Spot on SP007 – I found as much as I needed to know about the USA regulatory setting by reading what CCP itself had reported in its financial reports, augmented by the more detailed comments found in Encore Capital's 2013 annual report.
I noticed that Tomhagen signed himself off as “Michael” in an earlier post. If he is Michael Wu who puts out Investor Wag, then he is well worth heeding, especially on the arithmetic of CCP's profitability, its amortisation of PDL's, and how CCP compares with the likes of CLH in this regard. See http://investorwag.com/ for a good 2014 blurb on CCP.
I think that CCP will have to confine itself to a specialised slither of the USA market – a slither where CCP can assume a dominant position by understanding it better than the more-generalised debt collectors do. In the next few years while feeling its way forward, CCP's USA operation must at least break even, and not distract managerial focus from the main game in Australia.
The regulatory information supplied by Encore Capital's 2014 report is too detailed to easily take in, and it presents an extremely negative picture, suggesting that its authors were lawyers closing off every possibility of Encore being sued by investors claiming to have been mislead. If you visit http://investors.encorecapital.com/...Cat01.2_rs=11&secCat01.2_rc=10&control_symbol = you can call up the 2014 annual report put out on 02/26/15 (USA date-writing convention). The general USA picture is described in a more digestible manner in that report – to wit:
Portfolio Pricing, Supply and Demand
United States Markets
Prices for portfolios offered for sale directly from credit issuers continued to remain elevated during 2014, especially for fresh portfolios. Fresh portfolios are portfolios that are generally transacted within six months of the consumer’s account being charged-off by the financial institution. We believe this elevated pricing is due to a reduction in the supply of charged-off accounts and continued demand in the marketplace. We believe that the reduction in supply is partially due to shifts in underwriting standards by financial institutions, which have resulted in lower volumes of charged-off accounts. We believe that this reduction in supply is also the result of certain financial institutions temporarily halting their sales of charged-off accounts. Although we have seen moderation in certain instances, we expect pricing will remain at elevated levels for some period of time.
We believe that smaller competitors continue to face difficulties in the portfolio purchasing market because of the high cost to operate due to regulatory pressure and because issuers are being more selective with buyers in the marketplace, resulting in consolidation within the portfolio purchasing and recovery industry. We believe this favors larger participants in this market, such as Encore, because the larger market participants are better able to adapt to these pressures. Furthermore, as smaller competitors limit their participation in or exit the market, it may provide additional opportunities for us to purchase portfolios from competitors or to acquire competitors directly.
CCP Price at posting:
$11.80 Sentiment: Hold Disclosure: Held
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