Bad Debt Becomes Business
Ankur Singla@ankursingla
+4.4%
since Oct 8
The idea
I think missed payments on auto loans, personal loans and mortgages keep rising, and the businesses built around that stress keep growing. The core is the three listed debt buyers at roughly 48% combined, with credit bureaus around 23%, mortgage servicers near 14%, and a repossessed car auction house at 5%, plus 10% cash to add on sharp swings. No single name dominates, this is meant to be held for years, and a sudden spike in layoffs would make me rethink it since collectors need borrowers who are behind but still working.
What it owns
- Companies that buy unpaid debt cheaply and collect on it benefit when more borrowers miss payments, expanding the pool of accounts available to purchase. · Encore Capital GroupBuys charged-off consumer debt and collects on it, making it a direct play on rising delinquencies and the growth in available bad debt., PRA GroupPurchases charged-off loans from banks and lenders globally and collects on them, capturing value as more borrowers default., Jefferson CapitalAcquires defaulted personal and auto loans from banks and fintech lenders, focusing on loan types where delinquencies are rising.48%
- Lenders and collectors pay for credit data and scores to identify borrowers in trouble and decide which accounts to pursue when delinquencies rise. · TransUnionProvides credit data and analytics that debt collectors use to locate borrowers and assess collection potential as delinquencies increase., Fair IsaacIts credit score is the standard used by lenders to assess risk, and rising delinquencies make accurate scoring more valuable to the lending industry., EquifaxOne of the three major credit bureaus whose data lenders and collectors rely on to make decisions and track borrowers in default.23%
- Mortgage servicers earn fees for managing loans and working with homeowners who fall behind, generating revenue as delinquencies increase. · Onity GroupServices mortgages including troubled loans, earning fees for managing borrowers who fall behind on payments., Rithm CapitalCollects servicing fees on a large mortgage portfolio including loans that become delinquent, earning revenue as late payments rise.14%
- Auction platforms for repossessed and wrecked vehicles see higher volume when more car loans default and borrowers lose their cars. · RB GlobalOperates auctions for repossessed and damaged vehicles, seeing higher transaction volume as more car loans default and vehicles enter inventory.5%
- Cash10%