“Why Is PRA Group (PRAA) Down 10.9% Since Last Earnings Report?”

– – Quote from Zacks Research on Yahoo Finance today.

Portfolio Recovery Associates, a wholly owned subsidiary of PRA Group, Inc. (symbol PRAA), spent at least $8,000 in costs and hired two premiere law firms to defend against my allegations of wrongdoing that PRA said would be worth no more than $5,000 if it went to a jury. The CFPB made similar allegations against PRA in March 2023, that PRA did to millions of people what it did to me, and PRA settled for about $24 million.

These defense costs are a drop in the bucket compared to the money the debt buyer and collector spends on legal collections. According to SEC filings, the amount spent on lawsuits against alleged debtors approaches $100 million per year. According to the deposition of a PRA representative, the company wins 90% of its cases by default.

The litigious nature of PRA Group companies is one issue that may affect investors’ perception of PRAA stock value.

Another issue, that is not immediately related to this blog is PRA Group’s propensity to borrow.

SEC filings as reported by Zacks show PRA Group has $4.3 Billion in assets and $2.7 Billion in borrowings. Do the total assets reflect the face value of the junk debt PRA purchases for pennies on the dollar?

Court documents in another case involving a different debt buyer show that an industry standard is about an 11% rate of collection on the face value of portfolios.

If you know whether PRA or debt buyers in general report assets as face value or expected revenues, please leave a comment or send a private email to bohemian_books@yahoo.com. Designate the email “background only”, “anonymous” or “for attribution”.

The reason PRA’s borrowing may become pertinent to this blog soon is that a low actual value of assets to borrowing rate is likely to lead to bankruptcy court. In bankruptcy, PRA’s portfolios would be sold to other debt buyers. And the new buyer would continue the cycle of churning junk debt by collecting from individuals who don’t have law degrees or teams of attorneys to protect them from abusive debt collection practices.