A slowing economy will likely lead to rising defaults in America’s growing mountain of consumer debt, but bad news to some is like music to others. Portfolio Recovery Associates (Nasdaq: PRAA) and Asset Acceptance Capital Corp. (Nasdaq: AACC) are two debt collection specialists profiting from the ever-expanding opportunities of an unpaid credit card here and an unpaid auto loan there.

Both companies capitalize on portfolio purchase opportunities that result from the growing pool of consumer credit outstanding and an increasing number of credit card and debt charge-offs.

Consumer outstanding credit has grown more than 6% annually in the last 20 years and presently exceeds $2.4 trillion. Credit card charge-offs have been growing at a 12.5% annual rate and will reach $88 billion by 2010; the face value of all debt purchases in the United States has expanded 12% annually and will likely exceed $95 billion in 2010. The $100 billion credit card debt market, the $3 billion bankruptcy market, the $5 billion telecom credit default market and the $2 billion auto loan default market are all expected to double over the next three years.

Portfolio Recovery Associates and Assset Acceptance Capital took asset write-downs in 2007 that cut their share prices nearly in half, creating price appreciation potential for new investors. 

Portfolio Recovery Associates is the nation’s leading full-service provider of outsourced receivables management. It purchases, collects and manages portfolios of defaulting consumer receivables from banks, credit unions, consumer and auto finance companies and retail merchants.

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