically allow for the early termination of the forward flow contract by the purchaser or other appropriate remedies as mutually agreed upon. Forward flow contracts are a consistent source of defaulted consumer receivables for accounts receivables management providers and provide the debt owner with a source of revenue and a professional resolution of defaulted consumer receivables.
The Company’s legal recovery department oversees its internal legal collections and coordinates a nationwide collections attorney network, which is responsible for the preparation and filing of judicial collection proceedings in multiple jurisdictions, determining the suit criteria, and instituting wage garnishments to satisfy judgments. This network consists of approximately 50 law firms who work on a contingent fee basis. Legal cash collections generated by both its in house attorneys and outside independent contingent fee attorneys constituted approximately 24% of its total cash collections during 2011.
The Company’s bankruptcy department manages customer filings under the United States Bankruptcy Code on debtor accounts derived from three sources, which includes PRA’s Core purchased pools of charged off accounts that have filed for bankruptcy protection after being acquired by it, its purchased pools of bankrupt accounts, its third party servicing client relationships. Through its subsidiaries, it provides fee-based services, including vehicle location, skip tracing and collateral recovery services for auto lenders, governments and law enforcement via its PLS subsidiary; revenue administration, audit, and debt discovery/recovery services for government entities through its PRA GS business, and class action claims recovery services and related payment processing through its CCB subsidiary. PLS, through call center operations, performs national skip tracing, asset location and collateral recovery services, principally for auto finance companies.
Portfolio Recovery Associates Inc
STE 100, 120 CORPORATE BLVD
NORFOLK VA 23502