What is Portfolio Recovery Associates?
Portfolio Recovery Associates, Inc. and its subsidiaries are collectively, one of the largest debt collectors in the United States. Its business model is to purchase pools of consumer debt receivables, typically from large banks, for collection and servicing of such debts. Most, if not all debt services and/or collected from PRA originated from a different creditor. Portfolio Recovery Associates, Inc. makes money by purchasing delinquent accounts for pennies on the dollar in comparison to the face amount of the debt purchased.
Portfolio Recovery Associates, Inc. owns Portfolio Recovery Associates, LLC. Portfolio Recovery Associates LLC is the entity that performs the servicing and collection of consumer accounts, while different subsidiaries of Portfolio Recovery Associates, Inc. perform the same functions but for different types of debt (for example, it is believed through SEC filings that Portfolio Receivables Management, LLC services consumer debt receivables affected by bankruptcy).
Portfolio Recovery Associates, Inc. is a publicly traded company on Nasdaq under the ticker symbol PRAA. It was founded in 1996 by Kevin Stevenson and Steve Frederickson. It is based in Norfolk, Virginia, but has offices nationwide. It operates in North America, Europe and Brazil.
In Q4 2020, the receivables Portfolio Recovery Associates serviced consisted of approximately 28.9% major credit card debt, 62.1% private label credit card debt; 7.6% consumer finance debt; and 1.4% auto related debt.
According to Portfolio Recovery Associates Inc.’s Form 10-K filed with the SEC on February 21, 2021, (which is the company’s audited set of financial statements for the fiscal year ending December 31, 2020), the company generated over $2 Billion in cash collections during 2020, up from $1.8 billion in 2019.
The form 10-K includes a historic purchase price multiple reflecting gross collections on purchased receivables. From 1996-2010, Portfolio Recovery Associates, Inc. purchased $1.078 billion in a receivable pool that generated or is expected to generate $3.398 billion for a current estimated purchase price multiple of 315%. This multiple has gone down significantly since 2010. For 2020, the current estimated purchase price multiple on PRA’s acquisitions was 213%.
This latter information can be highly relevant when trying to settle with PRA on a debt that it services.
Moreover, in 2015, the consumer finance bureau and Portfolio Recovery Associate entered into a consent order for its debt collection practices. A copy of that consent order can be read here. Some of the findings include:
PRA bought debts it should have known to be inaccurate or that could not be legally enforced;
PRA bought debt from sellers without checking to make sure the debt the debts were accurate and enforceable; and
PRA engaged in misrepresentations or unlawful actions to pressure consumers into paying their debts.
I will have a separate blog post and podcast on what to do outside of bankruptcy if you receive a debt collection letter from Portfolio Recovery Associates.