PRA Group

PRA Group, Inc.
Formerly called
  • Portfolio Recovery Associates, LLC 1996–
  • Portfolio Recovery Associates, Inc. –2014
Traded as NASDAQ: PRAA [1]
Founded March 1996 (1996-03) in Virginia Beach, Virginia
Headquarters Norfolk, Virginia, United States
Key people
 Steven Fredrickson (CEO; co-founder), Kevin Stevenson (co-founder)
Owners Angelo, Gordon & Co. (72%, 2002)
Number of employees
 3500 (2014)
Subsidiaries
  • Anchor Receivables Management
  • RDS
Website Official website

PRA Group, Inc. or PRA, is an American debt buyer based in Norfolk, Virginia. PRA was listed in the Federal Trade Commission's " Report on the Debt Buying Industry (dated January, 2013) as one of the largest debt buyers in the US. PRA was among the top five debt buyers in the FTC Report. PRA files with the Securities and Exchange Commission (SEC), and in PRA's 2015 Annual Report to the SEC, PRA stated that it had total revenues of $942 million for 2015, and $880 million for 2014. In the SEC filings, PRA's revenues for 2013 were $735 million.

Hundreds of companies are debt buyers, but PRA Group is among the few that are publicly traded corporations.[2] In 2014, the company was referred to as a "major player in the debt-collection industry".[3] PRA was also listed as one of the largest debt buyer in Human Rights Watch's report " Rubber Stamp Justice", dated February, 2016; which questioned the collection practices of debt buyers.

History

PRA Group began as Portfolio Recovery Associates, LLC in March 1996,[4] starting with eight people in Virginia Beach, Virginia and start-up capital from Angelo, Gordon & Co..[5][6] By 2002, Angelo, Gordon & Co. held a 72% stake in the firm.[7] The company's debt purchasing activities began a few months after the company was formed, in May 1996.[6]

In 2000, the company reported that it had purchased US$1,000,000,000 of debt during the year, ranking (tying) in 10th place among top debt buyers.[8] By 2010, the company was noted as "the sixth-largest debt buyer in the U.S."[9]

PRA Group's initial public offering was in 2002 and was backed by William Blair & Company and Piper Jaffray.[3][7][10] The company is listed on the NASDAQ exchange and traded under the symbol PRAA.[11]

PRA's SEC filings for 2015 state that PRA has large international operations, due to its acquisitions of Aktiv Kapital, a Norway-based debt buyer and lender in Europe and Canada.

Company name

The name of the company when formed was Portfolio Recovery Associates, LLC.[4] On an unknown date, the company's name changed to Portfolio Recovery Associates, Inc. Then in October 2014, the name changed to PRA Group, Inc.[12] The PRA Group name and the design of its corporate logo were trademarked in 2014.[13]

Litigation

In 2014, the Attorney General of New York obtained a settlement against PRA Group "for repeatedly bringing improper debt collection actions against New York consumers."[14] The case involved "uncontested default judgements" levied against defendants who failed to respond to suits brought by PRA against them.[14] The settlement required abandonment of claims against debtors (amounting to millions of dollars), changes in collection practices, and a civil fine of US$300,000.[14] In September, 2015, the Consumer Financial Protection Bureau -the regulator of the debt buying industry, made public a Consent Order against PRA, which was detailed in PRA's 2015 Annual Report to the SEC. As part of the Consent Order, PRA received a substantial fine and penalty, and must make restitution to some of its customer due to a variety of questionable debt collection practices.

Adverse Regulatory Actions

In September 2015, The Consumer Financial Protection Bureau (CFPB) ordered Portfolio Recovery to pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts. Portfolio is also barred from reselling debts to third parties in the future.

The CFPB found that Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems, stated incorrect balances, interest rates, and payment due dates in attempting to collect debts from consumers. Failed to provide documention on debts. Filed court cases they knew they had no documentation for in hopes a consumer would default on their court date giving portfolio a default judgement. Portfolio filed cases on debts that they knew were outside the statute of limitations. Threatened that they were going to sue when an attorney had not even reviewed the case and made misrepresentations among other things.[15]

PRA's SEC filings for the calendar year 2015, page 92 and elsewhere, detail that the Internal Revenue Service conducted an audit of PRA of tax years 2005 to 2012. The IRS is currently in litigation with PRA, and there is a tax claim of at least $197 million against PRA that is now pending in U.S Tax Court. This matter is now set for trial in September, 2016.

Business model

PRA's business model is based on purchasing debt accounts, typically for "pennies on the dollar" of the amount owed,[6][16] from businesses who want to end collection efforts, then pursue collection over a period of years amounting to two to three times the original purchase price.[7][17]

The business of the company runs counter to that of the rest of the economy; as their CEO Steven Fredrickson put it in 2001:[18]

When times are, unfortunately, tough for people, times are good for the collection business.

The company applies predictive computational models when considering acquisition of a debt portfolio to help assess the potential return on investment, as well as on its existing portfolio to conduct ongoing review of its collection strategy and violates multiple FDCPA Laws as they see fit.[19]

One element of PRA's business is establishing payment plans for debtors which support payment in full of debt, payment in full being a key goal of each case purchased by the company.[6] Such payment plans may be both flexible and long term, extending for years.[6]

Another element of the business is to accommodate both the acquisition of debt which a company no longer wishes to manage, as well as managing collection of debt which a company wants to retain.[6] Around 2001, the typical retention period for debt by major finance firms was 180 days, a period of time during which they would "work bad debt accounts internally".[6] From a personnel and tactics point of view, working as a collections service provider is very different from pursuing collection on debt directly owned by the company, which drives the separation of the two activities.[6]

Corporate governance

When the company was established in 1996,[4] governance was vested as follows:[5]

All four of these founders had worked together previously at a Virginia Beach firm called "Household Recovery Service".[5]

As of 2007, the company's chief executive officer was Steven Fredickson.[17]

Board of directors

The chairman of the board of directors is Steve Fredrickson, who also holds the CEO and President roles.[20] As of 2014, Jim Nussle was among members of the company's board of directors.[21]

Operations

The company's headquarters are located in Norfolk, Virginia.[17]

In 2001, the main facility of the company was in the Riverside Commerce Center in Virginia Beach, Virginia, which employed 380 "collectors/supervisors".[6]

In 2000, the company established a call center in Hutchinson, Kansas.[22] By late 2001, this facility employed 75.[6]

The overall employment figure for 2002 was 590, across all sites and divisions.[7]

Also by 2002, about 50% of the company's debt portfolio (the spectrum of debts purchased) had come from major credit card issuers Visa, MasterCard and Discover.[7] The overall portfolio had a "face value" (the amount owed) of US$4,170,000,000 across 1.5 million individual accounts.[7]

As shown in its 2015 SEC filings, for the year ending December 31, 2015, PRA had revenues of $942 million, and $880 million in 2014.

As shown in the SEC filings by PRA for the calendar year 2015, PRA has substantial international operations from its acquiring Aktiv Kapital of Norway.

Subsidiaries

Among PRA Group's subsidiaries is "RDS" or "Revenue Discovery Systems", a financial services company based in Birmingham, Alabama focused on (presumably American) government clients.[23] The subsidiary "Anchor Receivables Management" was formed as a collection agency, working on debt for other companies without purchasing it outright; this company had a headcount of 45 as of 2001.[6]

Controlling interests

In April 2010, PRA secured a controlling interest in the company Claims Compensation Bureau, which specialized in "recovering funds and processing payments owed under class-action settlements".[9]

Operations personnel

As of 1998, the director of human resources was H. Bruce Palmer.[24]

As of 2001, Craig Grube held the role of senior vice president in charge of buying distressed debt for the company.[6]

As of 2010, Patrick Lipsky held the role of vice president of Analytics for the company.[19]

As of 2012, Rick Goulart took on the role of vice president for corporate communications, a role charged with management of both internal and external communications, including public relations.[25]

References

  1. ↑ http://files.shareholder.com/downloads/PRAA/715398218x0x744826/259AE99A-46DA-4623-BD1D-6909EFA24470/PRA_2013AR_29315_2_.pdf annual report
  2. ↑ Cackley, Alicia Puente, ed. (Sep 2009). Credit Cards: Fair Debt Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and Use of Technology (Report). Government Accountability Office. p. 7. ISBN 9781437924572. GAO-09-748.—via Google Books
  3. 1 2 Gill, Stephen; Cutler, A. Claire, eds. (2014). "New constitutionalism disciplinary neoliberalism". New Constitutionalism and World Order. Cambridge University Press. p. 243. ISBN 9781107053694 – via Google Books.
  4. 1 2 3 "Timeline". PRA Group. 1996. Retrieved 2 Feb 2015.
  5. 1 2 3 Raisor, Juanita (20 May 1996). "Monmouth Buys Raytheon Property on Bayside Road. (Business Weekly)". The Virginia-Pilot – via Highbeam Research.
  6. 1 2 3 4 5 6 7 8 9 10 11 12 Snider, Jody (12 Nov 2001). "Debt Recovery Proves Profitable for Virginia Beach, Va., Company". Knight Ridder/Tribune Business News – via Highbeam Research.
  7. 1 2 3 4 5 6 Shean, Tom (7 Sep 2002). "Norfolk, Va., Bill Collector Hopes to Raise $50 Million from Investors.". Knight Ridder/Tribune Business News – via Highbeam Research.
  8. ↑ Staff (1 Jan 2002). "Top Debt Buyers". Collections & Credit Risk. SourceMedia – via Highbeam Research. Face value totals based on self-reported numbers for Collections Source One.
  9. 1 2 Staff (7 May 2010). "Portfolio Recovery Associates Beats Wall Street's Expectations. (News)". Cardline. SourceMedia – via Highbeam Research.
  10. ↑ Damodaran, Aswath (2004). Investment Fables: Exposing the Myths of "can't Miss" Investment Strategies. Upper Saddle River, New Jersey: FT Press. p. 289. ISBN 9780131403123.—via Google Books
  11. ↑ "PRAA Stock Quote". NASDAQ. Retrieved 2 Feb 2015.
  12. ↑ PRA Group, Inc. (10 Nov 2014). 10Q (Report). U.S. Securities and Exchange Commission. p. 31. SEC Accession No. 0001185348-14-000047.
  13. ↑ "Uspto Issues Trademark: Pra Group". US Fed News Service. 14 Nov 2014 – via Highbeam Research.
  14. 1 2 3 "A.G. Schneiderman Announces Settlements with Two Major Consumer Debt Buyers for Unlawful Debt Collection Actions for Years, Portfolio Recovery Associates and Sherman Financial Group Obtained Judgments against New York Consumers Based upon Untimely Claims Schneiderman: Debt Collectors Must Abide by Same Rules as the Rest of Us" (Press release). New York Attorney General. 8 May 2014 – via Highbeam Research.
  15. ↑ http://blog.credit.com/2015/09/2-of-americas-largest-debt-collectors-will-refund-60-million-to-consumers-125132/?utm_source=newsletter&utm_medium=email&utm_campaign=9_11_2015_CRC&spMailingID=23500815&spUserID=MTAxNjY0NzIzODc1S0&spJobID=641412897&spReportId=NjQxNDEyODk3S0 2 of America’s Largest Debt Collectors Will Refund $60 Million to Consumers
  16. ↑ Vilailath, Boun. Debt Relief: Protection from Collectors and Unscrupulous Service Providers (Report). Global Debt Systems. p. 39.—via Google Books
  17. 1 2 3 Landis, David (Nov 2007). "When the news is bad, this company WINS". Investing. Kiplinger's Personal Finance: 62 – via Google Books.
  18. ↑ Davis, Michael (30 Oct 2001). "Call Center Workers are Still in Demand Despite Layoffs, Sector is Still Hiring. (Business)". The Virginia-Pilot – via Highbeam Research.
  19. 1 2 Staff (24 Apr 2010). "Portfolio Recovery Associates Selects SAS[R] for Proprietary Modeling". Marketing Weekly News. NewsRx – via Highbeam Research.
  20. 1 2 "Portfolio Recovery Associates Chairman to Give Landmark Executive-in-Residence Address" (Press release). Old Dominion University. 12 Oct 2011 – via Highbeam Research.
  21. ↑ "Nussle's Experience Lies in Advocacy, Fiscal, Legislative Arenas" (Press release). Credit Union National Association. 10 Sep 2014 – via Highbeam Research.
  22. ↑ Shean, Tom (25 Aug 2000). "Businesses in Norfolk, Va.-Area Wait for Verizon Strike to End". Knight Ridder/Tribune Business News – via Highbeam Research.
  23. ↑ National JobBank 2010. Adams Media. 2009. p. 6. ISBN 9781598698510.—via Google Books
  24. ↑ Staff (28 Feb 1998). "Local Scene. (Business)". The Virginia-Pilot – via Highbeam Research.
  25. ↑ Staff (16 Apr 2012). "Portfolio Recovery Associates to Expand Public Communications". Managed Care Weekly Digest. NewsRx – via Highbeam Research.
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