There does not seem to be a lot of cause for concern about the economy heading into a recession and that leading to consumers becoming unable to make payments on their unpaid debts, according to the Chief Executive of Encore Capital Group, who shared his feelings last week during a conference call with analysts to discuss the company’s second quarter financial performance.
Encore, which operated Midland Credit Management here in the United States, reported net income of $60 million during the second quarter of 2022, compared with $96.5 million during the same period last year. Revenues at the company were $357 million, compared with $427 million last year.
During the call, Ashish Masih, the CEO of Encore, discussed that things were pretty much back to normal following a period of elevated collection rates during the COVID-19 pandemic. “During the years of pandemic, 2020 and 2021, consumers had excess savings and cash, and they paid down their card balances and debts at very — at much higher rates,” Masih said. “However, now, as we stand today in middle of 2022, we see consumer behavior normalizing.”
But even with talk about an economy heading into a recession and inflation forcing consumers to cut back in order to be able to afford the necessities like food, gas, and shelter, Masih was not that worried about a potential decline in collection rates.
Talking about the current state of the economy compared to the Great Recession back in 2008 and 2009, Masih said, “the economy feels a bit different. In a normal recession, the unemployment rate will be much higher. Right now it’s a very low unemployment rate. People can get jobs even if they lose it, given they got into financial difficulty.”
Admitting that delinquency and default rates on rising on credit cards, Masih said that banks have a growing inventory of defaulted debt supply to get rid of, and Encore stands ready to purchase as much of it as it can.
Masih said that Encore has “not seen any impact on collections” as a result of inflation, but added that it might be difficult to discern that from the normalization of collections he referenced.