debt collectors like nco losing moneyNCO Group, one of the largest debt collectors in the United States, lost $31.7 million in the first quarter of 2011, according to a press release issued August 12, 2011.

Revenues from the company’s debt collection operation fell 7.7 percent while the firm’s debt buying arm took in less money as well.

Why Are Debt Collectors Like NCO Hurting?

I don’t have any particular insight into the debt collector’s business model, but I can tell you it’s no wonder that income is plummeting. After all, we’re no closer to a real-world economic recovery now than we were three years ago. The whole, “let’s bail out the banks,” thing hasn’t done much to spur job growth. Money’s tighter than ever for most folks.

Part of NCO’s business model is to buy up bad debt and try to collect on it, but the collection part is tougher when there’s no employment on the horizon. Using your home as an ATM is no longer an option given tighter mortgage lending standards and falling property values.

The water’s gone out of the pool in terms of consumer credit, so people are digging deeper and deeper into their ditches of debt. With less money to pay debt, they keep using what little they have of it. And when the debt’s done, it’s all done.

You can’t hire a debt collector and expect him or her to get blood from a financial corpse. No matter how good a debt collector is at getting payments, if the cupboard is bare then that’s the end of the story. Ultimately, revenue falls and even the debt collectors scramble for higher ground.

What’s In It For You?

A few things are starting to happen. Debt collectors, pressed to make their quotas and keep their jobs, start cutting corners. Maybe a few sly comments, or even a fib or two about the collections process. Some creative language on collection letters.

Either way, the desperation begins to seep through as the harassment gets kicked up a notch. The hope is that people don’t start talking with lawyers like me about enforcing their rights and suing the debt collectors, at least not in large enough numbers to offset the gains.

On the flip side, this may be a golden moment if you owe money and have a few bucks to fund a decent settlement. Maybe the debt collectors are hungry enough to chew on the scraps you toss their way. Perhaps it becomes a bit easier to make a deal.

What have you been seeing out there lately?