Portfolio Recovery Associates, Inc. (PRAA) is a full-service provider of outsourced receivables management. Incorporated in 1996, PRAA went public in 2002, and has become a major player in the outsourced accounts receivable collection market. PRAA purchases, manages, and collects defaulted consumer receivables from credit originators, such as banks, credit unions, auto finance companies, retail merchants, and other service providers. The defaulted consumer receivables it collects are either purchased from a credit originator (owned receivables) or are collected on behalf of clients on a commission (contingency) basis. The company provides a broad range of collection services, including revenue administration for government entities through its RDS business, collateral-location services for credit originators via IGS Nevada, and fee-based collections through Anchor Receivables Management. PRAA services receivables on behalf of clients on either a commission or transaction fee basis.
A majority of revenue (87% in 2006 and 91% in 2005) is earned on the recovery of purchased receivables. PRAA employs a large number of collectors (more than 900), focused on recovering these receivables. When this is not effective, its legal department oversees a number of independent law firms, working on a contingency basis, to file lawsuits to recover the debt. PRAA employs a disciplined pricing strategy when bidding for charged-off portfolios, aiming for a reasonable internal rate of return (IRR) regardless of the type of paper being purchased.
Acquisitions have also played a role in PRAA's growth. PRAA acquired IGS Nevada (a privately held company specializing in asset-location services, known as skip-tracing, to auto lenders) in October 2004 and Alatax (a privately held company specializing in government collections) in July 2005. As of September 30, 2007, PRAA had finance receivables of $326.5 million, common equity of $223.2 million, cash of $14.5 million, and total debt of $100.1 million.