Have You Ever Wondered Who Actually Owns Unpaid Debts?

When a debt goes unpaid for long enough, the original lender often sells it to a third party. But who exactly buys these debts, and how do they operate? The debt buying industry is a major sector, with companies acquiring billions in defaulted accounts every year. Some firms dominate the market, shaping how debt is collected and managed.

In this post, we’ll explore the largest debt buyers, their role in the financial system, and the impact of their operations.

Understanding the Debt Buying Industry

What Is a Debt Buyer?

A debt buyer is a company that purchases overdue or written-off debts from banks, credit card issuers, and other lenders. These debts are often acquired for a fraction of their original value. Once they own the debt, these companies either collect it themselves, hire debt collection agencies, or resell portions of their portfolio.

Debt buyers fall into three categories:

• Active buyers – collect the debts directly.
• Passive buyers – purchase debts as investments but rely on third-party collection agencies for collection activity.
• Resellers – acquire large portfolios and break them down for resale.

The Growth of Debt Buying

The modern debt buying industry expanded rapidly between 1999 and 2009. By 2008, a handful of firms controlled the vast majority of purchased credit card debt. Today, the industry is more concentrated than ever, with a few major players dominating the sector.

Debt buying is a global business, with companies operating in markets across the US, UK, and Europe. These firms help creditors recover money from accounts that would otherwise be written off as bad debts.

Who Are the Biggest Debt Buyers?

1. Encore Capital Group

Encore Capital Group is the largest debt buyer in the United States, managing over $200 billion in defaulted accounts. The company specialises in purchasing consumer debts, primarily from banks and credit card issuers. Through its subsidiary, Midland Credit Management, Encore acquires and collects debts from millions of individuals.

2. Portfolio Recovery Associates (PRA Group)

Portfolio Recovery Associates, commonly known as PRA Group, is another leading debt purchaser, focusing on delinquent credit card, utility, and telecom debts. With operations across the US and Europe, PRA Group is a publicly traded company that invests heavily in defaulted accounts, seeking to recover unpaid balances through legal and collection efforts.

3. Lowell Group (UK and Europe)

Lowell Group is a major player in the UK and European debt purchase markets, specialising in consumer and corporate debts. The company has grown significantly in recent years, acquiring multiple portfolios from major banks and financial institutions.

4. Cabot Credit Management

Cabot Credit Management is one of the largest debt purchasers in the UK, acquiring and collecting debts across various sectors, including financial services, retail, and utilities. The company operates under strict regulations and is known for using data-driven collection strategies.

5. Intrum

Operating across Europe, Intrum is one of the continent’s largest debt collection agencies. The company purchases non-performing loans from banks and financial institutions, managing a vast portfolio of overdue accounts.

6. doValue

Based in Italy and Southern Europe, doValue is a key debt purchaser in regions with high levels of non-performing loans. The company has played a significant role in managing distressed debts following economic downturns.

The Role of Debt Buyers in the Economy

Debt buyers play a vital role in the financial system, helping creditors recover losses while enabling continued lending. By purchasing and managing overdue accounts, they contribute to credit availability for consumers and businesses.

However, their practices have faced scrutiny, particularly regarding collection methods and legal compliance.

Controversies in Debt Buying

Mass Lawsuits and Collection Practices

Some debt buyers have faced criticism for their aggressive collection tactics. Between 2009 and 2014, firms filed mass lawsuits against consumers, often using automated systems with little oversight. In some cases, lawsuits were initiated without proper documentation, leading to legal challenges.

Student Loan Issues

Student loan debt has been a major area of debt purchasing, with firms like Navient managing collections for private and federal loans. In 2015, Navient was found guilty of overcharging military personnel on their student loans, resulting in a $60 million compensation order.

Legal Rulings on Time-Barred Debt

A 2017 Supreme Court decision allowed debt buyers to file claims on time-barred debts in bankruptcy cases. This raised concerns about fairness and the potential for misleading collection efforts.

Debt Buying Regulations and Compliance

Consumer Protection Laws

Debt collection is regulated under various consumer protection laws, designed to prevent unethical practices.

United States:

• The Fair Debt Collection Practices Act (FDCPA) restricts unfair, deceptive, or abusive debt collection practices.
• State-level laws impose additional requirements, such as licensing for debt buyers.

United Kingdom:

• The Financial Conduct Authority (FCA) oversees debt collection procedures.
• UK debt buyers must adhere to strict guidelines on transparency, fair treatment, and dispute resolution.

Europe:

• Countries like Italy and Spain have introduced regulations requiring greater accountability from debt buyers.
• Debt collection firms must follow industry best practices to maintain credibility.

The Changing Landscape of Debt Buying in Europe

Fewer Non-Performing Loans

The European debt market has seen a decline in bad loans, reducing the availability of distressed debt for sale. Banks have strengthened their balance sheets, leading to fewer non-performing loans (NPLs) being sold.

In Italy, NPL transactions dropped to €31 billion in 2023, just one-third of the 2018 peak. This has affected major firms like Intrum and doValue, whose share prices have hit record lows.

Rising Costs and Lower Returns

With higher borrowing costs, acquiring delinquent debt has become less attractive. Some firms have even started selling off previously acquired debt portfolios. For instance, Intrum sold a €33 billion loan portfolio to Cerberus in 2024, using the proceeds to reduce its own debt.

The Future of Debt Buying

Increased Regulation and Compliance

Debt buyers will face greater scrutiny as consumer protection laws tighten. The industry is moving towards:

• Stronger compliance measures to ensure ethical collection of debts.
• Technology-driven debt recovery, using AI and analytics to improve collection efficiency.
• Shifting focus to different types of debt, such as utilities and council tax debts.

Market Opportunities

Despite recent challenges, debt buying remains a profitable sector. As economic conditions fluctuate, new opportunities may arise for firms to acquire and manage distressed debts. However, the industry must balance responsible debt recovery with legal and reputational risks.

Final Thoughts

The debt buying industry plays a significant role in the financial ecosystem, with major firms controlling vast portfolios of overdue accounts. While debt buyers help recover funds and maintain credit availability, their practices must remain fair and transparent to protect consumers.

As regulations evolve and economic conditions shift, the industry will continue adapting to new challenges. Whether through enhanced compliance, better technology, or revised collection strategies, debt buyers will remain key players in managing overdue debts worldwide.