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Debt collection agencies recover unpaid debts for creditors like banks, hospitals, and utility companies. They either work on a contingency basis or purchase debt portfolios at significant discounts (e.g., 4 cents on the dollar). In the U.S., this is a $13 billion industry with over 6,000 companies employing 40,000 workers. About 77 million Americans have debts in collections, with an average balance of $5,178.
Key points to know:
Choosing the right agency requires thorough due diligence on compliance, reputation, and operational practices. Tools like Debexpert can assist in managing and selling debt portfolios securely and efficiently.
U.S. Debt Collection Industry Statistics and Key Facts 2025
The U.S. debt collection industry was worth $13.6 billion in 2026. However, from 2020 to 2025, the industry saw revenue decline at a 6.3% CAGR. This drop was largely due to pandemic-related measures like the American Rescue Plan and the suspension of student loan payments. Federal stimulus programs gave consumers more financial flexibility, which reduced the volume of new accounts sent to collections.
The number of businesses in the sector has also shrunk. By 2025, there were about 5,467 debt collection firms, reflecting a 3.5% annual decline since 2020. This trend points to industry consolidation, with larger, tech-driven companies gaining ground. The top 50 firms now account for 52% of total industry revenue, compared to 46% in 2007.
"The big are getting bigger, fueled by acquisitions and greater capability to harness artificial intelligence, as well as moving into international markets".
Economic changes are beginning to shift this trajectory. Interest rate changes and the return of student loan payments are putting new financial pressures on households, which could increase demand for collection services. Still, the industry remains highly sensitive to government policies and broader economic conditions. The idea that debt collection thrives during recessions is being challenged. These shifting dynamics are reshaping how agencies operate within the debt trading ecosystem.
To adapt to these changes, debt collection agencies have adjusted their role in the debt trading ecosystem. They typically operate on a contingency basis, earning fees for successful recoveries, or purchase debt portfolios outright at significant discounts. Agencies handle a range of debt placements, from early delinquencies to accounts that have already been through multiple collection attempts.
About 40% of the industry's revenue comes from financial services debt, like credit cards and loans, while the remaining 60% comes from non-financial obligations, including medical bills, telecommunications, and utilities. This broad revenue mix allows agencies to engage across various segments of the debt trading market. They offer specialized services such as skip tracing, accounts receivable management, and early-out services, helping creditors minimize losses.
The debt collection industry in the U.S. is heavily influenced by a few major players, even though 95% of companies in the sector are considered small businesses. These leading firms dominate the market with their scale, advanced technology, and specialized approaches. Knowing how these agencies operate can provide valuable insights for debt buyers and sellers navigating the industry. Here’s a closer look at three of the most influential companies.
Alorica stands out as a Business Process Outsourcing (BPO) and Customer Experience (CX) provider, focusing on first-party servicing rather than purchasing debt portfolios. With an impressive 10.4% market share, it leads the industry in size and influence.
What makes Alorica unique is its approach to collections. Acting as an extension of the creditor's team, it integrates debt recovery into broader customer service operations. This strategy allows creditors to maintain their relationships with consumers while recovering debts. Alorica serves a wide range of industries, offering omnichannel communication through phone, email, and text. Its significant scale and advanced technology infrastructure allow it to handle large volumes while adhering to regulatory standards.
Encore Capital Group is the largest publicly traded debt buyer in the U.S., reporting $1.46 billion in revenue in 2025. Unlike agencies that collect on behalf of creditors, Encore purchases portfolios of charged-off consumer debt - primarily defaulted credit card accounts and consumer loans - from major financial institutions at discounted rates. It then works to recover these debts for its own profit.
This business model not only helps original creditors offload nonperforming assets but also positions Encore as a major player in the secondary debt market. By combining its role as both a collector and an investor, Encore exemplifies how debt buyers contribute liquidity to the financial system while pursuing recovery efforts.
CBE Group specializes in healthcare and public sector collections, making it a key player in these highly regulated areas. Employing over 200 staff members, the company focuses on third-party collections for government entities, hospitals, and healthcare providers.
This specialization is significant, as 60% of industry revenue comes from non-financial obligations like medical bills and government-related debt. CBE's expertise in navigating the complex compliance requirements of these sectors sets it apart. Its work in public sector debt recovery highlights how agencies can carve out niches by addressing specific regulatory and consumer needs.
The debt collection industry in the U.S. is tightly regulated to protect consumers from harmful practices while still allowing legitimate debt recovery efforts. Knowing these rules is crucial for anyone involved in debt collection or managing debt portfolios.
The FDCPA serves as the cornerstone of federal debt collection laws. Its primary goal is to prevent abusive, deceptive, and unfair practices by third-party debt collectors, such as collection agencies, debt buyers, and attorneys working on behalf of others. It specifically applies to personal, family, or household debts, excluding business debts and original creditors.
"It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged."
– Fair Debt Collection Practices Act, Section 802
The Act establishes clear rules for how and when debt collectors can contact consumers. For example, they are prohibited from calling before 8:00 a.m. or after 9:00 p.m., contacting consumers at inconvenient locations, or reaching out to workplaces that don’t allow such communication. Harassment tactics like repeated calls, threats of violence, or obscene language are also banned. Misleading claims - such as pretending to represent the government or misstating the debt amount - are strictly forbidden.
Debt collectors must send a written validation notice within five days of their first contact, detailing the debt amount and the creditor’s name. Consumers have 30 days to dispute the debt in writing, during which time collection efforts must pause until the debt is verified. Regulation F further limits contact frequency, stating that collectors cannot make more than seven calls about a specific debt within seven consecutive days or call within seven days of a phone conversation about the debt.
Enforcement of the FDCPA includes serious penalties. Individual lawsuits can result in actual damages plus statutory damages of up to $1,000. In class actions, damages are capped at the lesser of $500,000 or 1% of the collector’s net worth. Recent actions highlight these enforcement efforts: in February 2024, the FTC secured a $20.3 million judgment against RCG Advances, LLC for deceptive practices; in December 2024, over $540,000 was refunded to consumers affected by a phantom debt scheme; and in May 2025, a debt collector faced a ban for coercing payments on debts that weren’t owed.
The Consumer Financial Protection Bureau (CFPB) plays a key role in regulating debt collection under the FDCPA, particularly through its Regulation F (12 CFR Part 1006). The CFPB supervises and examines debt collectors to ensure compliance with federal consumer financial laws, while the Federal Trade Commission (FTC) enforces the FDCPA as part of its broader mission to combat unfair or deceptive practices.
Oversight responsibilities are shared among several agencies. While the CFPB oversees most debt collectors, the FDIC, Federal Reserve, and NCUA regulate banks and credit unions. The CFPB also submits annual reports to Congress in collaboration with the FTC to detail its administration of the FDCPA.
Regulation F, last updated on April 19, 2023, includes rules for modern communication methods. Debt collectors can now use email and text messages, provided they offer clear opt-out options. While private social media messages are allowed, public posts about a debt are strictly prohibited. The regulation also requires collectors to retain records, ensuring compliance and aiding CFPB oversight.
To help industry participants stay compliant, the CFPB offers various tools, such as the Small Entity Compliance Guide, Supervision and Examination Materials, and a Model Validation Notice. These resources are designed to standardize debt information and make it clearer for consumers.
Collaborating with a debt collection agency can help recover outstanding debts while staying aligned with FDCPA and Regulation F guidelines.
Compliance is key. Before signing any agreement, ensure the agency strictly follows FDCPA and Regulation F. For instance, confirm they respect call frequency limits as outlined in Regulation F. Check their electronic communication practices to ensure they comply with legal standards.
Verify consumer validation procedures. The agency should use the CFPB Model Validation Notice for accurate consumer validation. If your customer base includes Spanish speakers, confirm the agency uses the official Spanish translation of the notice. Their dispute resolution process should be clear and capable of handling consumer challenges or requests to stop communication.
Examine their policies on time-barred debt and litigation. This helps avoid potential FDCPA violations. Review their approach to administrative wage garnishments and legal actions to ensure it aligns with your company’s risk tolerance.
Assess their reputation and operational practices. Look into consumer complaint data, enforcement actions, and the agency's financial stability. Evaluate their technology systems and record-keeping capabilities, as agencies are legally required to maintain detailed records of collection activities. Use the CFPB’s examination modules as a reference to review their business model, communication practices, validation notices, and information-sharing protocols.
| Selection Factor | Verification Details |
|---|---|
| Compliance | FDCPA and Regulation F adherence, recent audit results |
| Communications | Call frequency limits, electronic messaging protocols |
| Validation | Use of Model Validation Notice, itemization procedures |
| Dispute Handling | Processes for consumer challenges and cease requests |
| Data Security | Accuracy in credit bureau reporting, secure payment processing |
| Legal Practices | Policies on time-barred debt and litigation procedures |
Provide complete and accurate portfolio documentation. When transferring accounts, include essential details such as itemized records, signed contracts, the last 12 months of statements, and a full history of unresolved disputes. This ensures legal compliance and improves recovery potential. Before transferring portfolios, run data checks to catch any errors or incomplete records. Avoid selling accounts such as those belonging to deceased individuals, accounts in bankruptcy, or debts without clear ownership evidence.
Regularly monitor consumer complaints and repurchase volumes. Notify customers promptly when their debts are sold, providing details like the transferred amount and contact information for the new buyer.
Once you’ve selected an agency, ensure your portfolio data is prepared with precision and establish ongoing oversight to maintain transparency and compliance.
After setting strict selection criteria, platforms like Debexpert can simplify the process of managing and selling debt portfolios.
Debexpert connects sellers with vetted partners, solving the challenge of finding reliable agencies that meet compliance standards and specialize in specific debt types. The platform offers tools for listing and auctioning portfolios, giving you flexibility with formats like English, Dutch, Sealed-bid, or Hybrid auctions. Real-time tracking of buyer interest lets you adjust your strategy on the fly, while analytics tools help you assess your assets before listing.
Data security is a priority. With end-to-end encryption, Debexpert ensures sensitive consumer information remains protected during transactions. This is crucial since debt portfolios often contain nonpublic personal information subject to GLBA (Regulation P) requirements. The platform also consolidates communication between buyers and sellers, streamlining discussions about portfolio composition, dispute rates, and payment histories.
To build trust, Debexpert requires participants to verify their credentials before accessing detailed portfolio information. This reduces the risk of working with unqualified or non-compliant partners. Additionally, the platform tracks post-sale account details, aiding in internal record-keeping and regulatory reporting.
To ensure that your agency partner remains effective and compliant, it's essential to actively measure their performance. The Consumer Financial Protection Bureau (CFPB) evaluates agencies using seven key modules: entity business model, communications, information sharing and privacy, validation notices and dispute handling, payment processing, Equal Credit Opportunity Act (ECOA) compliance, and litigation practices. These modules can serve as a reliable framework for your internal audits.
Start by examining consumer complaints. Keep an eye on the volume, nature, and response times of complaints. The CFPB's 2024 Consumer Response Annual Report provides benchmarks by analyzing thousands of consumer complaints each year. Use these benchmarks to compare your agency's performance and flag any concerning trends early.
Focus on validation and dispute accuracy. Check how consistently the agency handles validation notices and disputes under the Fair Debt Collection Practices Act (FDCPA). Ensure they respect "cease communication" requests and adhere to time and place restrictions for electronic communications. Confirm they use the CFPB's Model Validation Notice and itemization tables correctly.
Evaluate data accuracy and legal practices. Ensure the agency maintains accurate account records and reports to credit bureaus correctly. Review their litigation practices, including administrative wage garnishments and handling of time-barred debt, to confirm legal compliance. Also, verify that they follow call frequency limits and cross-check their status against the Federal Trade Commission's (FTC) list of banned debt collectors to reduce third-party risks.
| Performance Category | Key Metric/Focus Area | Regulatory Reference |
|---|---|---|
| Consumer Relations | Complaint response rate and resolution quality | CFPB Exam Module 4 |
| Operational Accuracy | Validation notice timeliness and itemization accuracy | Regulation F / 12 CFR 1006 |
| Legal Compliance | Adherence to time-barred debt collection prohibitions | FDCPA / Regulation F |
| Data Management | Accuracy of reporting to credit bureaus | CFPB Exam Module 3 |
| Communication | Frequency and timing of calls/emails | Regulation F |
By closely monitoring these areas, you can strengthen your risk management efforts and ensure compliance.
Regular performance tracking is essential to minimize risks and maintain compliance.
Establish a routine audit schedule. Use the CFPB's "Debt Collection Examination Procedures" as a guide. Conduct quarterly reviews of communication practices, validation notices, dispute handling, and payment processing. Request sample validation notices and compare them against the CFPB's Model Validation Notice to confirm all required disclosures are included.
Inspect communication practices. Review call recordings and email templates to ensure compliance. Confirm that agencies stop contact immediately upon receiving written requests or notice of attorney representation. Verify that any third-party communications are limited to obtaining location information only.
Verify legal venue compliance. Ensure lawsuits are filed only in the judicial district where the consumer resides or where the original contract was signed. Check their policies on time-barred debt to confirm they aren't collecting amounts they aren't authorized to pursue.
Set up risk alerts. Create trigger alerts for spikes in complaints, regulatory inquiries, or leadership changes. Develop a scorecard to assess risk factors such as complaint volume, regulatory actions, data security incidents, and financial instability. Use this scorecard to assign an overall risk rating to each agency partner.
Document everything. Maintain thorough records of agency agreements, performance reports, audit findings, and correspondence. Regulation F requires debt collectors to keep detailed records of their activities, and you should follow the same practice for your oversight. These records can be critical during regulatory reviews or legal disputes.
Working effectively with debt collection agencies requires a solid understanding of regulations and a commitment to oversight. The Fair Debt Collection Practices Act (FDCPA) and CFPB's Regulation F set clear rules for agency communications, such as call limits and timely validation notices. As the Consumer Financial Protection Bureau explains:
"This part [Regulation F] carries out the purposes of the FDCPA, which include eliminating abusive debt collection practices by debt collectors, ensuring that debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged".
Thorough due diligence is a must. Before partnering with an agency, check their financial health, licensing credentials, and complaint history. The FTC’s list of banned debt collectors is a valuable resource for avoiding risky partnerships. Ensure that account information is complete - this includes documents like signed contracts, detailed account statements, and a breakdown of principal, interest, and fees. Steer clear of problematic debt types, such as those involving fraud, bankruptcy, deceased individuals, or accounts nearing the statute of limitations. These steps are crucial for maximizing returns in debt portfolio trading.
Regular audits are equally important. Monitor communication practices and dispute resolution procedures closely. Keep an eye on consumer complaints to confirm that collection efforts comply with legal and internal standards. The Office of the Comptroller of the Currency advises:
"banks should ensure that their debt buyers have accurate and complete information necessary to enable them to pursue collections in compliance with applicable laws and consumer protections".
Finally, embrace technology to streamline operations. Tools like Debexpert simplify portfolio management by offering secure file sharing, real-time analytics, and auction features that connect buyers and sellers. These platforms not only help maintain compliance but also improve data accuracy and performance tracking.
To figure out if a collector falls under the FDCPA, start by identifying the type of debts they are handling. The FDCPA applies specifically to consumer debts, which include obligations for personal, family, or household purposes. However, it’s important to note that not every entity involved in debt collection is subject to these rules.
Before diving into the purchase or sale of a debt portfolio, it's crucial to perform thorough due diligence to protect yourself from unnecessary risks and ensure compliance with legal standards. Start by verifying the accuracy and legality of the debt data. This includes checking that all documentation is in order and aligns with federal regulations such as the Fair Debt Collection Practices Act (FDCPA).
Take time to review the portfolio’s history. Look for any past violations or complaints that could signal potential problems. Assess the seller's compliance systems to ensure they meet regulatory requirements, and confirm that proper data security measures are in place to safeguard sensitive information.
Another key step is understanding the structure of the debt. Pay close attention to factors like the type of debt, its age, and the payment history. These details will help you make an informed decision and avoid surprises down the line.
To keep track of an agency's compliance, it's crucial to carry out regular reviews of how well they follow federal regulations, including their internal controls and policies. The Consumer Financial Protection Bureau (CFPB) plays a key role here by offering guidance and conducting supervisory activities such as examinations and enforcement actions. Staying on top of compliance trends and potential issues can be achieved by reviewing CFPB reports and actively participating in audits.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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