"The ongoing effects of the pandemic caused a greater number of consumers to reassess their financial circumstances. Many consumers chose to improve their financial standing by either reducing or eliminating their credit card debt, as well as resolving their charged-off debt. We continue to be well positioned to support consumers, providing hardship relief when appropriate, and also providing solutions for a large number of consumers who are able to pay off their debts, " said Ashish Masih, President and Chief Executive Officer Encore Capital Group, Inc. (NASDAQ:ECPG) on Encore's Q1 2022 Earnings Conference Call
"I believe it's helpful to understand the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts, which are an expected outcome of the lending business model. Our mission is to help consumers resolve their debts, so they can regain the freedom to focus on what's important to them. And we do that by engaging consumers in honest, empathetic, and respectful conversations," Mr. Masih emphasized.
"Consumers continue to perform kind of pretty well. I would attribute it to two things, right, consumer strength is continuing, although probably not at the level as last year, but also our operations and our strategies, how we work with them to set up a payment that works, how we deal with them, how easy we make it for them to interact with us, whether it's through call center or digital means. So, I think that's a bigger part -- a big part of it as well. That said, consumer strength continues, even though they are borrowing more, they are spending a lot more," Mr. Masih stated.
"One would imagine with inflation and other things that's starting to happen, but we haven't seen anything in the collections yet. Perhaps that's driving them to borrow more from cards, which we are seeing, which will be a positive thing for supply, a positive driver for supply, as you said. But nothing that we can discern at this point in terms of consumer behavior," Mr. Masih explained.
Looking forward, banks are reporting that the lending continues to grow.
Jonathan C. Clark, EVP and Chief Financial Officer introduced a new metric, cash efficiency margin, "to enhance visibility into our operating expense management. Cash efficiency margin replaces cost to collect as a more comprehensive measure that includes all Encore operating expenses. It uses cash receipts, which is the sum of collections and servicing revenues. Cash efficiency margin is simply the ratio of cash receipts minus operating expenses divided by cash receipts. We believe our cash efficiency margin is a simpler and more useful measure of efficiency. In addition, the components of the calculations are readily available in our disclosures with no adjustments required," he explained. To read more, click here.