Debt collector appears on Forturne Small Business 100 for the first time

In a potential symptom of America's personal finance troubles, a debt collection company made the annual Fortune ranking of the 100 fastest growing small companies for the first time this year. Portfolio Recovery Services joined the list at #69. This year's FSB 100 is predominantly made up of energy and defense companies.

Debt collection businesses operate by purchasing delinquent or charged-off debts from creditors and businesses for pennies on the dollar. Collectors then attempt to receive payment for the debt by finding the borrower, calling, writing letters and placing credit report records.  According to the Nilson Report, Portfolio Recovery Services is the #7 buyer of credit card debt in the US. In 2005, they purchased about $4 billion in direct credit card debts. Here are the other top collection agencies:

• Sherman Financial - Bought about $10 billion in credit card debts in 2005.
• NCO Portfolio Management - Bought about $13 billion in credit cards debts in 2005.
• B-Line - Bought about $8 billion in credit card debts in 2005.
• Unifund - Bought about $6 billion in credit card debts in 2005.
• Encore Capital - Bought about $5 billion in credit card debts in 2005.

These top five collection agencies purchased about 55% of the credit card debt sold by direct card issuers last year. In 2005, almost $90 billion in credit card debt was purchased by collection agencies. This is a dramatic rise from about $40 billion in 2000 and $11 billion in 1995. This growth is due both to the increase in consumer debt and to aggressive growth of external collection agencies (many credit card issuers used to manage collections in-house).

What do you think the growth of the collection industry means for consumers? Have you had a debt purchased by one of these companies? Share your feedback in the comments section below.

*Note - $90 billion in bad credit card debt equals over $300 for every man, woman and child in the United States. For Pete's sake, that's a lot of credit card debt in collections each year!