Collection Agencies Have Hold On Wall Street Industry Thrives As Consumer Debt Woes Mount

With consumer debt rising and more people unable to pay their bills, Wall Street has noticed an industry that makes money as the dead beat’s nightmare: collection agencies.

The collection industry raked in some $5.5 billion in fees last year and one company, NCO Group Inc., now trades at about $35 a share after going public in November at $13 a share.

The industry is growing as corporations and government agencies seek specialists in debt collection.

“With the unprecedented number of delinquencies, these companies are booming and they’ve attracted the interest of Wall Street,” said Mike Ginsberg, vice president of M. Kaulkin & Associates, a mergers and acquisitions consulting firm which specializes in collection agencies.

Kaulkin conducted a study on the industry and found it grew 11 percent last year to $5.5 billion, compared with $4.9 billion in 1995, Ginsberg said.

Rising consumer debt, which increased 50 percent from 1990 to 1996, “is fueling the growth of this industry,” Ginsberg said.

Growth has also followed the decision by big telecommunications companies such as AT&T Corp. to turn its billing operations over to specialists. AT&T offers dozens of different services with complicated bills and it’s easier for specialists to collect the bills.

Consolidation in the banking industry has also fueled growth, as recent deregulation has allowed banks such as Chase Manhattan Corp. and First Union Corp. to swallow up smaller banks.

“As banks continue to get larger, they’re going to rely on (collection) agencies to grow with them,” Ginsberg said.

Though collection agencies may be becoming big business, they can’t afford to lose the common touch. “It’s a business that still relies on persuasiveness,” Ginsberg said.