Between 1995 and 2004, the industry grew from purchasing $12 billion worth of consumer debt to $77.2 billion, according to the Nilson Report, a newsletter that monitors the credit industry. The report said that last year debt buyers paid an average of 5.4 cents for every dollar of unpaid debt.

For some firms, returns can run as high as five times the amount they paid for the debt, according to the report by Bethesda-based Kaulkin Ginsberg.

There are five publicly traded debt buyers, including Portfolio Recovery Associates, a nine-year-old Norfolk firm that went public in November 2002. Since its inception, the company — whose motto is "giving debt collection a good name" — has bought more than 6.2 million customer accounts with a face value of $11.1 billion for $265.8 million, or 2.39 percent. To date, it has collected debts at a rate of 2.5 to 3 times the purchase price, enabling the firm's revenue to grow from $6.8 million in 1998 to $113.4 million in 2004. In that same time period, profits increased to $27.5 million from $402,000.

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"If you run it right, it can be a good business," said Portfolio Recovery's chairman, Steven Fredrickson, who added that collectors are a vital part of America's credit-driven economy. "Without collectors, you couldn't have much of a lending environment. There has to be people like us to help enforce original contracts made" in which consumers promise to pay their debts.

Fredrickson said the company runs a six-week training program aimed at avoiding consumer complaints: "We think compliance is a big deal. . . . Nobody loves a debt collector, so you really need to mind your p's and q's."

Manny Newburger, a Texas attorney who represents many collection firms, estimates that the average collector makes between 40,000 and 50,000 calls a year. Multiply that by the 100,000 collectors that ACA International, the trade association for debt collectors, says are in the business and that comes to 4 billion phone calls a year. By comparison, the 58,687 complaints filed at the FTC are quite small, Newburger said.

Seeking life in ‘zombie debt’
The rise of the debt-buying industry has also led to an increase in complaints about attempts to collect what plaintiff attorneys often call "zombie debt," those unpaid bills that are so old the statute of limitations in which a creditor can sue to recover the debt has expired.

It's not illegal to try to collect this debt — and collection industry officials say there are a lot of consumers who want to pay, even if they are no longer legally obligated to. However, federal rules make it illegal to sue or even threaten to sue to collect it.

That's one of the chief reasons the Federal Trade Commission sued CAMCO. In its court filing, the agency, which had received more than 2,000 consumer complaints about CAMCO, called the Rockford, Ill., firm "a debt collection company gone wild."

It alleged that CAMCO harassed thousands of consumers to pay old, unenforceable debts or even debts they didn't owe. CAMCO sometimes tried to find people with the same name in the same geographic area and tried to collect the debt from them, the agency alleged. Even if the consumer was not the actual debtor, CAMCO threatened jail, seizure of property or garnishment of wages unless they paid, the FTC said. CAMCO collected millions every year "and perhaps as much as 80 percent of the money" came from consumers who never owed the original debt, the agency said in its complaint.

CAMCO closed last December after the FTC filed suit. Its $1.75 billion portfolio of consumer receivables was auctioned off for $6.8 million — to another debt buyer.

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