10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     .

COMMISSION FILE NUMBER: 000-26489

ENCORE CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	48-1090909
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
3111 Camino Del Rio North, Suite 1300 San Diego, California	92108
(Address of principal executive offices)	(Zip code)

(877) 445-4581

(Registrant’s telephone number, including area code)

(Not Applicable)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at July 16, 2012
Common Stock, $0.01 par value	24,807,861 shares

ENCORE CAPITAL GROUP, INC.

INDEX TO FORM 10-Q

	Page
PART I—FINANCIAL INFORMATION		1
Item 1—Condensed Consolidated Financial Statements (Unaudited)		1
Condensed Consolidated Statements of Financial Condition		1
Condensed Consolidated Statements of Comprehensive Income		2
Condensed Consolidated Statements of Stockholders’ Equity		3
Condensed Consolidated Statements of Cash Flows		4
Notes to Condensed Consolidated Financial Statements (Unaudited)		5
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3—Quantitative and Qualitative Disclosures About Market Risk		43
Item 4—Controls and Procedures		43
PART II – OTHER INFORMATION		44
Item 1—Legal Proceedings		44
Item 1A—Risk Factors		44
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		44
Item 6—Exhibits		45
SIGNATURES		46

PART I — FINANCIAL INFORMATION

Item 1 — Condensed Consolidated Financial Statements (Unaudited)

ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Financial Condition

(In Thousands, Except Par Value Amounts)

(Unaudited)

	June 30, 2012			December 31, 2011
Assets
Cash and cash equivalents	$	15,014		$	8,047
Accounts receivable, net		1,745			3,265
Investment in receivable portfolios, net		869,859			716,454
Deferred court costs, net		40,170			38,506
Property tax payment agreements receivable, net		139,421			—
Interest receivable		4,115			—
Property and equipment, net		20,161			17,796
Other assets		21,592			11,968
Goodwill		55,318			15,985
Identifiable intangible assets, net		550			462
Total assets	$	1,167,945		$	812,483
Liabilities and stockholders’ equity
Liabilities:
Accounts payable and accrued liabilities	$	41,149		$	29,628
Deferred tax liabilities, net		15,799			15,709
Debt		702,316			388,950
Other liabilities		5,040			6,661
Total liabilities		764,304			440,948
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.01 par value, 50,000 shares authorized, 24,797 shares and 24,520 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively		248			245
Additional paid-in capital		128,615			123,406
Accumulated earnings		277,854			249,852
Accumulated other comprehensive loss		(3,076	)		(1,968	)
Total stockholders’ equity		403,641			371,535
Total liabilities and stockholders’ equity	$	1,167,945		$	812,483

See accompanying notes to condensed consolidated financial statements

1

ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues
Revenue from receivable portfolios, net	$	138,731		$	111,093		$	265,136		$	216,419
Tax lien transfer
Interest income		2,982			—			2,982			—
Interest expense		(650	)		—			(650	)		—
Net interest income		2,332			—			2,332			—
Total revenues		141,063			111,093			267,468			216,419
Operating expenses
Salaries and employee benefits (excluding stock-based compensation expense)		22,651			17,129			42,689			33,796
Stock-based compensation expense		2,539			1,810			4,805			3,575
Cost of legal collections		41,024			40,686			79,659			77,195
Other operating expenses		12,427			8,250			24,025			17,040
Collection agency commissions		4,166			3,596			8,125			7,510
General and administrative expenses		18,582			9,089			32,240			18,767
Depreciation and amortization		1,420			958			2,660			1,862
Total operating expenses		102,809			81,518			194,203			159,745
Income from operations		38,254			29,575			73,265			56,674
Other (expense) income
Interest expense		(6,497	)		(5,369	)		(12,012	)		(10,962	)
Other income		77			35			349			160
Total other expense		(6,420	)		(5,334	)		(11,663	)		(10,802	)
Income from continuing operations before income taxes		31,834			24,241			61,602			45,872
Provision for income taxes		(12,846	)		(9,475	)		(24,506	)		(17,824	)
Income from continuing operations		18,988			14,766			37,096			28,048
(Loss) income from discontinued operations, net of tax		(2,392	)		9			(9,094	)		406
Net income	$	16,596		$	14,775		$	28,002		$	28,454
Weighted average shares outstanding:
Basic		24,919			24,433			24,850			24,384
Diluted		25,825			25,610			25,822			25,594
Basic earnings (loss) per share from:
Continuing operations	$	0.76		$	0.60		$	1.49		$	1.15
Discontinued operations	$	(0.10	)	$	0.00		$	(0.37	)	$	0.02
Net basic earnings per share	$	0.67		$	0.60		$	1.13		$	1.17
Diluted earnings (loss) per share from:
Continuing operations	$	0.74		$	0.58		$	1.44		$	1.09
Discontinued operations	$	(0.10	)	$	0.00		$	(0.37	)	$	0.02
Net diluted earnings per share	$	0.64		$	0.58		$	1.08		$	1.11
Other comprehensive loss:
Unrealized loss on derivative instruments		(2,944	)		(888	)		(1,822	)		(52	)
Income tax benefit related to unrealized gain on derivative instruments		1,154			351			714			23
Other comprehensive loss, net of tax		(1,790	)		(537	)		(1,108	)		(29	)
Comprehensive income	$	14,806		$	14,238		$	26,894		$	28,425

See accompanying notes to condensed consolidated financial statements

2

ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, In Thousands)

	Common Stock				Additional Paid-In			Accumulated		Accumulated Other Comprehensive			Total
	Shares		Par		Capital			Earnings		(Loss) Income			Equity
Balance at December 31, 2011		24,520	$	245	$	123,406		$	249,852	$	(1,968	)	$	371,535
Net income		—		—		—			28,002		—			28,002
Other comprehensive loss:
Unrealized loss on derivative instruments, net of tax		—		—		—			—		(1,108	)		(1,108	)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes		277		3		(1,180	)		—		—			(1,177	)
Stock-based compensation		—		—		4,805			—		—			4,805
Tax benefit related to stock-based compensation		—		—		1,584			—		—			1,584
Balance at June 30, 2012		24,797	$	248	$	128,615		$	277,854	$	(3,076	)	$	403,641

See accompanying notes to condensed consolidated financial statements

3

ENCORE CAPITAL GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, In Thousands)

	Six Months Ended June 30,
	2012			2011
Operating activities:
Net income	$	28,002		$	28,454
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		2,660			1,862
Impairment charge for goodwill and identifiable intangible assets		10,400			—
Amortization of loan costs and premium on property tax payment agreements receivable		1,210			901
Stock-based compensation expense		4,805			3,575
Income tax provision in excess of (less than) income tax payments		89			(162	)
Excess tax benefit from stock-based payment arrangements		(1,689	)		(4,727	)
Loss on sale of discontinued operations		2,416			—
(Reversal) provision for allowances on receivable portfolios, net		(789	)		6,504
Changes in operating assets and liabilities, net of effects of acquisition
Other assets		298			63
Deferred court costs		(1,664	)		(3,910	)
Prepaid income tax and income taxes payable		(6,455	)		24
Accounts payable, accrued liabilities and other liabilities		5,322			(841	)
Net cash provided by operating activities		44,605			31,743
Investing activities:
Cash paid for acquisition, net of cash acquired		(185,990	)		—
Purchases of receivable portfolios		(361,446	)		(184,376	)
Collections applied to investment in receivable portfolios, net		207,205			163,144
Proceeds from put-backs of receivable portfolios		1,625			1,698
Originations of property tax payment agreements receivable		(14,072	)		—
Collections applied to property tax payment agreements receivable, net		7,467			—
Purchases of property and equipment		(2,595	)		(1,461	)
Net cash used in investing activities		(347,806	)		(20,995	)
Financing activities:
Payment of loan costs		(1,619	)		(814	)
Proceeds from senior secured notes		—			25,000
Proceeds from revolving credit facilities		383,399			55,000
Repayment of revolving credit facilities		(70,500	)		(87,000	)
Proceeds from exercise of stock options		2,583			1,248
Taxes paid related to net share settlement of equity awards		(2,177	)		(3,388	)
Excess tax benefit from stock-based payment arrangements		1,689			4,727
Repayment of capital lease obligations		(3,207	)		(1,766	)
Net cash provided by (used in) financing activities		310,168			(6,993	)
Net increase in cash and cash equivalents		6,967			3,755
Cash and cash equivalents, beginning of period		8,047			10,905
Cash and cash equivalents, end of period	$	15,014		$	14,660
Supplemental disclosures of cash flow information:
Cash paid for interest	$	11,075		$	9,718
Cash paid for income taxes		23,108			17,814
Supplemental schedule of non-cash investing and financing activities:
Fixed assets acquired through capital lease		2,779			1,726

See accompanying notes to condensed consolidated financial statements

4

ENCORE CAPITAL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Ownership, Description of Business and Summary of Significant Accounting Policies

Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively, the “Company”), is a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. The Company purchases portfolios of defaulted consumer receivables and manages them by partnering with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies, commercial retailers, auto finance companies, and telecommunication companies, which the Company purchases at deep discounts. Defaulted receivables may also include receivables subject to bankruptcy proceedings, or consumer bankruptcy receivables. In addition, through its newly acquired subsidiary, Propel Financial Services, LLC (“Propel”), the Company assists Texas property owners who are delinquent on their property taxes by paying these taxes on behalf of the property owners in exchange for payment agreements collateralized by tax liens on the property.

Portfolio purchasing and recovery

The Company purchases receivables based on robust, account-level valuation methods and employs a suite of proprietary statistical and behavioral models across the full extent of its operations. These investments allow the Company to value portfolios accurately (and limit the risk of overpaying), avoid buying portfolios that are incompatible with its methods or goals and precisely align the accounts it purchases with its operational channels to maximize future collections. As a result, the Company has been able to realize significant returns from the receivables it acquires. The Company maintains strong relationships with many of the largest credit providers in the United States, and possesses one of the industry’s best collection staff retention rates.

The Company uses insights discovered during its purchasing process to build account collection strategies. The Company’s proprietary consumer-level collectability analysis is the primary determinant of whether an account will be actively serviced post-purchase. The Company continuously refines this analysis to determine the most effective collection strategy to pursue for each account it owns. After the Company’s preliminary analysis, it seeks to collect on only a fraction of the accounts it purchases, through one or more of its collection channels. The channel identification process is analogous to a funneling system where the Company first differentiates those consumers who it believes are not able to pay from those who are able to pay. Consumers who the Company believes are financially incapable of making any payments, facing extenuating circumstances or hardships (such as medical issues), serving in the military, or currently receiving social security as their only source of income are excluded from the next step of its collection process and are designated as inactive. The remaining pool of accounts in the funnel then receives further evaluation. At that point, the Company analyzes and determines a consumer’s perceived willingness to pay. Based on that analysis, the Company will pursue collections through letters and/or phone calls to its consumers. Despite its efforts to reach consumers and work out a settlement option, only a small number of consumers who are contacted choose to engage with the Company. Those who do are often offered deep discounts on their obligations, or are presented with payment plans that are better suited to meet their daily cash flow needs. The majority of contacted consumers, however, ignore both the Company’s calls and letters, and therefore the Company must then make the difficult decision whether or not to pursue collections through legal means.

Tax lien transfer

Propel’s principal activity is originating and servicing property tax lien transfers in the state of Texas by paying real estate taxes on behalf of real property owners in exchange for payment agreements collateralized by tax liens on the property. Propel purchases the property owner’s delinquent tax obligation from the local tax authority at par value and works with the property owner to create an affordable payment plan. Tax lien transfers provide the local taxing authorities with much needed tax revenue and property owners with a longer period of time to satisfy their obligations at a lower interest rate and fee structure than what the local tax authority would charge. Based in San Antonio, Texas, Propel is the largest tax lien transfer company in Texas. Propel offers competitive rates, flexible payment terms and has the ability to fund the transaction with the property owner quickly, thus saving the property owner from incurring additional fees and interest levied by the local tax authority. Propel is subject to regulation by the Office of Consumer Credit Commissioner of the state of Texas.

Financial Statement Preparation

The accompanying interim condensed consolidated financial statements have been prepared by Encore, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

5

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position, results of operations, and cash flows. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. Actual results could materially differ from those estimates.

Basis of Consolidation

Encore is a Delaware holding company whose principal assets are its investments in various wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

On May 8, 2012, the Company completed its acquisition of Propel Financial Services, LLC, BNC Retax, LLC, RioProp Ventures, LLC, and certain related affiliates (collectively, the “Propel Entities”). The condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2012 includes the results of operations of the Propel Entities only since the date of acquisition. For additional acquisition related information relating to the Propel Entities, please refer to the Company’s Current Report on Form 8-K filed with the SEC on July 24, 2012.

Reclassification

Certain reclassifications have been made to the condensed consolidated financial statements to conform to the current year’s presentation.

Note 2: Discontinued Operations

On May 16, 2012, the Company completed the sale of the assets of its bankruptcy servicing subsidiary Ascension Capital Group, Inc. (“Ascension”) to a subsidiary of American InfoSource, L.P. (“AIS”). The Company agreed to fund certain, agreed-upon operating losses in the first year of AIS’ ownership of the Ascension business, not to exceed $4.0 million. If the Ascension business becomes profitable under AIS’ ownership, the Company will be paid an earn-out equal to 30 to 40% of Ascension’s EBITDA for the first five years commencing May 16, 2012. The Company received no proceeds from the sale. Additionally, the Company recognized the entire $4.0 million loss contingency during the three months ended June 30, 2012.

The Company performed an interim goodwill impairment test for Ascension as of March 31, 2012 and concluded that the entire goodwill balance relating to Ascension of $9.9 million was impaired. Additionally, the Company wrote-off the remaining identifiable intangible assets of approximately $0.4 million relating to Ascension.

Ascension’s operations are presented as discontinued operations for the three and six months ended June 30, 2012 and 2011, in the Company’s consolidated statements of comprehensive income. The following table presents the revenue and components of discontinued operations, net of tax (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenue	$	1,892		$	4,725		$	5,704		$	9,693
(Loss) Income from discontinued operations before income taxes	$	(924	)	$	20		$	(11,942	)	$	669
Income tax benefit (expense)		362			(11	)		4,678			(263	)
(Loss) income from discontinued operations		(562	)		9			(7,264	)		406
Loss on sale of discontinued operations, before income taxes		(2,416	)		—			(2,416	)		—
Income tax benefit		586			—			586			—
Loss on sale of discontinued operations		(1,830	)		—			(1,830	)		—
Total (loss) income from discontinued operations	$	(2,392	)	$	9		$	(9,094	)	$	406

6

Note 3: Business Combination

On May 8, 2012, the Company acquired all of the outstanding equity interests of the Propel Entities (the “Propel Acquisition”) for $186.8 million in cash. The Propel Acquisition is being accounted for using the acquisition method of accounting and, accordingly, the tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the date of the acquisition.

The Company has completed an independent valuation study and determined the fair value of the assets acquired and the liabilities assumed from the Propel Entities. Fair value measurements have been applied based on assumptions that market participants would use in the pricing of the respective assets and liabilities. However, the purchase price allocation is still preliminary and is subject to adjustment based on a reconciliation of the actual balance sheet accounts as of the closing date to estimates used at the time of the consummation of the Propel Acquisition. This reconciliation is expected to be completed during the third quarter of 2012. As of the filing date of this Form 10-Q, the Company’s preliminary analysis indicated an additional payable to the seller amounted to approximately $0.7 million, which is reflected below.

The components of the preliminary purchase price allocation for the Propel Entities are as follows (in thousands):

Purchase price:
Cash paid	$	186,814
Estimated purchase price adjustment		725
Total estimated purchase price	$	187,539
Allocation of purchase price:
Cash	$	824
Accounts receivable		1,049
Interest receivable		3,679
Property tax payment agreements receivable		132,978
Fixed assets		461
Other assets		860
Liabilities assumed		(2,153	)
Identifiable intangible assets		570
Goodwill		49,271
Total net assets acquired	$	187,539

The following summary presents unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2012 and 2011 as if the Propel Acquisition had occurred on January 1, 2012 and 2011, respectively. The following unaudited pro forma financial information does not necessarily reflect the actual results that would have occurred had the Company and the Propel Entities been combined during the periods presented, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2012		2011		2012		2011
Consolidated pro forma revenue	$	143,109	$	115,168	$	273,975	$	224,277
Consolidated pro forma income from continuing operations		21,557		15,205		40,708		29,126

Note 4: Earnings per Share

Basic earnings per share is calculated by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and restricted stock units.

7

The components of basic and diluted earnings per share are as follows (in thousands, except earnings per share):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Income from continuing operations	$	18,988		$	14,766	$	37,096			28,048
(Loss) income from discontinued operations, net of tax		(2,392	)		9		(9,094	)		406
Net income available for common stockholders	$	16,596		$	14,775	$	28,002		$	28,454
Weighted average common shares outstanding – basic		24,919			24,433		24,850			24,384
Dilutive effect of stock-based awards		906			1,177		972			1,210
Weighted average common shares outstanding – diluted		25,825			25,610		25,822			25,594
Basic earnings (loss) per share from:
Continuing operations	$	0.76		$	0.60	$	1.49		$	1.15
Discontinued operations	$	(0.10	)	$	0.00	$	(0.37	)	$	0.02
Net basic earnings per share	$	0.67		$	0.60	$	1.13		$	1.17
Diluted earnings (loss) per share from:
Continuing operations	$	0.74		$	0.58	$	1.44		$	1.09
Discontinued operations	$	(0.10	)	$	0.00	$	(0.37	)	$	0.02
Net diluted earnings per share	$	0.64		$	0.58	$	1.08		$	1.11

Employee stock options to purchase approximately 391,900 and 300,400 shares of common stock during the three and six months ended June 30, 2012, respectively, and employee stock options to purchase approximately 209,000 and 125,000 shares of common stock during the three and six months ended June 30, 2011, respectively, were outstanding but not included in the computation of diluted earnings per share because the effect on diluted earnings per share would be anti-dilutive.

Note 5: Fair Value Measurements

The Company accounts for certain assets and liabilities at fair value. The authoritative guidance for fair value measurements defines fair value as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e. the “exit price”). The guidance utilizes a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level:

• Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	Fair Value Measurements as of June 30, 2012
	Level 1		Level 2			Level 3		Total
Liabilities
Interest rate swap agreements	$	—	$	(1,085	)	$	—	$	(1,085	)
Foreign currency exchange contracts		—		(3,955	)		—		(3,955	)

8

	Fair Value Measurements as of December 31, 2011
	Level 1		Level 2			Level 3		Total
Assets
Foreign currency exchange contracts	$	—	$	168		$	—	$	168
Liabilities
Interest rate swap agreements		—		(1,014	)		—		(1,014	)
Foreign currency exchange contracts		—		(2,371	)		—		(2,371	)

Fair values of derivative instruments included in Level 2 are estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies.

Financial instruments not required to be carried at fair value

The fair value of property tax payment agreements receivable is estimated by discounting the future cash flows using the current rates at which similar property tax payment agreements receivable would be made to borrowers with similar credit ratings and for the same remaining maturities. The carrying amount of property tax payment agreements receivable approximates fair value. Additionally, the carrying amount of interest receivable approximates fair value. Borrowings under the Company’s revolving credit facilities are carried at historical cost, adjusted for additional borrowings less principal repayments, which approximates fair value. For investment in receivable portfolios, there is no active market or observable inputs for the fair value estimation. The Company does not consider it practical to attempt to estimate the fair value of such financial instruments due to the excessive costs that would be incurred in doing so.

Note 6: Derivatives and Hedging Instruments

The Company uses derivative instruments to manage risks related to interest rates and foreign currency. The Company’s outstanding interest rate swap contracts and foreign currency exchange contracts qualify for hedge accounting treatment under the authoritative guidance for derivatives and hedging.

Interest Rate Swaps

The Company may periodically enter into derivative financial instruments, typically interest rate swap agreements, to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. As of June 30, 2012, the Company had six interest rate swap agreements outstanding with a total notional amount of $150.0 million. Under the swap agreements, the Company receives floating interest rate payments based on one-month reserve-adjusted LIBOR and makes interest payments based on fixed interest rates. The Company intends to continue electing the one-month reserve-adjusted LIBOR as the benchmark interest rate on the debt being hedged through its term. No credit spread was hedged. The Company designates its interest rate swap instruments as cash flow hedges.

The authoritative accounting guidance requires companies to recognize derivative instruments as either an asset or liability measured at fair value in the statement of financial position. The effective portion of the change in fair value of the derivative instrument is recorded in other comprehensive income (“OCI”). The ineffective portion of the change in fair value of the derivative instrument, if any, is recognized in interest expense in the period of change. From the inception of the hedging program, the Company has determined that the hedging instruments are highly effective.

Foreign Currency Exchange Contracts

The Company has operations in India, which exposes the Company to foreign currency exchange rate fluctuations due to transactions denominated in Indian rupees, such as employee salaries and rent expenditures. To mitigate this risk, the Company enters into derivative financial instruments, principally forward contracts, which are designated as cash flow hedges, to mitigate fluctuations in the cash payments of future forecasted transactions in Indian rupees for up to 36 months. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed. The Company reviews all exposures and derivative positions on an ongoing basis.

9

Gains and losses on cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged transaction is recorded in the consolidated financial statements. Once the underlying transaction is recorded in the consolidated financial statements, the Company reclassifies the accumulated other comprehensive income or loss on the derivative into earnings. If all or a portion of the forecasted transaction was cancelled, this would render all or a portion of the cash flow hedge ineffective and the Company would reclassify the ineffective portion of the hedge into earnings. The Company generally does not experience ineffectiveness of the hedge relationship and the accompanying consolidated financial statements do not include any such gains or losses.

As of June 30, 2012, the total notional amount of the forward contracts to buy Indian rupees in exchange for U.S. dollars was $27.2 million. All outstanding contracts qualified for hedge accounting treatment as of June 30, 2012. The Company estimates that approximately $1.9 million of net derivative loss included in OCI will be reclassified into earnings within the next 12 months. No gains or losses were reclassified from OCI into earnings as a result of forecasted transactions that failed to occur during the three and six months ended June 30, 2012 and 2011.

The Company does not enter into derivative instruments for trading or speculative purposes.

The following table summarizes the fair value of derivative instruments as recorded in the Company’s condensed consolidated statements of financial condition (in thousands):

	June 30, 2012				December 31, 2011
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other liabilities	$	(1,085	)	Other liabilities	$	(1,014	)
Foreign currency exchange contracts	Other assets		—		Other assets		168
Foreign currency exchange contracts	Other liabilities		(3,955	)	Other liabilities		(2,371	)

The following tables summarize the effects of derivatives in cash flow hedging relationships on the Company’s statements of comprehensive income during the periods presented (in thousands):

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income - Effective Portion					Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Three Months Ended June 30,							Three Months Ended June 30,						Three Months Ended June 30,
	2012			2011				2012			2011			2012		2011
Interest rate swaps	$	140		$	(1,072	)	Interest expense	$	—		$	—	Other (expense) income	$	—	$	—
Foreign currency exchange contracts		(3,120	)		242		Salaries and employee benefits		(442	)		94	Other (expense) income		—		—
Foreign currency exchange contracts		(510	)		57		General and administrative expenses		(78	)		20	Other (expense) income		—		—

10

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income - Effective Portion					Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Six Months Ended June 30,							Six Months Ended June 30,						Six Months Ended June 30,
	2012			2011				2012			2011			2012		2011
Interest rate swaps	$	(71	)	$	(566	)	Interest expense	$	—		$	—	Other (expense) income	$	—	$	—
Foreign currency exchange contracts		(2,200	)		597		Salaries and employee benefits		(557	)		167	Other (expense) income		—		—
Foreign currency exchange contracts		(204	)		122		General and administrative expenses		(95	)		38	Other (expense) income		—		—

Note 7: Stock-Based Compensation

On March 9, 2009, Encore’s Board of Directors (the “Board”) approved an amendment and restatement of the 2005 Stock Incentive Plan (“2005 Plan”), which was originally adopted on March 30, 2005, for Board members, employees, officers, and executives of, and consultants and advisors to, the Company. The amendment and restatement of the 2005 Plan increased by 2,000,000 shares the maximum number of shares of the Company’s common stock that may be issued or be subject to awards under the plan, established a new 10-year term for the plan and made certain other amendments. The 2005 Plan amendment was approved by the Company’s stockholders on June 9, 2009. The 2005 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, and performance-based awards to eligible individuals. As amended, the 2005 Plan allows the granting of an aggregate of 3,500,000 shares of the Company’s common stock for awards. In addition, shares subject to options granted under the 2005 Plan that terminate or expire without being exercised will become available for grant under the 2005 Plan. The benefit provided under the 2005 Plan is compensation subject to authoritative guidance for stock-based compensation.

In accordance with authoritative guidance for stock-based compensation, compensation expense is recognized only for those shares expected to vest, based on the Company’s historical experience and future expectations. Total stock-based compensation expense during the three months ended June 30, 2012 and 2011 was $2.5 million and $1.8 million, respectively. Total stock-based compensation expense during the six months ended June 30, 2012 and 2011 was $4.8 million and $3.6 million, respectively.

The Company’s stock-based compensation arrangements are described below:

Stock Options

The 2005 Plan permits the granting of stock options to certain employees and directors of the Company. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of issuance. They generally vest over three to five years of continuous service, and have ten-year contractual terms.

The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards. All options are amortized ratably over the requisite service periods of the awards, which are generally the vesting periods.

The fair value for options granted was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions

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	Six Months Ended June 30,
	2012			2011
Weighted average fair value of options granted	$	11.77		$	13.26
Risk free interest rate		0.89	%		2.0	%
Dividend yield		0.0	%		0.0	%
Volatility factor of the expected market price of the Company’s common stock		63	%		61	%
Weighted-average expected life of options		5 Years			5 Years

Unrecognized compensation cost related to stock options as of June 30, 2012, was $3.0 million. The weighted-average remaining expense period, based on the unamortized value of these outstanding stock options, was approximately 2.1 years.

A summary of the Company’s stock option activity as of June 30, 2012, and changes during the six months ended, is presented below:

	Number of Shares			Option Price Per Share		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011		2,182,940		$	0.51 – $24.65	$	13.00
Granted		193,500			—		22.17
Cancelled/forfeited		—			—		—
Exercised		(122,200	)		0.51 – 20.09		6.41
Outstanding at June 30, 2012		2,254,240		$	0.51 – $24.65	$	14.14	$	34,887
Exercisable at June 30, 2012		1,366,412		$	0.51 – $24.65	$	12.39	$	23,550

The total intrinsic value of options exercised during the six months ended June 30, 2012 and 2011 was $2.4 million and $9.9 million, respectively. As of June 30, 2012, the weighted-average remaining contractual life of options outstanding and options exercisable was 5.7 years and 4.3 years, respectively.

Non-Vested Shares

Under the Company’s 2005 Plan, Board members, employees, officers and executives of, and consultants and advisors to, the Company are eligible to receive restricted stock units and restricted stock awards. In accordance with the authoritative guidance, the fair value of these non-vested shares is equal to the closing sale price of the Company’s common stock on the date of issuance. The total number of these awards expected to vest is adjusted by estimated forfeiture rates. As of June 30, 2012, 16,437 of the non-vested shares are expected to vest over approximately one to two years based on certain performance goals (“Performance-Based Awards”). The fair value of the Performance-Based Awards is expensed over the expected vesting period, net of estimated forfeitures. If performance goals are not expected to be met, the compensation expense previously recognized would be reversed. No reversals of compensation expense related to the Performance-Based Awards have been made as of June 30, 2012. The remaining 609,523 non-vested shares are not performance-based, and will vest over approximately one to three years of continuous service.

A summary of the status of the Company’s restricted stock units and restricted stock awards as of June 30, 2012, and changes during the six months ended, is presented below:

	Non-Vested Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		589,117		$	19.22
Awarded		318,291		$	22.63
Vested		(243,784	)	$	17.04
Cancelled/forfeited		(37,664	)	$	22.15
Non-vested at June 30, 2012		625,960		$	21.63

Unrecognized compensation expense related to non-vested shares as of June 30, 2012, was $8.7 million. The weighted-average remaining expense period, based on the unamortized value of these outstanding non-vested shares, was approximately 2.1 years. The fair value of restricted stock units and restricted stock awards vested during the six months ended June 30, 2012 and 2011 remained consistent at approximately $5.6 million.

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Note 8: Investment in Receivable Portfolios, Net

In accordance with the authoritative guidance for loans and debt securities acquired with deteriorated credit quality, discrete receivable portfolio purchases during a quarter are aggregated into pools based on common risk characteristics. Once a static pool is established, the portfolios are permanently assigned to the pool. The discount (i.e., the difference between the cost of each static pool and the related aggregate contractual receivable balance) is not recorded because the Company expects to collect a relatively small percentage of each static pool’s contractual receivable balance. As a result, receivable portfolios are recorded at cost at the time of acquisition. The purchase cost of the portfolios includes certain fees paid to third parties incurred in connection with the direct acquisition of the receivable portfolios.

In compliance with the authoritative guidance, the Company accounts for its investments in consumer receivable portfolios using either the interest method or the cost recovery method. The interest method applies an internal rate of return (“IRR”) to the cost basis of the pool, which remains unchanged throughout the life of the pool, unless there is an increase in subsequent expected cash flows. Subsequent increases in expected cash flows are generally recognized prospectively through an upward adjustment of the pool’s IRR over its remaining life. Subsequent decreases in expected cash flows do not change the IRR, but are recognized as an allowance to the cost basis of the pool, and are reflected in the consolidated statements of comprehensive income as a reduction in revenue, with a corresponding valuation allowance, offsetting the investment in receivable portfolios in the consolidated statements of financial condition.

The Company utilizes its proprietary forecasting models to continuously evaluate the economic life of each pool. The collection forecast of each pool is generally estimated to be between 84 to 96 months based on the expected collection period of each pool. The Company often experiences collections beyond the 84 to 96 month collection forecast. As of June 30, 2012, the total estimated remaining collections beyond the 84 to 96 month collection forecast was $113.6 million.

The Company accounts for each static pool as a unit for the economic life of the pool (similar to one loan) for recognition of revenue from receivable portfolios, for collections applied to the cost basis of receivable portfolios, and for provision for loss or allowance. Revenue from receivable portfolios is accrued based on each pool’s IRR applied to each pool’s adjusted cost basis. The cost basis of each pool is increased by revenue earned and decreased by gross collections and portfolio allowances.

If the amount and timing of future cash collections on a pool of receivables are not reasonably estimable, the Company accounts for such portfolios on the cost recovery method as Cost Recovery Portfolios. The accounts in these portfolios have different risk characteristics than those included in other portfolios acquired during the same quarter, or the necessary information was not available to estimate future cash flows and, accordingly, they were not aggregated with other portfolios. Under the cost recovery method of accounting, no income is recognized until the purchase price of a Cost Recovery Portfolio has been fully recovered.

Accretable yield represents the amount of revenue the Company expects to generate over the remaining life of its existing investment in receivable portfolios based on estimated future cash flows. Total accretable yield is the difference between future estimated collections and the current carrying value of a portfolio. All estimated cash flows on portfolios where the cost basis has been fully recovered are classified as zero basis cash flows.

The following table summarizes the Company’s accretable yield and an estimate of zero basis future cash flows at the beginning and end of the period presented (in thousands):

	Accretable Yield			Estimate of Zero Basis Cash Flows			Total
Balance at December 31, 2011	$	821,527		$	32,676		$	854,203
Revenue recognized, net		(119,340	)		(7,065	)		(126,405	)
Net additions to existing portfolios(1)		131,039			3,608			134,647
Additions for current purchases(1)		119,533			—			119,533
Balance at March 31, 2012	$	952,759		$	29,219		$	981,978
Revenue recognized, net		(131,624	)		(7,107	)		(138,731	)
Net additions to existing portfolios(1)		77,473			13,738			91,211
Additions for current purchases(1)		178,332			—			178,332
Balance at June 30, 2012	$	1,076,940		$	35,850		$	1,112,790

⁽¹⁾  Estimated remaining collections and accretable yield include anticipated collections beyond the 84 to 96 month collection forecast.

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	Accretable Yield			Estimate of Zero Basis Cash Flows			Total
Balance at December 31, 2010	$	739,785		$	4,274		$	744,059
Revenue recognized, net		(101,709	)		(3,617	)		(105,326	)
Net additions to existing portfolios		18,715			2,948			21,663
Additions for current purchases		93,098			—			93,098
Balance at March 31, 2011	$	749,889		$	3,605		$	753,494
Revenue recognized, net		(106,961	)		(4,132	)		(111,093	)
Net additions to existing portfolios		15,575			3,900			19,475
Additions for current purchases		95,532			—			95,532
Balance at June 30, 2011	$	754,035		$	3,373		$	757,408

During the three months ended June 30, 2012, the Company purchased receivable portfolios with a face value of $6.0 billion for $231.0 million, or a purchase cost of 3.8% of face value. The estimated future collections at acquisition for these portfolios amounted to $407.4 million. During the six months ended June 30, 2012, the Company purchased receivable portfolios with a face value of $8.9 billion for $361.4 million, or a purchase cost of 4.0% of face value. The estimated future collections at acquisition for these portfolios amounted to $643.6 million.

During the three months ended June 30, 2011, the Company purchased receivable portfolios with a face value of $3.0 billion for $93.7 million, or a purchase cost of 3.1% of face value. The estimated future collections at acquisition for these portfolios amounted to $185.9 million. During the six months ended June 30, 2011, the Company purchased receivable portfolios with a face value of $5.9 billion for $184.4 million, or a purchase cost of 3.1% of face value. The estimated future collections at acquisition for these portfolios amounted to $364.3 million.

All collections realized after the net book value of a portfolio has been fully recovered (“Zero Basis Portfolios”) are recorded as revenue (“Zero Basis Revenue”). During the three months ended June 30, 2012 and 2011, Zero Basis Revenue was approximately $6.1 million and $2.9 million, respectively. During the six months ended June 30, 2012 and 2011, approximately $12.2 million and $5.9 million were recognized as Zero Basis Revenue, respectively.

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The following tables summarize the changes in the balance of the investment in receivable portfolios during the following periods (in thousands, except percentages):

	Three Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	741,580		$	—		$	741,580
Purchases of receivable portfolios		230,983			—			230,983
Gross collections(1)		(233,437	)		(7,107	)		(240,544	)
Put-backs and recalls(2)		(891	)		—			(891	)
Revenue recognized		131,443			6,126			137,569
Portfolio allowance reversals, net		181			981			1,162
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (3)		56.3	%		86.2	%		57.2	%

	Three Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	648,820		$	—		$	648,820
Purchases of receivable portfolios		93,701			—			93,701
Gross collections(1)		(190,901	)		(4,132	)		(195,033	)
Put-backs and recalls(2)		(798	)		—			(798	)
Revenue recognized		109,185			2,914			112,099
(Portfolio allowances) portfolio allowance reversals, net		(2,224	)		1,218			(1,006	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (3)		57.2	%		70.5	%		57.5	%

	Six Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	716,454		$	—		$	716,454
Purchases of receivable portfolios		361,446			—			361,446
Gross collections(1)		(457,380	)		(14,172	)		(471,552	)
Put-backs and recalls(2)		(1,625	)		—			(1,625	)
Revenue recognized		252,189			12,158			264,347
(Portfolio allowances) portfolio allowance reversals, net		(1,225	)		2,014			789
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (3)		55.1	%		85.8	%		56.1	%

	Six Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	644,753		$	—		$	644,753
Purchases of receivable portfolios		184,376			—			184,376
Gross collections(1)		(378,318	)		(7,749	)		(386,067	)
Put-backs and recalls(2)		(1,698	)		—			(1,698	)
Revenue recognized		216,989			5,934			222,923
(Portfolio allowances) portfolio allowance reversals, net		(8,319	)		1,815			(6,504	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (3)		57.4	%		76.6	%		57.7	%

⁽¹⁾  Does not include amounts collected on behalf of others.

15

⁽²⁾  Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represent accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).

⁽³⁾  Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.

The following table summarizes the change in the valuation allowance for investment in receivable portfolios during the periods presented (in thousands):

	Valuation Allowance
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Balance at beginning of period	$	109,867		$	104,169		$	109,494		$	98,671
Provision for portfolio allowances		2,116			2,553			3,875			8,648
Reversal of prior allowances		(3,278	)		(1,547	)		(4,664	)		(2,144	)
Balance at end of period	$	108,705		$	105,175		$	108,705		$	105,175

The Company currently utilizes various business channels for the collection of its receivables. The following table summarizes the total collections by collection channel (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Legal collections	$	114,876	$	98,084	$	224,448	$	186,572
Collection sites		111,641		84,576		221,511		173,117
Collection agencies		14,043		12,421		25,629		26,411
Other		—		—		—		54
	$	240,560	$	195,081	$	471,588	$	386,154

Note 9: Property Tax Payment Agreements Receivable, Net

The Company’s portfolio of property tax payment agreements receivable primarily consists of payment agreements collateralized by tax liens on residential and commercial properties in the state of Texas. The tax liens are in a priority position to most other liens on the properties, including those that existed at the time the tax lien was transferred from the respective taxing authority to the Company. Repayment of residential and commercial property tax payment agreements receivable is generally dependent on the property owner. However, repayment may ultimately come through payments from other lien holders or foreclosure on the properties. Risk of loss is mitigated by the Company’s internal underwriting policies, including its policy relating to the amount of taxes it will pay relative to the value of the property. The Company will generally not originate a tax lien transfer if this percentage is in excess of 25% and, in most cases, this percentage is below 15%.

16

The Company evaluates the entire portfolio of property tax payment agreements receivable for impairment. The primary credit quality indicator the Company uses to evaluate its portfolio is lien to value ratio. The Company has not experienced any losses on the property tax payment agreements receivable in its portfolio. In addition, management believes, based on the fact that the tax liens that collateralize the payment agreements are in a priority position over most other liens on the properties, that it will not experience any material losses on the ultimate collection of its property tax payment agreements receivable. Therefore, no allowance has been provided for as of June 30, 2012.

The following table presents the Company’s aging analysis of property tax payment agreements receivable as of June 30, 2012. These amounts do not include the related deferred origination fees or premiums on purchased property tax payment agreements receivable (in thousands):

	Current		30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total
Property tax payment agreements receivable	$	110,080	$	4,098	$	6,711	$	21,687	$	142,576

Note 10: Deferred Court Costs, Net

The Company contracts with a nationwide network of attorneys that specialize in collection matters. The Company generally refers charged-off accounts to its contracted attorneys when it believes the related debtor has sufficient assets to repay the indebtedness and has, to date, been unwilling to pay. In connection with the Company’s agreement with the contracted attorneys, it advances certain out-of-pocket court costs (“Deferred Court Costs”). The Company capitalizes Deferred Court Costs in its consolidated financial statements and provides a reserve for those costs that it believes will ultimately be uncollectible. The Company determines the reserve based on its analysis of court costs that have been advanced and those that have been recovered. Deferred Court Costs not recovered within three years of placement are fully written-off. Collections received from these debtors are first applied against related court costs with the balance applied to the debtors’ account.

Deferred Court Costs for the three-year deferral period consist of the following as of the dates presented (in thousands):

	June 30, 2012			December 31, 2011
Court costs advanced	$	238,887		$	228,977
Court costs recovered		(65,937	)		(60,017	)
Court costs reserve		(132,780	)		(130,454	)
	$	40,170		$	38,506

Note 11: Other Assets

Other assets consist of the following (in thousands):

	June 30, 2012		December 31, 2011
Prepaid income tax	$	6,507	$	53
Debt issuance costs, net of amortization		4,920		4,293
Prepaid expenses		5,624		5,232
Security deposit—India building lease		1,550		1,482
Deferred compensation assets		721		722
Real estate owned		311		—
Other		1,959		186
	$	21,592	$	11,968

Deferred compensation assets represent monies held in a trust associated with the Company’s deferred compensation plan.

Note 12: Debt

The Company is obligated under borrowings as follows (in thousands):

17

	June 30, 2012		December 31, 2011
Revolving credit facility	$	490,000	$	305,000
Propel facility		127,899		—
Senior secured notes		75,000		75,000
Capital lease obligations and other		9,417		8,950
	$	702,316	$	388,950

Revolving Credit Facility

On April 10 and May 8, 2012, Encore entered into amendments to its revolving credit facility. The amendments added new lenders, appointed a new administrative agent, changed the borrowing base advance rate and the method for its calculation, increased the aggregate revolving loan commitment by $145.0 million, from $410.5 million to $555.5 million, and reset the accordion feature by an additional $100.0 million, resulting in a maximum of $655.5 million that can be borrowed under the facility. Additionally, the May 8, 2012 amendment approved the Propel Acquisition discussed in Note 3 “Business Combination.”

Loan fees and other loan costs associated with the above amendments amounted to approximately $0.9 million. These costs were included in other assets in the Company’s consolidated statements of financial condition and will be amortized over the remaining term of the facility.

Provisions of the amended revolving credit facility include:

• Interest at a floating rate equal to, at the Company’s option, either: (1) reserve adjusted LIBOR, plus a spread that ranges from 350 to 400 basis points, depending on the Company’s leverage; or (2) Alternate Base Rate (“ABR”), plus a spread that ranges from 250 to 300 basis points, depending on the Company’s leverage. ABR, as defined in the agreement, means the highest of (i) the rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City, (ii) the federal funds effective rate from time to time, plus 0.5% and (iii) reserved adjusted LIBOR for a one month interest period on the applicable date, plus 1.0%;

• $10.0 million sub-limits for swingline loans and letters of credit;

• A borrowing base equal to (1) the lesser of (i) 30%—35% (depending, as defined in the amendment, on the Company’s trailing 12-month cost per dollar collected) of eligible estimated remaining collections, initially set at 33%, and (ii) the product of the net book value of all receivable portfolios acquired on or after January 1, 2005 multiplied by 95%, minus (2) the aggregate principal amount outstanding of the Prudential senior secured notes;

• Restrictions and covenants, which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens;

• Repurchases of up to $50.0 million of Encore’s common stock, subject to compliance with certain covenants and available borrowing capacity;

• A change of control definition, which excludes acquisitions of stock by Red Mountain Capital Partners LLC, JCF FPK LLP and their respective affiliates of up to 50% of the outstanding shares of Encore’s voting stock;

• Events of default which, upon occurrence, may permit the lenders to terminate the revolving credit facility and declare all amounts outstanding to be immediately due and payable;

• An annual capital expenditure limit of $12.5 million;

• An annual rental expense limit of $12.5 million;

• An outstanding capital lease limit of $12.5 million;

• An acquisition limit of $100.0 million; and

• Collateralization by all assets of the Company, other than the assets of the Propel Entities.

At June 30, 2012, the outstanding balance on the revolving credit facility was $490.0 million, which bore a weighted average interest rate of 4.07% and 4.11% for the three and six months ended June 30, 2012, respectively. As discussed above, on April 10 and May 8, 2012, Encore entered into amendments to its revolving credit facility, thereby increasing the aggregate revolving loan commitment by $145.0 million.

Subject to compliance with the revolving credit facility, Encore is authorized by its Board to repurchase up to $50.0 million of its common stock.

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Propel Facility

In connection with the Company’s Propel Acquisition, as discussed in Note 3, “Business Combination,” the Company entered into a new $160.0 million syndicated loan facility (the “Propel Facility”). The Company financed the Propel Acquisition using the Propel Facility, Encore’s existing revolving credit facility, and cash on hand. In addition to funding a portion of the acquisition the Propel Facility will be used to fund future growth at Propel.

Loan fees and other loan costs associated with the Propel Facility amounted to approximately $0.7 million. These costs were included in other assets in the Company’s consolidated statements of financial condition and are amortized over the term of the Propel Facility.

The Propel Facility has a three-year term and includes the following key provisions:

• Interest at Propel’s option, at either: (1) LIBOR, plus a spread that ranges from 300 to 375 basis points, depending on Propel’s cash flow leverage ratio; or (2) Prime Rate, which is defined in the agreement as the rate of interest per annum equal to the sum of (a) the interest rate quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate” plus (b) the Prime Rate Margin, which is a spread that ranges from 0 to 75 basis points, depending on Propel’s cash flow leverage ratio;

• A borrowing base of 90% of the face value of the tax lien collateralized notes;

• Interest payable monthly; principal and interest due at maturity;

• Restrictions and covenants, which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens;

• Events of default which, upon occurrence, may permit the lender to terminate the Propel Facility and declare all amounts outstanding to be immediately due and payable; and

• A $40.0 million accordion feature.

The Propel Facility is collateralized by the tax lien collateralized payment agreements and requires Propel to maintain various financial covenants, including a minimum interest coverage ratio and a maximum cash flow leverage ratio.

At June 30, 2012, the outstanding balance on the Propel Facility was $127.9 million, which bore a weighted average interest rate of 3.54% for the three months ended June 30, 2012.

Senior Secured Notes

As of June 30, 2012, Encore had $75.0 million in senior secured notes with certain affiliates of Prudential Capital Group. Twenty five million dollars of the senior secured notes bear an annual interest rate of 7.375% and mature in 2018. These notes require quarterly interest only payments through May 2013. Beginning in May 2013, the notes require a quarterly payment of interest plus $1.25 million of principal. The remaining $50.0 million of the senior secured notes bear an annual interest rate of 7.75% and mature in 2017 with principal amortization beginning in December 2012. These notes require quarterly interest only payments through December 2012. Beginning in December 2012, the notes require a quarterly payment of interest plus $2.5 million of principal.

The senior secured notes are guaranteed in full by certain of Encore’s subsidiaries and are collateralized by all assets of the Company. The senior secured notes may be accelerated and become automatically and immediately due and payable upon certain events of default, including certain events related to insolvency, bankruptcy or liquidation. Additionally, the senior secured notes may be accelerated at the election of the holder or holders of a majority in principal amount of the senior secured notes upon certain events of default by Encore, including the breach of affirmative covenants regarding guarantors, collateral, most favored lender treatment or minimum revolving credit facility commitment or the breach of any negative covenant. If Encore prepays the senior secured notes at any time for any reason, payment will be at the higher of par or the present value of the remaining scheduled payments of principal and interest on the portion being prepaid. The discount rate used to determine the present value is 50 basis points over the then current Treasury Rate corresponding to the remaining average life. The covenants are substantially similar to those in the revolving credit facility. Prudential Capital Group and the administrative agent for the lenders of the revolving credit facility have an intercreditor agreement related to collateral, actionable default, powers and duties and remedies, among other topics. Certain terms of the senior secured notes were amended on May 8, 2012, to provide for the change in administrative and collateral agent, the Propel Acquisition, and the addition of the Propel Facility.

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Capital Lease Obligations

The Company has capital lease obligations primarily for certain computer equipment. As of June 30, 2012, the Company’s combined obligations for these computer equipment leases were approximately $8.7 million. These lease obligations require monthly or quarterly payments through July 2016 and have implicit interest rates that range from zero to approximately 7.7%.

Note 13: Income Taxes

The Company recorded an income tax provision of $12.8 million, reflecting an effective rate of 40.4% of pretax income from continuing operations during the three months ended June 30, 2012. The effective tax rate for the three months ended June 30, 2012 primarily consisted of a provision for federal income taxes of 32.7% (which is net of a benefit for state taxes of 2.3%), a blended provision for state taxes of 6.5%, and a provision due to the true-up of certain state and federal tax accounts of 1.2%.

The Company recorded an income tax provision of $9.5 million, reflecting an effective rate of 39.1% of pretax income from continuing operations during the three months ended June 30, 2011. The effective tax rate for the three months ended June 30, 2011 primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a blended provision for state taxes of 7.0%, and a net benefit for permanent book versus tax differences of 0.4%.

The Company recorded an income tax provision of $24.5 million, reflecting an effective rate of 39.8% of pretax income from continuing operations during the six months ended June 30, 2012. The effective tax rate for the six months ended June 30, 2012, primarily consisted of a provision for federal income taxes of 32.7% (which is net of a benefit for state taxes of 2.3%), a provision for state taxes of 6.5%, and a provision due to the true-up of certain state and federal tax accounts of 0.6%.

The Company recorded an income tax provision of $17.8 million, reflecting an effective rate of 38.9% of pretax income from continuing operations during the six months ended June 30, 2011. The effective tax rate for the six months ended June 30, 2011, primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a provision for state taxes of 7.0%, and a benefit for permanent book versus tax differences of 0.6%.

The Company’s subsidiary in India was operating under a tax holiday through March 31, 2011, at which time the tax holiday expired. If there had been no tax holiday for the quarter ended March 31, 2011, the Company would have expensed an additional $0.6 million in income taxes. The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday for the next eight years and a 50% tax holiday for the following four years. The impact of the tax holiday in Costa Rica for the three and six months ended June 30, 2012 was immaterial.

As of June 30, 2012, the Company had a gross unrecognized tax benefit of $1.9 million that, if recognized, would result in a net tax benefit of approximately $1.2 million and would have a positive effect on the Company’s effective tax rate. During the three and six months ended June 30, 2012, there were no material changes to the unrecognized tax benefit.

During the three and six months ended June 30, 2012, the Company did not provide for United States income taxes or foreign withholding taxes on the quarterly undistributed earnings from continuing operations of its subsidiaries operating outside of the United States. Undistributed earnings of the subsidiaries during the three and six months ended June 30, 2012, were approximately $1.3 million and $3.7 million, respectively. Such undistributed earnings are considered permanently reinvested.

Note 14: Purchase Concentrations

The following table summarizes purchases by seller sorted by total aggregate cost (in thousands, except percentages):

	Six Months Ended June 30, 2012
	Cost			%
Seller 1	$	130,592			36.1	%
Seller 2		81,843			22.6	%
Seller 3		41,941			11.6	%
Seller 4		27,792			7.7	%
Seller 5		24,438			6.8	%
Other sellers		54,840			15.2	%
	$	361,446			100.0	%
Adjustments(1)		(254	)
Purchases, net	$	361,192

⁽¹⁾  Adjusted for Put-backs and Recalls.

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Note 15: Commitments and Contingencies

Litigation

The Company is involved in disputes and legal actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions based on the Fair Debt Collection Practices Act (“FDCPA”), comparable state statutes, the Telephone Consumer Protection Act (“TCPA”), state and federal unfair competition statutes, and common law causes of action. The violations of law alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate assertions of fact in support of its collection actions, and/or has acted improperly in connection with its efforts to contact consumers. These cases are frequently styled as supposed class actions. In addition, from time to time, the Company is subject to litigation and other actions by governmental bodies, including formal and informal investigations relating to its collection activities by the Federal Trade Commission, state attorneys general, and other governmental bodies, with which the Company cooperates.

There has been no material development in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

In certain legal proceedings, the Company may have recourse to insurance or third party contractual indemnities to cover all or portions of its litigation expenses, judgments or settlements. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred.

Purchase Commitments

In the normal course of business, the Company enters into forward flow purchase agreements and other purchase commitment agreements. As of June, 2012, the Company has entered into agreements to purchase receivable portfolios with a face value of approximately $1.3 billion for a purchase price of approximately $58.6 million. The Company has no purchase commitments extending past one year.

Note 16: Segment Information

The Company conducts business through two operating segments: portfolio purchasing and recovery and tax lien transfer. The Company’s management relies on internal management reporting processes that provide segment revenue, segment operating income, and segment asset information in order to make financial decisions and allocate resources. The operating results from the Company’s tax lien transfer segment are immaterial to the Company’s total consolidated operating results. However, total assets from this segment are significant as compared to the Company’s total consolidated assets. As a result, in accordance with authoritative guidance on segment reporting, the Company’s tax lien transfer segment is determined to be a reportable segment.

Segment operating income includes income from operations before depreciation, amortization of intangible assets, and stock-based compensation expense. The following table provides a reconciliation of revenue and segment operating income by reportable segment to consolidated results and was derived from the segment’s internal financial information as used for corporate management purposes (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Revenues:
Portfolio purchasing and recovery	$	138,731	$	111,093	$	265,136	$	216,419
Tax lien transfer		2,332		—		2,332		—
	$	141,063	$	111,093	$	267,468	$	216,419
Operating income:
Portfolio purchasing and recovery	$	41,394	$	32,343	$	79,911	$	62,111
Tax lien transfer		819		—		819		—
		42,213		32,343		80,730		62,111
Depreciation and amortization		1,420		958		2,660		1,862
Stock-based compensation		2,539		1,810		4,805		3,575
Other expense		6,420		5,334		11,663		10,802
Income from continuing operations before income taxes	$	31,834	$	24,241	$	61,602	$	45,872

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Additionally, assets are allocated to operating segments for management review. As of June 30, 2012, total segment assets were $970.4 million and $202.5 million for the portfolio purchasing and recovery segment and tax lien transfer segment, respectively.

Note 17: Goodwill and Identifiable Intangible Assets

In accordance with authoritative guidance, goodwill is tested at the reporting unit level annually for impairment and in interim periods if certain events occur indicating the fair value of a reporting unit may be below its carrying value.

As discussed in Note 2, “Discontinued Operations,” on May 16, 2012, the Company completed the sale of Ascension to AIS.

In connection with the preparation of its financial statements and based, in part, on the anticipated disposition, the Company performed an interim goodwill impairment test for Ascension as of March 31, 2012 and concluded that Ascension’s entire goodwill balance of $9.9 million was impaired. Additionally, the Company wrote-off Ascension’s remaining identifiable intangible assets of approximately $0.4 million as of March 31, 2012.

As of June 30, 2012, the Company has two reporting units that carry goodwill: portfolio purchasing and recovery and tax lien transfer. Annual testing is performed as of October 1^st for the portfolio purchasing and recovery reporting unit and as of April 1^st for the tax lien transfer reporting unit.

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The Company’s acquired intangible assets are summarized as follows (in thousands):

	As of June 30, 2012							As of December 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	—	$	—		$	—	$	6,000	$	(5,538	)	$	462
Trade name and other		570		(20	)		550		—		—			—
Total intangible assets subject to amortization	$	570	$	(20	)	$	550	$	6,000	$	(5,538	)	$	462
Intangible assets not subject to amortization:
Goodwill – portfolio purchasing and recovery						$	6,047						$	6,047
Goodwill – tax lien transfer							49,271							—
Goodwill – bankruptcy servicing							—							9,938
Total goodwill						$	55,318						$	15,985

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Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the securities laws. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “will,” “may” and similar expressions often characterize forward-looking statements. These statements may include, but are not limited to, projections of collections, revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services and financing needs or plans, as well as assumptions relating to these matters. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we caution that these expectations or predictions may not prove to be correct or we may not achieve the financial results, savings or other benefits anticipated in the forward-looking statements. These forward-looking statements are necessarily estimates reflecting the best judgment of our senior management and involve a number of risks and uncertainties, some of which may be beyond our control or cannot be predicted or quantified, that could cause actual results to differ materially from those suggested by the forward-looking statements. Many factors, including but not limited to those set forth in our Annual Report on Form 10-K under “Part I, Item 1A. Risk Factors,” could cause our actual results, performance, achievements or industry results to be very different from the results, performance, achievements or industry results expressed or implied by these forward-looking statements. Our business, financial condition or results of operations could also be materially and adversely affected by other factors besides those listed. Forward-looking statements speak only as of the date the statements were made. We do not undertake any obligation to update or revise any forward-looking statements to reflect new information or future events, or for any other reason, even if experience or future events make it clear that any expected results expressed or implied by these forward-looking statements will not be realized. In addition, it is generally our policy not to make any specific projections as to future earnings, and we do not endorse projections regarding future performance that may be made by third parties.

Our Business and Operating Segments

We are a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. We purchase portfolios of defaulted consumer receivables and manage them by partnering with individuals as they repay their obligations and work toward financial recovery. In addition, through our newly acquired subsidiary Propel Financial Services, LLC (“Propel”), we assist Texas property owners who are delinquent on their property taxes by paying these taxes on behalf of the property owners in exchange for payment agreements collateralized by tax liens on the property.

We conduct business through two operating segments: portfolio purchasing and recovery and tax lien transfer. The operating results from our tax lien transfer segment are immaterial to our total consolidated operating results. However, the total segment assets are significant as compared to our total consolidated assets. As a result, in accordance with authoritative guidance on segment reporting, our tax lien transfer segment is determined to be a reportable segment.

Portfolio purchasing and recovery

Our portfolio purchasing and recovery segment purchases receivables based on robust, account-level valuation methods and employs a suite of proprietary statistical and behavioral models. These investments allow us to value portfolios accurately (and limit the risk of overpaying), avoid buying portfolios that are incompatible with our methods or goals and precisely align the accounts we purchase with our operational channels to maximize future collections. As a result, we have been able to realize significant returns from the receivables we acquire. We maintain strong relationships with many of the largest credit providers in the United States, and possess one of the industry’s best collection staff retention rates.

While seasonality does not have a material impact on our portfolio purchasing and recovery segment, collections are generally strongest in our first calendar quarter, slower in the second and third calendar quarters, and slowest in the fourth calendar quarter. Relatively higher collections in the first quarter could result in a lower cost-to-collect ratio compared to the other quarters, as our fixed costs would be constant and applied against a larger collection base. The seasonal impact on our business may be influenced by our purchasing levels, the types of portfolios we purchase, and our operating strategies.

Collection seasonality with respect to our portfolio purchasing and recovery segment can also impact our revenue recognition rate. Generally, revenue for each pool group declines steadily over time, whereas collections can fluctuate from quarter to quarter based on seasonality, as described above. In quarters with lower collections (e.g., the fourth calendar quarter), revenue as a percentage of collections can be higher than in quarters with higher collections (e.g., the first calendar quarter).

In addition, seasonality could have an impact on the relative level of quarterly earnings. In quarters with stronger collections, total costs are higher, as a result of the additional efforts required to generate those collections. Since revenue for each pool group declines steadily over time, in quarters with stronger collections and higher costs (e.g., the first calendar quarter), all else being equal, earnings could be lower than in quarters with slower collections and lower costs (e.g., the fourth calendar quarter). Additionally, in quarters where a greater percentage of collections come from our legal and agency outsourcing channels, cost to collect will be higher than if there were more collections from our internal collection sites.

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Tax lien transfer

Our tax lien transfer segment focuses on the property tax financing industry. We provide property tax solutions to customers in the state of Texas by paying delinquent real estate taxes on behalf of real property owners in exchange for payment agreements collateralized by tax liens on the property. We purchase the property owner’s delinquent tax obligation from the local tax authority at par value and work with the property owner to create an affordable payment plan. Revenue from our tax lien transfer segment for the period May 8, 2012 (date of acquisition) through June 30, 2012, comprised 2% and 1% of total consolidated revenues for the three and six months ended June 30, 2012, respectively. Operating income from our tax lien transfer segment for the period May 8, 2012 (date of acquisition) through June 30, 2012, comprised 2% and 1% of our total consolidated operating income for the three and six months ended June 30, 2012, respectively.

Discontinued Operations

On May 16, 2012, we completed the sale of the assets of our bankruptcy servicing subsidiary Ascension Capital Group, Inc. (“Ascension”). Accordingly, Ascension’s results of operations were reflected as discontinued operations for the three and six months ended June 30, 2012 and 2011.

Portfolio Purchasing and Recovery Overview

While there has been improvement in macroeconomic indicators during the last three months, a broad economic recovery has yet to fully materialize for the U.S. consumer. Slow job growth, uncertainty over state and federal taxes, and limited credit availability continue to challenge U.S. consumers, as demonstrated by weak consumer spending and volatile but rising consumer confidence levels.

Despite this macroeconomic uncertainty through the second quarter of 2012, most of our internal collection metrics were consistent with, or better than, what we observed during the same periods in 2010 and 2011. To illustrate, payer rates, adjusted for changes in the mix of settlements-in-full versus payment plans, remained consistent. As compared to prior years, more of our consumers continue to opt to settle their debt obligations through payment plans as opposed to one-time settlements. Settlements made through payment plans impact our recoveries in two ways. First, the delay in cash flows from payments received over extended time periods may result in a provision for portfolio allowance. When a long-term payment stream (as compared to a one-time payment of the same amount) is discounted using a pool group’s internal rate of return, or IRR, the net present value is lower. In other words, despite the absolute value of total cash received being identical in both scenarios, accounting for the timing of cash flows in a payment plan yields a lower net present value, which, in turn, can result in a provision for portfolio allowance. Despite this, as a result of our cautious approach to setting initial pool group’s internal rates of return, we have experienced no provisions for portfolio allowances for the 2009 – 2012 pool groups. Second, payment plans inherently contain the possibility of consumers failing to complete all scheduled payments, which we term a “broken payer.”

The rate at which consumers are honoring their obligations and completing their payment plans has continued to increase over the last six months. We believe this is the result of two factors: our commitment to partner effectively with consumers during their recovery process and the strength of our analytic platform, which allows us to make accurate and timely decisions about how best to maximize our portfolio returns. Nevertheless, payment plans may still produce broken payers that fail to fulfill all scheduled payments. When this happens, we are often successful in getting the consumer back on plan, but this is not always the case, and in those instances where we are unable to do so, we may experience a shortfall in recoveries as compared to our initial forecasts. Please refer to “Management’s Discussion and Analysis – Revenue” below for a more detailed explanation of the provision for portfolio allowances.

Purchases and Collections

Purchases by Type

The following table summarizes the types of charged-off consumer receivables portfolios we purchased for the periods presented (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Credit card	$	202,294	$	88,257	$	310,229	$	176,248
Telecom		28,689		5,248		51,217		6,484
Consumer bankruptcy receivables(1)		—		196		—		1,644
	$	230,983	$	93,701	$	361,446	$	184,376

⁽¹⁾  Represents portfolio receivables subject to Chapter 13 and Chapter 7 bankruptcy proceedings acquired from issuers.

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During the three months ended June 30, 2012, we invested $231.0 million in receivable portfolios, primarily for charged-off credit card portfolios with face values aggregating $6.0 billion, for an average purchase price of 3.8% of the face value of the purchased receivables. This is a $137.3 million increase, or 146.5%, in the amount invested, compared to the $93.7 million invested during the three months ended June 30, 2011, to acquire receivable portfolios, primarily consisting of charged-off credit card portfolios, with a face value aggregating $3.0 billion for an average purchase price of 3.1% of the face value of the purchased receivables. Included in our portfolio purchases for the three months ended June 30, 2012, is a single, one-time purchase of more than $100.0 million.

During the six months ended June 30, 2012, we invested $361.4 million in receivable portfolios, primarily for charged-off credit card portfolios with face values aggregating $8.9 billion, for an average purchase price of 4.0% of the face value of the purchased receivables. This is a $177.1 million increase, or 96.0%, in the amount invested, compared to the $184.4 million invested during the six months ended June 30, 2011, to acquire receivable portfolios, primarily consisting of charged-off credit card portfolios, with a face value aggregating $5.9 billion for an average purchase price of 3.1% of the face value of the purchased receivables. Included in our portfolio purchases for the six months ended June 30, 2012, is a single, one-time purchase of more than $100.0 million.

Average purchase price, as a percentage of face value, varies from period to period depending on, among other things, the quality of the accounts purchased and the length of time from charge off to the time we purchase the portfolios.

Collections by Channel

We utilized numerous business channels for the collection of charged-off credit card receivables and other charged-off receivables. The following table summarizes gross collections by collection channel in the respective periods (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Legal collections	$	114,876	$	98,084	$	224,448	$	186,572
Collection sites		111,641		84,576		221,511		173,117
Collection agencies		14,043		12,421		25,629		26,411
Other		—		—		—		54
	$	240,560	$	195,081	$	471,588	$	386,154

Gross collections increased $45.5 million, or 23.3%, to $240.6 million during the three months ended June 30, 2012, from $195.1 million during the three months ended June 30, 2011. Gross collections increased $85.4 million, or 22.1%, to $471.6 million during the six months ended June 30, 2012, from $386.2 million during the six months ended June 30, 2011.

Results of Operations

Results of operations in dollars and as a percentage of total revenue were as follows (in thousands, except per share amounts and percentages):

	Three Months Ended June 30,
	2012				2011
Revenues
Revenue from receivable portfolios, net	$	138,731	98.3	%	$	111,093	100.0	%
Net interest income —tax lien transfer		2,332	1.7	%		—	0.0	%
Total revenues		141,063	100.0	%		111,093	100.0	%
Operating expenses
Salaries and employee benefits (excluding stock-based compensation expense)		22,651	16.1	%		17,129	15.4	%

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	Three Months Ended June 30,
	2012					2011
Stock-based compensation expense		2,539		1.8	%		1,810		1.6	%
Cost of legal collections		41,024		29.1	%		40,686		36.6	%
Other operating expenses		12,427		8.8	%		8,250		7.4	%
Collection agency commissions		4,166		2.9	%		3,596		3.3	%
General and administrative expenses		18,582		13.2	%		9,089		8.2	%
Depreciation and amortization		1,420		1.0	%		958		0.9	%
Total operating expenses		102,809		72.9	%		81,518		73.4	%
Income from operations		38,254		27.1	%		29,575		26.6	%
Other (expense) income
Interest expense		(6,497	)	(4.6	)%		(5,369	)	(4.8	)%
Other income		77		0.1	%		35		0.0	%
Total other expense		(6,420	)	(4.5	)%		(5,334	)	(4.8	)%
Income from continuing operations before income taxes		31,834		22.6	%		24,241		21.8	%
Provision for income taxes		(12,846	)	(9.1	)%		(9,475	)	(8.5	)%
Income from continuing operations		18,988		13.5	%		14,766		13.3	%
(Loss) income from discontinued operations, net of tax		(2,392	)	(1.7	)%		9		0.0	%
Net income	$	16,596		11.8	%	$	14,775		13.3	%

	Six Months Ended June 30,
	2012					2011
Revenues
Revenue from receivable portfolios, net	$	265,136		99.1	%	$	216,419		100.0	%
Net interest income – tax lien transfer		2,332		0.9	%		—		0.0	%
Total revenues		267,468		100.0	%		216,419		100.0	%
Operating expenses
Salaries and employee benefits (excluding stock-based compensation expense)		42,689		16.0	%		33,796		15.6	%
Stock-based compensation expense		4,805		1.8	%		3,575		1.6	%
Cost of legal collections		79,659		29.8	%		77,195		35.7	%
Other operating expenses		24,025		9.0	%		17,040		7.9	%
Collection agency commissions		8,125		3.0	%		7,510		3.5	%
General and administrative expenses		32,240		12.0	%		18,767		8.7	%
Depreciation and amortization		2,660		1.0	%		1,862		0.8	%
Total operating expenses		194,203		72.6	%		159,745		73.8	%
Income from operations		73,265		27.4	%		56,674		26.2	%
Other (expense) income
Interest expense		(12,012	)	(4.5	)%		(10,962	)	(5.1	)%
Other income		349		0.1	%		160		0.1	%
Total other expense		(11,663	)	(4.4	)%		(10,802	)	(5.0	)%
Income from continuing operations before income taxes		61,602		23.0	%		45,872		21.2	%
Provision for income taxes		(24,506	)	(9.1	)%		(17,824	)	(8.2	)%
Income from continuing operations		37,096		13.9	%		28,048		13.0	%
(Loss) income from discontinued operations, net of tax		(9,094	)	(3.4	)%		406		0.2	%
Net income	$	28,002		10.5	%	$	28,454		13.2	%

27

Comparison of Results of Operations

Revenues

Our revenues consist primarily of portfolio revenue and interest income net of related interest expense from property tax payment agreements receivable.

Portfolio revenue consists of accretion revenue and zero basis revenue. Accretion revenue represents revenue derived from pools (quarterly groupings of purchased receivable portfolios) with a cost basis that has not been fully amortized. Revenue from pools with a remaining unamortized cost basis is accrued based on each pool’s effective interest rate applied to each pool’s remaining unamortized cost basis. The cost basis of each pool is increased by revenue earned and decreased by gross collections and portfolio allowances. The effective interest rate is the internal rate of return derived from the timing and amounts of actual cash received and anticipated future cash flow projections for each pool. All collections realized after the net book value of a portfolio has been fully recovered, or Zero Basis Portfolios, are recorded as revenue, or Zero Basis Revenue. We account for our investment in receivable portfolios utilizing the interest method in accordance with the authoritative guidance for loans and debt securities acquired with deteriorated credit quality. Interest income, net of related interest expense represents net interest income on property tax payment agreements receivable.

The following tables summarize collections, revenue, end of period receivable balance and other related supplemental data, by year of purchase from our portfolio purchasing and recovery segment (in thousands, except percentages):

	Three Months Ended June 30, 2012													As of June 30, 2012
	Collections(1)		Gross Revenue(2)		Revenue Recognition Rate(3)			Net Reversal (Portfolio Allowance)			Revenue % of Total Revenue			Unamortized Balances		Monthly IRR
ZBA(4)	$	7,107	$	6,126		86.2	%	$	981			4.5	%	$	—		—
2005		3,205		1,037		32.4	%		1,053			0.8	%		5,000		5.7	%
2006		3,406		2,141		62.9	%		(876	)		1.6	%		12,869		5.1	%
2007		4,575		2,361		51.6	%		333			1.7	%		14,079		5.1	%
2008		15,567		8,432		54.2	%		(329	)		6.1	%		42,512		6.0	%
2009		29,819		17,348		58.2	%		—			12.6	%		64,115		8.0	%
2010		58,769		34,995		59.5	%		—			25.4	%		140,057		7.5	%
2011		80,391		42,524		52.9	%		—			30.9	%		252,702		5.1	%
2012		37,705		22,605		60.0	%		—			16.4	%		338,525		3.0	%
Total	$	240,544	$	137,569		57.2	%	$	1,162			100.0	%	$	869,859		5.4	%

	Three Months Ended June 30, 2011													As of June 30, 2011
	Collections(1)		Gross Revenue(2)		Revenue Recognition Rate(3)			Net Reversal (Portfolio Allowance)			Revenue % of Total Revenue			Unamortized Balances		Monthly IRR
ZBA(4)	$	4,132	$	2,914		70.5	%	$	1,218			2.6	%	$	—		—
2004		359		16		4.5	%		102			0.0	%		—		0.0	%
2005		5,080		2,201		43.3	%		(54	)		2.0	%		11,050		5.6	%
2006		5,048		3,674		72.8	%		(1,205	)		3.3	%		22,661		5.1	%
2007		12,170		7,333		60.3	%		(381	)		6.5	%		26,710		6.9	%
2008		23,760		13,132		55.3	%		(686	)		11.7	%		75,471		5.3	%
2009		44,107		27,426		62.2	%		—			24.5	%		110,723		7.5	%
2010		78,271		42,872		54.8	%		—			38.2	%		240,543		5.4	%
2011		22,106		12,531		56.7	%		—			11.2	%		170,625		3.7	%
Total	$	195,033	$	112,099		57.5	%	$	(1,006	)		100.0	%	$	657,783		5.3	%

28

	Six Months Ended June 30, 2012													As of June 30, 2012
	Collections(1)		Gross Revenue(2)		Revenue Recognition Rate(3)			Net Reversal (Portfolio Allowance)			Revenue % of Total Revenue			Unamortized Balances		Monthly IRR
ZBA(4)	$	14,172	$	12,158		85.8	%	$	2,015			4.6	%	$	—		—
2005		6,636		2,356		35.5	%		975			0.9	%		5,000		5.7	%
2006		7,175		4,646		64.8	%		(1,996	)		1.8	%		12,869		5.1	%
2007		9,625		5,098		53.0	%		124			1.9	%		14,079		5.1	%
2008		32,880		17,477		53.2	%		(329	)		6.6	%		42,512		6.0	%
2009		62,397		38,086		61.0	%					14.4	%		64,115		8.0	%
2010		122,765		72,093		58.7	%		—			27.3	%		140,057		7.5	%
2011		165,611		84,448		51.0	%		—			31.9	%		252,702		5.1	%
2012		50,291		27,985		55.6	%		—			10.6	%		338,525		3.0	%
Total	$	471,552	$	264,347		56.1	%	$	789			100.0	%	$	869,859		5.4	%

	Six Months Ended June 30, 2011													As of June 30, 2011
	Collections(1)		Gross Revenue(2)		Revenue Recognition Rate(3)			Net Reversal (Portfolio Allowance)			Revenue % of Total Revenue			Unamortized Balances		Monthly IRR
ZBA(4)	$	7,749	$	5,934		76.6	%	$	1,815			2.7	%	$	—		—
2004		1,462		196		13.4	%		102			0.0	%		—		0.0	%
2005		10,551		4,942		46.8	%		(657	)		2.2	%		11,050		5.6	%
2006		10,361		7,819		75.5	%		(3,686	)		3.5	%		22,661		5.1	%
2007		25,628		16,051		62.6	%		(1,844	)		7.2	%		26,710		6.9	%
2008		50,185		28,113		56.0	%		(2,234	)		12.6	%		75,471		5.3	%
2009		93,773		56,736		60.5	%		—			25.5	%		110,723		7.5	%
2010		155,990		85,991		55.1	%		—			38.6	%		240,543		5.4	%
2011		30,368		17,141		56.4	%		—			7.7	%		170,625		3.7	%
Total	$	386,067	$	222,923		57.7	%	$	(6,504	)		100.0	%	$	657,783		5.3	%

⁽¹⁾  Does not include amounts collected on behalf of others.

⁽²⁾  Gross revenue excludes the effects of net portfolio allowances or net portfolio allowance reversals.

⁽³⁾  Revenue recognition rate excludes the effects of net portfolio allowances or net portfolio allowance reversals.

⁽⁴⁾  ZBA revenue typically has a 100% revenue recognition rate. However, collections on ZBA pool groups where a valuation allowance remains must first be recorded as an allowance reversal until the allowance for that pool group is zero. Once the valuation allowance is reversed, the revenue recognition rate will become 100%.

Total revenues were $141.1 million during the three months ended June 30, 2012, an increase of $30.0 million, or 27.0%, compared to total revenues of $111.1 million during the three months ended June 30, 2011. Total revenues were $267.5 million during the six months ended June 30, 2012, an increase of $51.1 million, or 23.6%, compared to total revenues of $216.4 million during the three months ended June 30, 2011.

Revenue from our portfolio purchasing and recovery segment was $138.7 million during the three months ended June 30, 2012, an increase of $27.6 million, or 24.9%, compared to revenue of $111.1 million during the three months ended June 30, 2011. Portfolio revenue was $265.1 million during the six months ended June 30, 2012, an increase of $48.7 million, or 22.5%, compared to portfolio revenue of $216.4 million during the six months ended June 30, 2011. The increase in portfolio revenue during the three and six months ended June 30, 2012 was primarily the result of additional accretion revenue associated with a higher portfolio balance during the three and six months ended June 30, 2012 compared to the same periods of the prior year. During the three months ended June 30, 2012, we recorded a net portfolio allowance reversal of $1.2 million, compared to a net portfolio allowance provision of $1.0 million during the three months ended June 30, 2011. During the six months ended June 30, 2012, we recorded a net portfolio allowance reversal of $0.8 million, compared to a net portfolio allowance provision of $6.5 million during the six months ended June 30, 2011.

Net interest income from our tax lien transfer segment was $2.3 million for the period from acquisition (May 8, 2012) through June 30, 2012.

29

Operating Expenses

Total operating expenses were $102.8 million during the three months ended June 30, 2012, an increase of $21.3 million, or 26.1%, compared to total operating expenses of $81.5 million during the three months ended June 30, 2011.

Total operating expenses were $194.2 million during the six months ended June 30, 2012, an increase of $34.5 million, or 21.6%, compared to total operating expenses of $159.7 million during the six months ended June 30, 2011.

Operating expenses are explained in more detail as follows:

Salaries and employee benefits

Salaries and employee benefits, excluding stock-based compensation expense, increased $5.5 million, or 32.2%, to $22.7 million during the three months ended June 30, 2012, from $17.1 million during the three months ended June 30, 2011. The increase was primarily the result of increases in headcount and related compensation expense to support the growth in our portfolio purchasing and recovery business and the acquisition of Propel Financial Services, LLC, BNC Retax, LLC, RioProp Ventures, LLC, and certain related affiliates (collectively, the “Propel Entities”). Salaries and employee benefits related to our internal legal channel were approximately $1.6 million and $0.3 million for the three months ended June 30, 2012 and 2011, respectively.

Salaries and employee benefits, excluding stock-based compensation expense, increased $8.9 million, or 26.3%, to $42.7 million during the six months ended June 30, 2012, from $33.8 million during the six months ended June 30, 2011. The increase was primarily the result of increases in headcount and related compensation expense to support our growth. Salaries and employee benefits related to our internal legal channel were approximately $2.9 million and $0.8 million for the six months ended June 30, 2012 and 2011, respectively.

Salaries and employee benefits, excluding stock-based compensation expense broken down between the reportable segments are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Salaries and employee benefits, excluding stock-based compensation:
Portfolio purchasing and recovery	$	21,963	$	17,129	$	42,001	$	33,796
Tax lien transfer		688		—		688		—
	$	22,651	$	17,129	$	42,689	$	33,796

Stock-based compensation expense

Stock-based compensation increased $0.7 million, or 40.3%, to $2.5 million during the three months ended June 30, 2012, from $1.8 million during the three months ended June 30, 2011. Stock-based compensation increased $1.2 million, or 34.4%, to $4.8 million during the three months ended June 30, 2012, from $3.6 million during the six months ended June 30, 2011. The increases were primarily attributable to higher fair value of equity awards granted in recent periods.

Cost of legal collections – Portfolio purchasing and recovery

The cost of legal collections increased $0.3 million, or 0.8%, to $41.0 million during the three months ended June 30, 2012, compared to $40.7 million during the three months ended June 30, 2011. These costs represent contingent fees paid to our nationwide network of attorneys and costs of litigation. The increase in the cost of legal collections was primarily the result of an increase of $1.3 million in contingent fees paid to our network of attorneys related to an increase of $16.8 million, or 17.1%, in gross collections through our legal channel. Gross legal collections amounted to $114.9 million during the three months ended June 30, 2012, up from $98.1 million collected during the three months ended June 30, 2011. The increase was offset by a decrease of $1.1 million in upfront litigation costs expensed during the period. The cost of legal collections decreased as a percent of gross collections through this channel to 35.7% during the three months ended June 30, 2012, from 41.5% during the three months ended June 30, 2011, primarily due to an improvement in our court cost recovery rate and a decrease in the commission rate we pay our contracted attorneys.

The cost of legal collections increased $2.5 million, or 3.2%, to $79.7 million during the six months ended June 30, 2012, compared to $77.2 million during the six months ended June 30, 2011. The increase in the cost of legal collections was primarily the result of an increase of $4.6 million in contingent fees paid to our network of attorneys related to an increase of $37.8 million, or 20.3%, in gross collections through our legal channel. Gross legal collections amounted to $224.4 million during the six months ended June 30, 2012, up from $186.6 million collected during the six months ended June 30, 2011. The cost of legal collections decreased as a percent of gross collections through this channel to 35.5% during the six months ended June 30, 2012, from 41.4% during the six months ended June 30, 2011, primarily due to an improvement in our court cost recovery rate and a decrease in the commission rate we pay our contracted attorneys.

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The following table summarizes our legal collection channel performance and related direct costs (in thousands, except percentages):

	Three Months Ended June 30,										Six Months Ended June 30,
	2012					2011					2012					2011
Collections(1)	$	114,876		100.0	%	$	98,084		100.0	%	$	224,448		100.0	%	$	186,572		100.0	%
Court costs advanced		23,105		20.1	%		24,354		24.8	%		45,221		20.1	%		47,653		25.5	%
Court costs deferred		(10,946	)	(9.5	)%		(11,038	)	(11.2	)%		(22,573	)	(10.0	)%		(22,629	)	(12.1	)%
Court cost expense(2)		12,159		10.6	%		13,316		13.6	%		22,648		10.1	%		25,024		13.4	%
Other(3)		592		0.5	%		421		0.4	%		1,171		0.5	%		915		0.5	%
Commissions		28,273		24.6	%		26,949		27.5	%		55,840		24.9	%		51,256		27.5	%
Total Costs	$	41,024		35.7	%	$	40,686		41.5	%	$	79,659		35.5	%	$	77,195		41.4	%

⁽¹⁾  Includes collections from our internal legal channel of approximately $4.3 million and $0.3 million for the three months ended June 30, 2012 and 2011, respectively; and approximately $7.2 million and $0.3 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾  In connection with our agreement with contracted attorneys, we advance certain out-of-pocket court costs. We capitalize these costs in our consolidated financial statements and provide a reserve and corresponding court cost expense for the costs that we believe will be ultimately uncollectible. This amount includes changes in our anticipated recovery rate of court costs expensed. This amount also includes court costs expensed through our internal legal channel of approximately $1.5 million and less than $0.1 million for the three months ended June 30, 2012 and 2011, respectively; and approximately $2.7 million and $0.3 million for the six months ended June 30, 2012 and 2011, respectively.

⁽³⁾  Other costs consist of costs related to counter claims and legal network subscription fees.

Other operating expenses

Other operating expenses increased $4.1 million, or 50.6%, to $12.4 million during the three months ended June 30, 2012, from $8.3 million during the three months ended June 30, 2011. The increase was primarily the result of an increase of $1.3 million in direct mail campaign expenses, an increase of $0.5 million in recruiting expenses, an increase of $0.5 million in advertising expenses related to the Propel Entities, an increase of $0.4 million in media-related expenses, an increase of $0.4 million in payment processing costs, and a net increase in various other operating expenses of $1.0 million, all to support our growth.

Other operating expenses increased $7.0 million, or 41.0%, to $24.0 million during the six months ended June 30, 2012, from $17.0 million during the six months ended June 30, 2011. The increase was primarily the result of an increase of $2.7 million in direct mail campaign expenses, an increase of $0.7 million in recruiting expenses, an increase of $0.5 million in advertising expenses related to the Propel Entities, an increase of $0.9 million in media-related expenses, an increase of $0.5 million in payment processing cost, and a net increase in various other operating expenses of $1.7 million, all to support our growth.

Other operating expenses broken down between the reportable segments are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Other operating expenses:
Portfolio purchasing and recovery	$	11,857	$	8,250	$	23,455	$	17,040
Tax lien transfer		570		—		570		—
	$	12,427	$	8,250	$	24,025	$	17,040

Collection agency commissions – Portfolio purchasing and recovery

During the three months ended June 30, 2012, we incurred $4.2 million in commissions to third party collection agencies, or 29.7%, of the related gross collections of $14.0 million, compared to $3.6 million in commissions, or 29.0%, of the related gross collections of $12.4 million, during the three months ended June 30, 2011. The increase in the net commission rate as a percentage of the related gross collections was primarily due to the mix of accounts placed with the agencies. Commissions, as a percentage of collections through this channel, vary from period to period depending on, among other things, the time from charge-off of the accounts placed with an agency. Generally, freshly charged-off accounts and consumer bankruptcy receivable accounts have a lower commission rate than consumer credit card receivable accounts and accounts that have been charged off for a longer period of time.

During the six months ended June 30, 2012, we incurred $8.1 million in commissions to third party collection agencies, or 31.7%, of the related gross collections of $25.6 million, compared to $7.5 million in commissions, or 28.4%, of the related gross collections of $26.4 million, during the six months ended June 30, 2011. As discussed above, the increase in the net commission rate as a percentage of the related gross collections was primarily due to the mix of accounts placed with the agencies.

31

General and administrative expenses

General and administrative expenses increased $9.5 million, or 104.4%, to $18.6 million during the three months ended June 30, 2012, from $9.1 million during the three months ended June 30, 2011. The increase was primarily the result of $3.8 million in accounting and consulting fees attributable to our acquisition of the Propel Entities (the “Propel Acquisition”), an increase of $2.8 million in costs related to legal settlements, an increase of $1.0 million in corporate legal expenses, an increase of $0.3 million in building rent and a net increase in other general and administrative expenses of $1.6 million.

General and administrative expenses increased $13.5 million, or 71.8%, to $32.2 million during the six months ended June 30, 2012, from $18.8 million during the six months ended June 30, 2011. The increase was primarily the result of $4.3 million in accounting and consulting fees attributable to our Propel Acquisition, an increase of $4.4 million in costs related to legal settlements, an increase of $1.3 million in corporate legal expenses, an increase of $0.7 million in building rent and a net increase in other general and administrative expenses of $2.8 million.

General and administrative expenses broken down between the reportable segments are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
General and administrative expenses:
Portfolio purchasing and recovery	$	18,327	$	9,089	$	31,985	$	18,767
Tax lien transfer		255		—		255		—
	$	18,582	$	9,089	$	32,240	$	18,767

Depreciation and amortization

Depreciation and amortization expense increased $0.4 million, or 48.2%, to $1.4 million during the three months ended June 30, 2012, from $1.0 million during the three months ended June 30, 2011. Depreciation and amortization expense increased $0.8 million, or 42.9%, to $2.7 million during the six months ended June 30, 2012, from $1.9 million during the six months ended June 30, 2012. The increases during the three and six months ended June 30, 2012 were primarily related to increased depreciation expenses resulting from our acquisition of fixed assets in recent periods.

Cost per Dollar Collected – Portfolio purchasing and recovery

The following tables summarize our cost per dollar collected (in thousands, except percentages):

	Three Months Ended June 30,
	2012											2011
	Collections		Cost			Cost Per Channel Dollar Collected			Cost Per Total Dollar Collected			Collections		Cost			Cost Per Channel Dollar Collected			Cost Per Total Dollar Collected
Legal networks(1)	$	114,876	$	41,024			35.7	%		17.1	%	$	98,084	$	40,686			41.5	%		20.9	%
Collection sites		111,641		6,649	(2)		6.0	%		2.8	%		84,576		6,527	(2)		7.7	%		3.4	%
Collection agency outsourcing		14,043		4,166			29.7	%		1.7	%		12,421		3,596			29.0	%		1.8	%
Other indirect costs(3)		—		43,144			—			17.9	%		—		28,899			—			14.8	%
Total	$	240,560	$	94,983	(4)					39.5	%	$	195,081	$	79,708	(4)					40.9	%

32

	Six Months Ended June 30,
	2012											2011
	Collections		Cost			Cost Per Channel Dollar Collected			Cost Per Total Dollar Collected			Collections		Cost			Cost Per Channel Dollar Collected			Cost  Per Total Dollar Collected
Legal networks(1)	$	224,448	$	79,659			35.5	%		16.9	%	$	186,572	$	77,195			41.4	%		20.0	%
Collection sites		221,511		13,125	(2)		5.9	%		2.8	%		173,117		13,236	(2)		7.6	%		3.4	%
Collection agency outsourcing		25,629		8,125			31.7	%		1.7	%		26,411		7,510			28.4	%		1.9	%
Other		—		—			—			—			54		—			—			—
Other indirect costs(3)		—		82,713			—			17.5	%		—		58,229			—			15.1	%
Total	$	471,588	$	183,622	(4)					38.9	%	$	386,154	$	156,170	(4)					40.4	%

⁽¹⁾  Collections include collections from our internal legal channel of approximately $4.3 million and $0.3 million for the three months ended June 30, 2012 and 2011, respectively; and approximately $7.2 million and $0.3 million for the six months ended June 30, 2012 and 2011, respectively. Court costs expensed through our internal legal channel were approximately $1.5 million and $0.2 million for the three months ended June 30, 2012 and 2011, respectively; and approximately $2.7 million and $0.3 million for the six months ended June 30, 2012 and 2011, respectively.

⁽²⁾  Cost in collection sites represents only Account Manager and their Supervisors’ salaries, variable compensation and employee benefits.

⁽³⁾  Other indirect costs represent non-collection salaries and employee benefits, general and administrative expenses, other operating expenses, and depreciation and amortization. Included in other indirect costs were costs related to our internal collection channel of approximately $0.6 million and $0.3 million for the three months ended June 30, 2012 and 2011, respectively; approximately $1.1 million and $0.4 million for the six months ended June 30, 2012 and 2011, respectively.

⁽⁴⁾  Represents all operating expenses, excluding stock-based compensation expense, tax lien transfer segment operating expenses, and acquisition related expenses. We include this information in order to facilitate a comparison of approximate cash costs to cash collections for the debt purchasing business in the periods presented. Refer to the items for reconciliation of operating expenses, excluding stock-based compensation expense, tax lien transfer segment operating expenses, and acquisition related expenses to generally accepted accounting practices (“GAAP”) total operating expenses in the table below.

The following table presents the items for reconciliation of operating expenses, excluding stock-based compensation expense, tax lien transfer operating expenses, and acquisition related expenses to GAAP total operating expenses (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
GAAP total operating expenses, as reported	$	102,809		$	81,518		$	194,203		$	159,745
Stock-based compensation expense		(2,539	)		(1,810	)		(4,805	)		(3,575	)
Tax lien transfer segment operating expenses		(1,513	)		—			(1,513	)		—
Acquisition related expenses		(3,774	)		—			(4,263	)		—

During the three months ended June 30, 2012, cost per dollar collected decreased by 140 basis points to 39.5% of gross collections from 40.9% of gross collections during the three months ended June 30, 2011. This decrease was due to several factors, including:

• The cost of legal collections as a percentage of total collections decreased to 17.1% during the three months ended June 30, 2012, from 20.9% during the three months ended June 30, 2011 and, as a percentage of legal collections, decreased to 35.7% from 41.5%. The decreases were primarily due to an improvement in our court cost recovery rate and a decrease in the commission rate we pay our contracted attorneys.

• The cost from our collection sites, which includes Account Manager salaries, variable compensation and employee benefits, as a percentage of total collections, decreased to 2.8% during the three months ended June 30, 2012, from 3.4% during the three months ended June 30, 2011 and, as a percentage of our site collections, decreased to 6.0% from 7.7%. The decreases were primarily due to the continued growth of our collection workforce in India and improvements in our consumer insights, which allow us to more effectively determine which consumers have the ability to pay and how to best engage with them.

• Collection agency commissions, as a percentage of total collections, decreased to 1.7% during the three months ended June 30, 2012, from 1.8% during the same period in the prior year. The decrease was due to our continued effort in shifting collections from third party agencies to our collection sites. Our collection agency commission rate increased to 29.7% during the three months ended June 30, 2012, from 29.0% during the same period in the prior year. The increase in our commission rate was a result of a change in the mix of accounts placed into this channel. Generally, freshly charged-off accounts and consumer bankruptcy receivable accounts have a lower commission rate than consumer credit card receivable accounts and accounts that have been charged off for a longer period of time.

33

The decrease in cost per dollar collected was partially offset by an increase in other costs not directly attributable to specific channel collections (other indirect costs), as a percentage of total collections, of 3.1% to 17.9% for the three months ended June 30, 2012, from 14.8% for the three months ended June 30, 2011. These costs include non-collection site salaries and employee benefits, general and administrative expenses, other operating expenses, and depreciation and amortization. The dollar increase and the increase in cost per dollar collected were due to several factors, including increases in corporate settlements, increases in headcount and increases in other general and administrative expenses, to support our growth.

During the six months ended June 30, 2012, cost per dollar collected decreased by 150 basis points to 38.9% of gross collections from 40.4% of gross collections during the six months ended June 30, 2011. This decrease was due to several factors, including:

• The cost of legal collections as a percentage of total collections decreased to 16.9% during the six months ended June 30, 2012, from 20.0% during the six months ended June 30, 2011 and, as a percentage of legal collections, decreased to 35.5% from 41.4%. The decreases were primarily due to an improvement in our court cost recovery rate and a decrease in the commission rate we pay our contracted attorneys.

• The cost from our collection sites, which includes Account Manager salaries, variable compensation and employee benefits, as a percentage of total collections, decreased to 2.8% during the six months ended June 30, 2012, from 3.4% during the six months ended June 30, 2011 and, as a percentage of our site collections, decreased to 5.9% from 7.6%. The decreases were primarily due to the continued growth of our collection workforce in India and improvements in our consumer insights, which allow us to more effectively determine which consumers have the ability to pay and how to best engage with them.

• Collection agency commissions, as a percentage of total collections, decreased to 1.7% during the six months ended June 30, 2012, from 1.9% during the same period in the prior year. The decrease was due to our continued effort in shifting collections from third party agencies to our collection sites. Our collection agency commission rate increased to 31.7% during the six months ended June 30, 2012, from 28.4% during the same period in the prior year. The increase in our commission rate was a result of a change in the mix of accounts placed into this channel. Generally, freshly charged-off accounts and consumer bankruptcy receivable accounts have a lower commission rate than accounts that have been charged off for a longer period of time.

The decrease in cost per dollar collected was partially offset by an increase in other costs not directly attributable to specific channel collections (other indirect costs), as a percentage of total collections, of 2.4% to 17.5% for the six months ended June 30, 2012, from 15.1% for the six months ended June 30, 2011. These costs include non-collection site salaries and employee benefits, general and administrative expenses, other operating expenses, and depreciation and amortization. The dollar increase and the increase in cost per dollar collected were due to several factors, including increases in corporate settlements and increases in headcount and general and administrative expenses, to support our growth.

Interest Expense – Portfolio purchasing and recovery

Interest expense increased $1.1 million, or 21.0%, to $6.5 million during the three months ended June 30, 2012, from $5.4 million during the three months ended June 30, 2011. Interest expense increased $1.1 million, or 9.6%, to $12.0 million during the six months ended June 30, 2012, from $11.0 million during the six months ended June 30, 2011.

The following table summarizes our interest expense (in thousands, except percentages):

	Three Months Ended June 30,
	2012		2011		$ Change		% Change
Stated interest on debt obligations	$	5,932	$	4,908	$	1,024		20.9	%
Amortization of loan fees and other loan costs		565		461		104		22.6	%
Total interest expense	$	6,497	$	5,369	$	1,128		21.0	%

	Six Months Ended June 30,
	2012		2011		$ Change		% Change
Stated interest on debt obligations	$	10,981	$	10,061	$	920		9.1	%
Amortization of loan fees and other loan costs		1,031		901		130		14.4	%
Total interest expense	$	12,012	$	10,962	$	1,050		9.6	%

34

Stated interest on debt obligations increased $1.0 million during the three months ended June 30, 2012, compared to the same period of the prior year. Stated interest on debt obligations increased $0.9 million during the six months ended June 30, 2012, compared to the same period of the prior year. The increases in stated interest on debt obligations for the three and six months ended June 30, 2012, were primarily due to higher outstanding loan balances under our revolving credit facility.

Provision for Income Taxes

During the three months ended June 30, 2012, we recorded an income tax provision of $12.8 million, reflecting an effective rate of 40.4% of pretax income from continuing operations. The effective tax rate for the three months ended June 30, 2012 primarily consisted of a provision for federal income taxes of 32.7% (which is net of a benefit for state taxes of 2.3%), a blended provision for state taxes of 6.5%, and a provision due to the true-up of certain state and federal tax accounts of 1.2%.

During the three months ended June 30, 2011, we recorded an income tax provision of $9.5 million, reflecting an effective rate of 39.1% of pretax income from continuing operations. The effective tax rate for the three months ended June 30, 2011 primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a blended provision for state taxes of 7.0%, and a net benefit for permanent book versus tax differences of 0.4%.

During the six months ended June 30, 2012, we recorded an income tax provision of $24.5 million, reflecting an effective rate of 39.8% of pretax income from continuing operations. The effective tax rate for the six months ended June 30, 2012 primarily consisted of a provision for federal income taxes of 32.7% (which is net of a benefit for state taxes of 2.3%), a provision for state taxes of 6.5%, and a provision due to the true-up of certain state and federal tax accounts of 0.6%.

During the six months ended June 30, 2011, we recorded an income tax provision of $17.8 million, reflecting an effective rate of 38.9% of pretax income from continuing operations. The effective tax rate for the six months ended June 30, 2011 primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a provision for state taxes of 7.0% and a benefit for permanent book versus tax differences of 0.6%.

The increase in our overall effective tax rate from June 30, 2011 to June 30, 2012 was primarily attributable to an increase in the effective tax rate in India. Our operations in India benefited from a tax holiday, which expired on March 31, 2011. Our subsidiary in Costa Rica is operating under a 100% tax holiday for the next eight years and a 50% tax holiday for the following four years. The impact of the tax holiday in Costa Rica for the three and six months ended June 30, 2012 was immaterial.

35

Supplemental Performance Data – Portfolio purchasing and recovery

Cumulative Collections to Purchase Price Multiple

The following table summarizes our purchases and related gross collections by year of purchase (in thousands, except multiples):

Year of Purchase	Purchase Price(1)			Cumulative Collections through June 30, 2012
				<2006		2006		2007		2008		2009		2010		2011		2012		Total(2)		CCM(3)
<2005	$	385,471	(4)	$	974,411	$	164,211	$	85,333	$	45,893	$	27,708	$	19,986	$	15,180	$	6,179	$	1,338,901		3.5
2005		192,585			66,491		129,809		109,078		67,346		42,387		27,210		18,651		7,045		468,017		2.4
2006		141,027			—		42,354		92,265		70,743		44,553		26,201		18,306		7,179		301,601		2.1
2007		204,097			—		—		68,048		145,272		111,117		70,572		44,035		16,708		455,752		2.2
2008		227,859			—		—		—		69,049		165,164		127,799		87,850		33,157		483,019		2.1
2009		253,359			—		—		—		—		96,529		206,773		164,605		62,492		530,399		2.1
2010		358,581			—		—		—		—		—		125,853		288,788		122,790		537,431		1.5
2011		384,972			—		—		—		—		—		—		123,596		165,712		289,308		0.8
2012		360,832			—		—		—		—		—		—		—		50,290		50,290		0.1
Total	$	2,508,783		$	1,040,902	$	336,374	$	354,724	$	398,303	$	487,458	$	604,394	$	761,011	$	471,552	$	4,454,718		1.8

⁽¹⁾  Adjusted for put-backs, account recalls, and purchase price rescissions. Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represents accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).

⁽²⁾  Cumulative collections from inception through June 30, 2012, excluding collections on behalf of others.

⁽³⁾  Cumulative Collections Multiple (“CCM”) through June 30, 2012 – collections as a multiple of purchase price.

⁽⁴⁾  From inception through December 31, 2004.

Total Estimated Collections to Purchase Price Multiple

The following table summarizes our purchases, resulting historical gross collections, and estimated remaining gross collections by year of purchase (in thousands, except multiples):

	Purchase  Price(1)			Historical Collections(2)		Estimated Remaining Collections(4)		Total Estimated Gross Collections		Total Estimated Gross Collections to Purchase Price
<2005	$	385,471	(3)	$	1,338,901	$	9,787	$	1,348,688		3.5
2005		192,585			468,017		13,238		481,255		2.5
2006		141,027			301,601		23,371		324,972		2.3
2007		204,097			455,752		50,387		506,139		2.5
2008		227,859			483,019		94,911		577,930		2.5
2009		253,359			530,399		183,655		714,054		2.8
2010		358,581			537,431		411,450		948,881		2.6
2011		384,972			289,308		573,116		862,424		2.2
2012		360,832			50,290		622,734		673,024		1.9
Total	$	2,508,783		$	4,454,718	$	1,982,649	$	6,437,367		2.6

⁽¹⁾  Adjusted for Put-Backs, Recalls, and purchase price rescissions.

⁽²⁾  Cumulative collections from inception through June 30, 2012, excluding collections on behalf of others.

⁽³⁾  From inception through December 31, 2004.

⁽⁴⁾  Estimated remaining collections include anticipated collections beyond our 84 to 96 month collection forecast.

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Estimated Remaining Gross Collections by Year of Purchase

The following table summarizes our estimated remaining gross collections by year of purchase (in thousands):

	Estimated Remaining Gross Collections by Year of Purchase(1)
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		2022		Total
<2005	$	9,787	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	9,787
2005		4,632		4,605		2,965		1,025		11		—		—		—		—		—		—		13,238
2006		6,785		11,323		3,091		1,511		661		—		—		—		—		—		—		23,371
2007		12,732		17,697		8,754		4,419		4,163		2,622		—		—		—		—		—		50,387
2008		24,005		33,287		17,962		9,440		5,323		3,484		1,410		—		—		—		—		94,911
2009		39,193		62,255		39,925		20,919		11,140		4,652		3,684		1,887		—		—		—		183,655
2010		80,493		127,925		82,324		51,235		29,559		18,991		10,506		7,183		3,234		—		—		411,450
2011		118,695		183,006		106,785		65,997		39,759		23,550		16,162		9,560		6,847		2,755		—		573,116
2012		97,374		195,678		131,528		79,885		49,810		30,584		17,639		9,140		6,121		3,559		1,416		622,734
	$	393,696	$	635,776	$	393,334	$	234,431	$	140,426	$	83,883	$	49,401	$	27,770	$	16,202	$	6,314	$	1,416	$	1,982,649

⁽¹⁾  Estimated remaining collections include anticipated collections beyond our 84 to 96 month collection forecast.

Unamortized Balances of Portfolios

The following table summarizes the remaining unamortized balances of our purchased receivable portfolios by year of purchase (in thousands, except percentages):

	Unamortized Balance as  of June 30, 2012		Purchase Price(1)		Unamortized Balance as a Percentage of Purchase Price			Unamortized Balance as a Percentage of Total
2005	$	5,000	$	192,585		2.6	%		0.6	%
2006		12,869		141,027		9.1	%		1.5	%
2007		14,079		204,097		6.9	%		1.6	%
2008		42,512		227,859		18.7	%		4.9	%
2009		64,115		253,359		25.3	%		7.4	%
2010		140,057		358,581		39.1	%		16.1	%
2011		252,702		384,972		65.6	%		29.0	%
2012		338,525		360,832		93.8	%		38.9	%
Total	$	869,859	$	2,123,312		41.0	%		100.0	%

⁽¹⁾  Purchase price refers to the cash paid to a seller to acquire a portfolio less Put-Backs, plus an allocation of our forward flow asset (if applicable), and less the purchase price for accounts that were sold at the time of purchase to another debt purchaser.

Changes in the Investment in Receivable Portfolios

Revenue related to our investment in receivable portfolios comprises two groups. First, revenue from those portfolios that have a remaining book value and are accounted for on the accrual basis (“Accrual Basis Portfolios”), and second, revenue from those portfolios that have fully recovered their book value Zero Basis Portfolios and, therefore, every dollar of gross collections is recorded entirely as Zero Basis Revenue. If the amount and timing of future cash collections on a pool of receivables are not reasonably estimable, we account for such portfolios on the cost recovery method (“Cost Recovery Portfolios”). No revenue is recognized on Cost Recovery Portfolios until the cost basis has been fully recovered, at which time they become Zero Basis Portfolios.

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The following tables summarize the changes in the balance of the investment in receivable portfolios and the proportion of revenue recognized as a percentage of collections (in thousands, except percentages):

	Three Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	741,580		$	—		$	741,580
Purchases of receivable portfolios		230,983			—			230,983
Gross collections(1)		(233,437	)		(7,107	)		(240,544	)
Put-backs and recalls		(891	)		—			(891	)
Revenue recognized		131,443			6,126			137,569
Portfolio allowance reversals, net		181			981			1,162
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (2)		56.3	%		86.2	%		57.2	%
	Three Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	648,820		$	—		$	648,820
Purchases of receivable portfolios		93,701			—			93,701
Gross collections(1)		(190,901	)		(4,132	)		(195,033	)
Put-backs and recalls		(798	)		—			(798	)
Revenue recognized		109,185			2,914			112,099
(Portfolio allowances) portfolio allowance reversals, net		(2,224	)		1,218			(1,006	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (2)		57.2	%		70.5	%		57.5	%
	Six Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	716,454		$	—		$	716,454
Purchases of receivable portfolios		361,446			—			361,446
Gross collections(1)		(457,380	)		(14,172	)		(471,552	)
Put-backs and recalls		(1,625	)		—			(1,625	)
Revenue recognized		252,189			12,158			264,347
(Portfolio allowances) portfolio allowance reversals, net		(1,225	)		2,014			789
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (2)		55.1	%		85.8	%		56.1	%
	Six Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	644,753		$	—		$	644,753
Purchases of receivable portfolios		184,376			—			184,376
Gross collections(1)		(378,318	)		(7,749	)		(386,067	)
Put-backs and recalls		(1,698	)		—			(1,698	)
Revenue recognized		216,989			5,934			222,923
(Portfolio allowances) portfolio allowance reversals, net		(8,319	)		1,815			(6,504	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (2)		57.4	%		76.6	%		57.7	%

⁽¹⁾  Does not include amounts collected on behalf of others.

⁽²⁾  Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.

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As of June 30, 2012, we had $869.9 million in investment in receivable portfolios. This balance will be amortized based upon current projections of cash collections in excess of revenue applied to the principal balance. The estimated amortization of the investment in receivable portfolio balance is as follows (in thousands):

Year Ended December 31,	Amortization
2012(1)	$	141,898
2013		286,825
2014		186,840
2015		111,703
2016		72,466
2017		44,425
2018		22,249
2019		3,453
Total	$	869,859

⁽¹⁾  2012 amount consists of six months data from July 1, 2012 to December 31, 2012.

Collections by Channel

We utilize numerous business channels for the collection of charged-off credit cards and other receivables. The following table summarizes the gross collections by collection channel (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Legal collections	$	114,876	$	98,084	$	224,448	$	186,572
Collection sites		111,641		84,576		221,511		173,117
Collection agencies		14,043		12,421		25,629		26,411
Other		—		—		—		54
	$	240,560	$	195,081	$	471,588	$	386,154

Legal Outsourcing Costs as a Percentage of Gross Collections by Year of Collection

The following table summarizes our legal outsourcing court cost expense and commissions as a percentage of gross collections by year of collection:

	Collection Year
Placement Year	2003			2004			2005			2006			2007			2008			2009			2010			2011			2012			Cumulative Average
2003		41.7	%		39.2	%		35.2	%		33.4	%		31.0	%		32.0	%		32.9	%		33.2	%		31.3	%		32.7	%		36.9	%
2004		—			41.7	%		39.8	%		35.7	%		32.4	%		32.8	%		33.2	%		34.6	%		32.2	%		33.0	%		38.1	%
2005		—			—			46.1	%		40.6	%		32.6	%		32.1	%		32.3	%		34.0	%		32.5	%		31.3	%		38.5	%
2006		—			—			—			54.9	%		41.0	%		32.8	%		30.5	%		33.5	%		32.7	%		31.3	%		39.8	%
2007		—			—			—			—			64.8	%		43.5	%		31.3	%		32.2	%		32.5	%		31.7	%		42.6	%
2008		—			—			—			—			—			69.7	%		43.0	%		33.1	%		31.4	%		29.7	%		42.6	%
2009		—			—			—			—			—			—			69.7	%		41.4	%		31.1	%		28.4	%		42.7	%
2010		—			—			—			—			—			—			—			72.5	%		39.1	%		29.0	%		44.2	%
2011		—			—			—			—			—			—			—			—			64.5	%		36.9	%		49.7	%
2012		—			—			—			—			—			—			—			—			—			71.8	%		71.8	%

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Headcount by Function by Site

The following table summarizes our headcount by function by site:

	Headcount as of June 30,
	2012				2011
	Domestic		International		Domestic		International
General & Administrative		521		487		413		281
Account Manager		215		1,382		232		1,019
Bankruptcy Specialist		—		73		114		94
		736		1,942		759		1,394

Gross Collections by Account Manager

The following table summarizes our collection performance by Account Manager (in thousands, except headcount):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Gross collections—collection sites	$	111,641	$	84,576	$	221,511	$	173,117
Average active Account Manager		1,459		1,217		1,345		1,179
Collections per average active Account Manager	$	76.5	$	69.5	$	164.7	$	146.8

Gross Collections per Hour Paid

The following table summarizes our gross collections per hour paid to Account Managers (in thousands, except gross collections per hour paid):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Gross collections—collection sites	$	111,641	$	84,576	$	221,511	$	173,117
Total hours paid		611		589		1,143		1,114
Collections per hour paid	$	182.7	$	143.6	$	193.8	$	155.4

Collection Sites Direct Cost per Dollar Collected

The following table summarizes our gross collections in collection sites and the related direct cost (in thousands, except percentages):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Gross collections—collection sites	$	111,641		$	84,576		$	221,511		$	173,117
Direct cost(1)	$	6,649		$	6,527		$	13,125		$	13,236
Cost per dollar collected		6.0	%		7.7	%		5.9	%		7.6	%

⁽¹⁾  Represent Account Managers and their supervisors’ salaries, variable compensation, and employee benefits.

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Salaries and Employee Benefits by Function

The following table summarizes our salaries and employee benefits by function (excluding stock-based compensation) (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Portfolio purchasing and recovery activities
Collection site salaries and employee benefits(1)	$	6,649	$	6,527	$	13,125	$	13,236
Non-collection site salaries and employee benefits		15,314		10,602		28,876		20,560
Subtotal		21,963		17,129		42,001		33,796
Tax lien transfer		688		—		688		—
	$	22,651	$	17,129	$	42,689	$	33,796

⁽¹⁾  Represent Account Managers and their supervisors’ salaries, variable compensation, and employee benefits.

Purchases by Quarter

The following table summarizes the purchases we made by quarter, and the respective purchase prices (in thousands):

Quarter	# of Accounts		Face Value		Purchase Price
Q1 2010		839		2,112,332		81,632
Q2 2010		1,002		2,245,713		83,336
Q3 2010		1,101		2,616,678		77,889
Q4 2010		1,206		3,882,646		119,100
Q1 2011		1,243		2,895,805		90,675
Q2 2011		1,477		2,998,564		93,701
Q3 2011		1,633		2,025,024		65,731
Q4 2011		2,776		3,782,595		136,743
Q1 2012		2,132		2,902,409		130,463
Q2 2012		3,679		6,034,499		230,983

41

Liquidity and Capital Resources

Overview

Historically, we have met our cash requirements by utilizing our cash flows from operations, bank borrowings, and equity offerings. Our primary cash requirements have included the purchase of receivable portfolios, operating expenses, and the payment of interest and principal on bank borrowings and tax payments.

The following table summarizes our cash flows by category for the periods presented (in thousands):

	Six Months Ended June 30,
	2012			2011
Net cash provided by operating activities	$	44,605		$	31,743
Net cash used in investing activities		(347,806	)		(20,995	)
Net cash provided by (used in) financing activities		310,168			(6,993	)

On April 10 and May 8, 2012, we entered into amendments to our revolving credit facility. The amendments added new lenders, appointed a new administrative agent, changed the borrowing base advance rate and the method for its calculation, increased the aggregate revolving loan commitment by $145.0 million, from $410.5 million to $555.5 million, and reset the accordion feature by an additional $100.0 million, resulting in a maximum of $655.5 million that can be borrowed under the facility.

On May 8, 2012, in connection with our Propel Acquisition, we entered into a new $160.0 million syndicated loan facility (the “Propel Facility”). The Propel Facility was used to fund a portion of the purchase price and will be used to fund future growth at Propel.

Currently, all of our portfolio purchases are funded with cash from operations and borrowings under our debt facilities. See Note 12 “Debt” to our unaudited condensed consolidated financial statements for a further discussion of our debt.

Operating Cash Flows

Net cash provided by operating activities was $44.6 million and $31.7 million during the six months ended June 30, 2012 and 2011, respectively.

Cash provided by operating activities during the six months ended June 30, 2012, was primarily related to net income of $28.0 million and a $10.4 million non-cash add back related to impairment charges for goodwill and identifiable intangible assets related to Ascension, which is included in our discontinued operations. Cash provided by operating activities during the six months ended June 30, 2011, was primarily attributable to net income of $28.5 million and $6.5 million in a non-cash add back related to the net provision for allowance on our receivable portfolios.

Investing Cash Flows

Net cash used in investing activities was $347.8 million and $21.0 million during the six months ended June 30, 2012 and 2011, respectively.

The cash flows used in investing activities during the six months ended June 30, 2012, were primarily related to receivable portfolio purchases of $361.4 million, cash paid for our Propel Acquisition, net of cash acquired of $186.0 million, offset by gross collection proceeds applied to the principal of our receivable portfolios in the amount of $207.2 million. The cash flows used in investing activities during the six months ended June 30, 2011, were primarily related to receivable portfolio purchases of $184.4 million, offset by gross collection proceeds applied to the principal of our receivable portfolios in the amount of $163.1 million.

Capital expenditures for fixed assets acquired with internal cash flow were $2.6 million and $1.5 million for six months ended June 30, 2012 and 2011, respectively.

Financing Cash Flows

Net cash provided by financing activities was $310.2 million during the six months ended June 30, 2012, and net cash used in financing activities was $7.0 million during the six months ended June 30, 2011.

The cash provided by financing activities during the six months ended June 30, 2012, reflects $383.4 million in borrowings under our revolving credit facility and the Propel Facility, including approximately $187.2 million borrowed for our acquisition of the Propel Entities, offset by $70.5 million in repayments of amounts outstanding under our revolving credit facility. The cash used in financing activities during the six months ended June 30, 2011, reflects $87.0 million in repayments of amounts outstanding under our revolving credit facility, offset by $55.0 million in borrowings under our revolving credit facility and $25.0 million in borrowings under our senior secured notes.

42

We are in compliance with all covenants under our financing arrangements. We believe that we have sufficient liquidity to fund our operations for at least the next twelve months, given our expectation of continued positive cash flows from operations, our cash and cash equivalents of $15.0 million as of June 30, 2012, availability under our revolving credit facilities and our access to capital markets.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency. At June 30, 2012, there had not been a material change in any of the foreign currency risk information disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Interest Rate. At June 30, 2012, there had not been a material change in the interest rate risk information disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”) and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and accordingly, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on their most recent evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are effective.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

43

PART II—OTHER INFORMATION

Item 1 – Legal Proceedings

We are involved in disputes and legal actions from time to time in the ordinary course of business. We, along with others in our industry, are routinely subject to legal actions based on the FDCPA, comparable state statutes, the TCPA, state and federal unfair competition statutes, and common law causes of action. The violations of law alleged in these actions often include claims that we lack specified licenses to conduct our business, attempt to collect debts on which the statute of limitations has run, have made inaccurate assertions of fact in support of our collection actions and/or have acted improperly in connection with our efforts to contact consumers. These cases are frequently styled as supposed class actions. In addition, from time to time, we are subject to litigation and other actions by governmental bodies, including formal and informal investigations relating to our collection activities by the Federal Trade Commission, state attorneys general and other governmental bodies, with which we cooperate.

There has been no material development in any of the legal proceedings disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.

In certain legal proceedings, we may have recourse to insurance or third party contractual indemnities to cover all or portions of our litigation expenses, judgments, or settlements. In accordance with authoritative guidance, we record loss contingencies in our financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, we record the minimum estimated liability. We continuously assess the potential liability related to our pending litigation and revise our estimates when additional information becomes available. Our legal costs are recorded to expense as incurred.

Item 1A – Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. We urge you to carefully consider the specific risk factors listed under Part I, Item 1A of our 2011 Annual Report on Form 10-K filed on February 9, 2012 (incorporated by reference herein), together with all other information included or incorporated in our reports filed with the SEC. Any such risks may materialize, and additional risks not known to us, or that we now deem immaterial, may arise. In such event, our business, financial condition, results of operations or prospects could be materially adversely affected. If that occurs, the market price of our common stock could fall, and you could lose all or part of your investment.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Our revolving credit facilities contain restrictions and covenants, which limit, among other things, the payment of dividends.

44

Item 6. Exhibits

2.1	Securities Purchase Agreement, dated as of May 8, 2012, by and among Propel Acquisition LLC and McCombs Family Partners, Ltd., JHBC Holdings, LLC and Texas Tax Loans, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
4.1	Amendment No. 1, dated as of May 8, 2012, to Amended and Restated Senior Secured Note Purchase Agreement, dated as of February 10, 2011, by and among the Company, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Retirement Insurance and Annuity Company and Prudential Annuities Life Assurance Corporation, and SunTrust Bank as collateral agent and administrative agent (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.1	Amendment No. 4, dated as of April 10, 2012, to Credit Agreement, dated as of February 8, 2010, by and among the Company, the financial institutions listed on the signature pages thereto, and JPMorgan Chase Bank, N.A. as collateral agent and administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 16, 2012).
10.2	Amendment No. 5, dated as of May 8, 2012, to Credit Agreement, dated as of February 8, 2010, by and among the Company, the financial institutions listed on the signature pages thereto, and SunTrust Bank as collateral agent and administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.3	Credit Facility Loan Agreement, dated as of May 8, 2012, by and among Texas Capital Bank, National Association, as administrative agent, certain banks and Propel Financial Services, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.4	Guaranty Agreement dated as of May 8, 2012, with respect to the Credit Facility Loan Agreement, dated as of May 8, 2012 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.5	Form of Restricted Stock Award Grant Notice and Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 (filed herewith).
31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (filed herewith).
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101	The following financial information from the Encore Capital Group, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Financial Condition; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Statements of Stockholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ENCORE CAPITAL GROUP, INC.
By:	/s/ Paul Grinberg
	Paul Grinberg
	Executive Vice President,
	Chief Financial Officer and Treasurer

Date: August 2, 2012

46

EXHIBIT INDEX

2.1	Securities Purchase Agreement, dated as of May 8, 2012, by and among Propel Acquisition LLC and McCombs Family Partners, Ltd., JHBC Holdings, LLC and Texas Tax Loans, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
4.1	Amendment No. 1, dated as of May 8, 2012, to Amended and Restated Senior Secured Note Purchase Agreement, dated as of February 10, 2011, by and among the Company, The Prudential Insurance Company of America, Pruco Life Insurance Company, Prudential Retirement Insurance and Annuity Company and Prudential Annuities Life Assurance Corporation, and SunTrust Bank as collateral agent and administrative agent (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.1	Amendment No. 4, dated as of April 10, 2012, to Credit Agreement, dated as of February 8, 2010, by and among the Company, the financial institutions listed on the signature pages thereto, and JPMorgan Chase Bank, N.A. as collateral agent and administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 16, 2012).
10.2	Amendment No. 5, dated as of May 8, 2012, to Credit Agreement, dated as of February 8, 2010, by and among the Company, the financial institutions listed on the signature pages thereto, and SunTrust Bank as collateral agent and administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.3	Credit Facility Loan Agreement, dated as of May 8, 2012, by and among Texas Capital Bank, National Association, as administrative agent, certain banks and Propel Financial Services, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.4	Guaranty Agreement dated as of May 8, 2012, with respect to the Credit Facility Loan Agreement, dated as of May 8, 2012 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
10.5	Form of Restricted Stock Award Grant Notice and Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2012).
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 (filed herewith).
31.2	Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (filed herewith).
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101	The following financial information from the Encore Capital Group, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Financial Condition; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Statements of Stockholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, J. Brandon Black, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Encore Capital Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2012	By:	/s/ J. Brandon Black
		J. Brandon Black
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Paul Grinberg, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Encore Capital Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 2, 2012	By:	/s/ Paul Grinberg
		Paul Grinberg
		Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

ENCORE CAPITAL GROUP, INC.

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Encore Capital Group, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition and results of operations of the Company.

/s/ J. Brandon Black

J. Brandon Black

President and Chief Executive Officer

August 2, 2012

/s/ Paul Grinberg

Paul Grinberg

Executive Vice President, Chief

Financial Officer and Treasurer

August 2, 2012

XML

Discontinued Operations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenue and components of discontinued operations, net of tax
Revenue	$ 1,892	$ 4,725	$ 5,704	$ 9,693
(Loss) Income from discontinued operations before income taxes	(924)	20	(11,942)	669
Income tax benefit (expense)	362	(11)	4,678	(263)
(Loss) income from discontinued operations	(562)	9	(7,264)	406
Loss on sale of discontinued operations, before income taxes	(2,416)		(2,416)
Income tax benefit	586		586
Loss on sale of discontinued operations	(1,830)		2,416
Total (loss) income from discontinued operations	$ (2,392)	$ 9	$ (9,094)	$ 406

XML

Investment in Receivable Portfolios, Net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011	Mar. 31, 2011
Summary of accretable yield and an estimate of zero basis future cash flows
Beginning Balance	$ 981,978	$ 854,203	$ 753,494	$ 744,059
Revenue recognized, net	(138,731)	(126,405)	(111,093)	(105,326)
Net additions to existing portfolios	91,211	134,647	19,475	21,663
Additions for current purchases	178,332	119,533	95,532	93,098
Ending Balance	1,112,790	981,978	757,408	753,494
Accretable Yield [Member]
Summary of accretable yield and an estimate of zero basis future cash flows
Beginning Balance	952,759	821,527	749,889	739,785
Revenue recognized, net	(131,624)	(119,340)	(106,961)	(101,709)
Net additions to existing portfolios	77,473	131,039	15,575	18,715
Additions for current purchases	178,332	119,533	95,532	93,098
Ending Balance	1,076,940	952,759	754,035	749,889
Estimate of Zero Basis Cash Flows [Member]
Summary of accretable yield and an estimate of zero basis future cash flows
Beginning Balance	29,219	32,676	3,605	4,274
Revenue recognized, net	(7,107)	(7,065)	(4,132)	(3,617)
Net additions to existing portfolios	13,738	3,608	3,900	2,948
Ending Balance	$ 35,850	$ 29,219	$ 3,373	$ 3,605

XML

Derivatives and Hedging Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest rate swap agreements [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Gain or (Loss) Recognized in OCI- Effective Portion	$ 104	$ (1,072)	$ (71)	$ (566)
Foreign currency exchange contracts 1 [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Gain or (Loss) Recognized in OCI- Effective Portion	(3,120)	242	(2,200)	597
Foreign currency exchange contracts 2 [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Gain or (Loss) Recognized in OCI- Effective Portion	(510)	57	297	65
Interest Expense [Member] | Interest rate swap agreements [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Gain or (Loss) Reclassified from OCI into Income - Effective Portion
Salaries And Employee Benefits [Member] | Foreign currency exchange contracts 1 [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Gain or (Loss) Reclassified from OCI into Income - Effective Portion	(442)	94	(557)	167
General And Administrative Expenses [Member] | Foreign currency exchange contracts 2 [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Gain or (Loss) Reclassified from OCI into Income - Effective Portion	(78)	20	(95)	38
Other (Expense) Income [Member] | Interest rate swap agreements [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
Other (Expense) Income [Member] | Foreign currency exchange contracts 1 [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
Other (Expense) Income [Member] | Foreign currency exchange contracts 2 [Member]
Summary of the effects of derivatives in cash flow hedging relationships on statements of income
Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing

XML

Goodwill and Identifiable Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Summary of acquired intangible assets
Gross Carrying Amount	$ 570	$ 6,000
Accumulated Amortization	(20)	(5,538)
Net Carrying Amount	550	462
Goodwill	55,318	15,985
Goodwill - portfolio purchasing and recovery [Member]
Summary of acquired intangible assets
Goodwill	6,047	6,047
Goodwill - tax lien transfer [Member]
Summary of acquired intangible assets
Goodwill	49,271
Goodwill - bankruptcy servicing [Member]
Summary of acquired intangible assets
Goodwill		9,938
Customer Relationships [Member]
Summary of acquired intangible assets
Gross Carrying Amount		6,000
Accumulated Amortization		(5,538)
Net Carrying Amount		462
Trade name and other [Member]
Summary of acquired intangible assets
Gross Carrying Amount	570
Accumulated Amortization	(20)
Net Carrying Amount	$ 550

XML

Investment in Receivable Portfolios, Net (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of changes in the balance of the investment in receivable portfolios
Balance, beginning of period	$ 741,580	$ 648,820	$ 716,454	$ 644,753
Purchases of receivable portfolios	230,983	93,701	361,446	184,376
Gross collections	(240,544)	(195,033)	(471,552)	(386,067)
Put-backs and recalls	(891)	(798)	(1,625)	(1,698)
Revenue recognized	137,569	112,099	264,347	222,923
Portfolio allowance reversals, net	1,162	(1,006)	789	(6,504)
Balance, end of period	869,859	657,783	869,859	657,783
Revenue as a percentage of collections	57.20%	57.50%	56.10%	57.70%
Accrual Basis Portfolios [Member]
Summary of changes in the balance of the investment in receivable portfolios
Balance, beginning of period	741,580	648,820	716,454	644,753
Purchases of receivable portfolios	230,983	93,701	361,446	184,376
Gross collections	(233,437)	(190,901)	(457,380)	(378,318)
Put-backs and recalls	(891)	(798)	(1,625)	(1,698)
Revenue recognized	131,443	109,185	252,189	216,989
Portfolio allowance reversals, net	181	(2,224)	(1,225)	(8,319)
Balance, end of period	869,859	657,783	869,859	657,783
Revenue as a percentage of collections	56.30%	57.20%	55.10%	57.40%
Zero Basis Portfolios [Member]
Summary of changes in the balance of the investment in receivable portfolios
Balance, beginning of period
Gross collections	(7,107)	(4,132)	(14,172)	(7,749)
Revenue recognized	6,126	2,914	12,158	5,934
Portfolio allowance reversals, net	981	1,218	2,014	1,815
Balance, end of period
Revenue as a percentage of collections	86.20%	70.50%	85.80%	76.60%

XML

Fair Value Measurements (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Foreign currency exchange contracts		$ 168
Liabilities
Interest rate swap agreements	(1,085)	(1,014)
Foreign currency exchange contracts	(3,955)	(2,371)
Level 1 [Member]
Assets
Foreign currency exchange contracts
Liabilities
Interest rate swap agreements
Foreign currency exchange contracts
Level 2 [Member]
Assets
Foreign currency exchange contracts		168
Liabilities
Interest rate swap agreements	(1,085)	(1,014)
Foreign currency exchange contracts	(3,955)	(2,371)
Level 3 [Member]
Assets
Foreign currency exchange contracts
Liabilities
Interest rate swap agreements
Foreign currency exchange contracts

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Deferred Court Costs, Net (Tables)

6 Months Ended

Jun. 30, 2012

Deferred Court Costs, Net [Abstract]

Schedule of deferred court costs

	June 30, 2012			December 31, 2011
Court costs advanced	$	238,887		$	228,977
Court costs recovered		(65,937	)		(60,017	)
Court costs reserve		(132,780	)		(130,454	)
	$	40,170		$	38,506

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Investment in Receivable Portfolios, Net (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of total collections by collection channel
Collection of receivables	$ 240,560	$ 195,081	$ 471,588	$ 386,154
Legal Collections [Member]
Summary of total collections by collection channel
Collection of receivables	114,876	98,084	224,448	186,572
Collection Sites [Member]
Summary of total collections by collection channel
Collection of receivables	111,641	84,576	221,511	173,117
Collection Agencies [Member]
Summary of total collections by collection channel
Collection of receivables	14,043	12,421	25,629	26,411
Other [Member]
Summary of total collections by collection channel
Collection of receivables				$ 54

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Goodwill and Identifiable Intangible Assets (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012
Goodwill and Identifiable Intangible Assets (Textual) [Abstract]
Interim goodwill impairment	$ 9.9
Identifiable intangible assets write-off	$ 0.4

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2012

Discontinued Operations [Abstract]

Revenue and components of discontinued operations, net of tax

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenue	$	1,892		$	4,725		$	5,704		$	9,693
(Loss) Income from discontinued operations before income taxes	$	(924	)	$	20		$	(11,942	)	$	669
Income tax benefit (expense)		362			(11	)		4,678			(263	)
(Loss) income from discontinued operations		(562	)		9			(7,264	)		406
Loss on sale of discontinued operations, before income taxes		(2,416	)		—			(2,416	)		—
Income tax benefit		586			—			586			—
Loss on sale of discontinued operations		(1,830	)		—			(1,830	)		—
Total (loss) income from discontinued operations	$	(2,392	)	$	9		$	(9,094	)	$	406

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Stock Based Compensation (Details) (USD $)	6 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Weighted-average assumptions
Weighted average fair value of options granted	$ 11.77	$ 13.26
Risk free interest rate	0.89%	2.00%
Dividend yield	0.00%	0.00%
Volatility factor of the expected market price of the Company's common stock	63.00%	61.00%
Weighted-average expected life of options	5 years	5 years

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Business Combination (Details 1) (Consolidated Entities [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Consolidated Entities [Member]
Future results of operations of the combined companies
Consolidated pro forma revenue	$ 143,109	$ 115,168	$ 273,975	$ 224,277
Consolidated pro forma income from continuing operations	$ 21,557	$ 15,205	$ 40,708	$ 29,126

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Reconciliation of revenue and operating income from segments to consolidated

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Revenues:
Portfolio purchasing and recovery	$	138,731	$	111,093	$	265,136	$	216,419
Tax lien transfer		2,332		—		2,332		—
	$	141,063	$	111,093	$	267,468	$	216,419
Operating income:
Portfolio purchasing and recovery	$	41,394	$	32,343	$	79,911	$	62,111
Tax lien transfer		819		—		819		—
		42,213		32,343		80,730		62,111
Depreciation and amortization		1,420		958		2,660		1,862
Stock-based compensation		2,539		1,810		4,805		3,575
Other expense		6,420		5,334		11,663		10,802
Income from continuing operations before income taxes	$	31,834	$	24,241	$	61,602	$	45,872

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Stock Based Compensation (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2012
Summary of restricted stock units
Non-vested at December 31, 2011	589,117
Awarded	318,291
Vested	(243,784)
Cancelled/forfeited	(37,664)
Non-vested at June 30, 2012	625,960
Weighted Average Grant Date Fair Value, Non-vested at December 31, 2011	$ 19.22
Weighted Average Grant Date Fair Value, Awarded	$ 22.63
Weighted Average Grant Date Fair Value, Vested	$ 17.04
Weighted Average Grant Date Fair Value, Cancelled/forfeited	$ 22.15
Weighted Average Grant Date Fair Value, Non-vested at June 30, 2012	$ 21.63

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Commitments and Contingencies (Details) (USD $)	1 Months Ended
	Jun. 30, 2012
Commitments and Contingencies (Textual) [Abstract]
Face value of receivable portfolios purchased	$ 1,300,000,000
Purchase price of receivable portfolios	58,600,000
Purchase commitments in past one year

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Deferred Court Costs, Net (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of deferred court costs
Court costs advanced	$ 238,887	$ 228,977
Court costs recovered	(65,937)	(60,017)
Court costs reserve	(132,780)	(130,454)
Deferred court costs, net	$ 40,170	$ 38,506

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Derivatives and Hedging Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Interest rate swap agreements [Member] | Other Liabilities [Member]
Summary of fair value of derivative instruments as recorded in consolidated statements of financial position
Derivatives designated as hedging instruments	$ (1,085)	$ (1,014)
Interest rate swap agreements [Member] | Other Assets [Member]
Summary of fair value of derivative instruments as recorded in consolidated statements of financial position
Derivatives designated as hedging instruments		168
Foreign currency exchange contracts [Member] | Other Liabilities [Member]
Summary of fair value of derivative instruments as recorded in consolidated statements of financial position
Derivatives designated as hedging instruments	$ (3,955)	$ (2,371)

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Business Combination

6 Months Ended

Jun. 30, 2012

Business Combination [Abstract]

Business Combination

Note 3: Business Combination

On May 8, 2012, the Company acquired all of the outstanding equity interests of the Propel Entities (the “Propel Acquisition”) for $186.8 million in cash. The Propel Acquisition is being accounted for using the acquisition method of accounting and, accordingly, the tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the date of the acquisition.

The Company has completed an independent valuation study and determined the fair value of the assets acquired and the liabilities assumed from the Propel Entities. Fair value measurements have been applied based on assumptions that market participants would use in the pricing of the respective assets and liabilities. However, the purchase price allocation is still preliminary and is subject to adjustment based on a reconciliation of the actual balance sheet accounts as of the closing date to estimates used at the time of the consummation of the Propel Acquisition. This reconciliation is expected to be completed during the third quarter of 2012. As of the filing date of this Form 10-Q, the Company’s preliminary analysis indicated an additional payable to the seller amounted to approximately $0.7 million, which is reflected below.

The components of the preliminary purchase price allocation for the Propel Entities are as follows (in thousands):

Purchase price:
Cash paid	$	186,814
Estimated purchase price adjustment		725
Total estimated purchase price	$	187,539
Allocation of purchase price:
Cash	$	824
Accounts receivable		1,049
Interest receivable		3,679
Property tax payment agreements receivable		132,978
Fixed assets		461
Other assets		860
Liabilities assumed		(2,153	)
Identifiable intangible assets		570
Goodwill		49,271
Total net assets acquired	$	187,539

The following summary presents unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2012 and 2011 as if the Propel Acquisition had occurred on January 1, 2012 and 2011, respectively. The following unaudited pro forma financial information does not necessarily reflect the actual results that would have occurred had the Company and the Propel Entities been combined during the periods presented, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2012		2011		2012		2011
Consolidated pro forma revenue	$	143,109	$	115,168	$	273,975	$	224,277
Consolidated pro forma income from continuing operations		21,557		15,205		40,708		29,126

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Other Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Components of other assets
Prepaid income tax	$ 6,507	$ 53
Debt issuance costs, net of amortization	4,920	4,293
Prepaid expenses	5,624	5,232
Security deposit-building lease	1,550	1,482
Deferred compensation assets	721	722
Real Estate Owned	311
Other	1,959	186
Total other assets	$ 21,592	$ 11,968

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Business Combination (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	May 08, 2012
Business Combinations (Textual) [Abstract]
Company acquired all of the outstanding equity of propel in cash	$ 186,814,000	$ 186,800,000
Approximately additional amount payable to seller	$ 700,000
Date of Acquisition, Propel	May 08, 2012

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Derivatives and Hedging Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Derivatives And Hedging Instruments [Abstract]

Summary of fair value of derivative instruments as recorded in consolidated statements of financial position

	June 30, 2012				December 31, 2011
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other liabilities	$	(1,085	)	Other liabilities	$	(1,014	)
Foreign currency exchange contracts	Other assets		—		Other assets		168
Foreign currency exchange contracts	Other liabilities		(3,955	)	Other liabilities		(2,371	)

Summary of the effects of derivatives in cash flow hedging relationships on statements of income

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income - Effective Portion					Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Three Months Ended June 30,							Three Months Ended June 30,						Three Months Ended June 30,
	2012			2011				2012			2011			2012		2011
Interest rate swaps	$	140		$	(1,072	)	Interest expense	$	—		$	—	Other (expense) income	$	—	$	—
Foreign currency exchange contracts		(3,120	)		242		Salaries and employee benefits		(442	)		94	Other (expense) income		—		—
Foreign currency exchange contracts		(510	)		57		General and administrative expenses		(78	)		20	Other (expense) income		—		—

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income - Effective Portion					Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Six Months Ended June 30,							Six Months Ended June 30,						Six Months Ended June 30,
	2012			2011				2012			2011			2012		2011
Interest rate swaps	$	(71	)	$	(566	)	Interest expense	$	—		$	—	Other (expense) income	$	—	$	—
Foreign currency exchange contracts		(2,200	)		597		Salaries and employee benefits		(557	)		167	Other (expense) income		—		—
Foreign currency exchange contracts		(204	)		122		General and administrative expenses		(95	)		38	Other (expense) income		—		—

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Summary of financial assets and liabilities measured at fair value on a recurring basis

	Fair Value Measurements as of June 30, 2012
	Level 1		Level 2			Level 3		Total
Liabilities
Interest rate swap agreements	$	—	$	(1,085	)	$	—	$	(1,085	)
Foreign currency exchange contracts		—		(3,955	)		—		(3,955	)

	Fair Value Measurements as of December 31, 2011
	Level 1		Level 2			Level 3		Total
Assets
Foreign currency exchange contracts	$	—	$	168		$	—	$	168
Liabilities
Interest rate swap agreements		—		(1,014	)		—		(1,014	)
Foreign currency exchange contracts		—		(2,371	)		—		(2,371	)

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Investment in Receivable Portfolios, Net (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of change in the valuation allowance for investment in receivable portfolio
Balance at beginning of period	$ 109,867	$ 104,169	$ 109,494	$ 98,671
Provision for portfolio allowances	2,116	2,553	3,875	8,648
Reversal of prior allowance	(3,278)	(1,547)	(4,664)	(2,144)
Balance at end of period	$ 108,705	$ 105,175	$ 108,705	$ 105,175

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Components of basic and diluted earnings per share
Income from continuing operations	$ 18,988	$ 14,766	$ 37,096	$ 28,048
(Loss) income from discontinued operations, net of tax	(2,392)	9	(9,094)	406
Net income available for common stockholders	$ 16,596	$ 14,775	$ 28,002	$ 28,454
Weighted average common shares outstanding - basic	24,919	24,433	24,850	24,384
Dilutive effect of stock-based awards	906	1,177	972	1,210
Weighted average common shares outstanding - diluted	25,825	25,610	25,822	25,594
Basic earnings (loss) per share from:
Continuing operations	$ 0.76	$ 0.60	$ 1.49	$ 1.15
Discontinued operations	$ (0.10)	$ 0.00	$ (0.37)	$ 0.02
Net basic earnings per share	$ 0.67	$ 0.60	$ 1.13	$ 1.17
Diluted earnings (loss) per share from:
Continuing operations	$ 0.74	$ 0.58	$ 1.44	$ 1.09
Discontinued operations	$ (0.10)	$ 0.00	$ (0.37)	$ 0.02
Net diluted earnings per share	$ 0.64	$ 0.58	$ 1.08	$ 1.11

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Disclosure Of Compensation Related Costs Share-based Payments [Abstract]

Weighted-average assumptions

	Six Months Ended June 30,
	2012			2011
Weighted average fair value of options granted	$	11.77		$	13.26
Risk free interest rate		0.89	%		2.0	%
Dividend yield		0.0	%		0.0	%
Volatility factor of the expected market price of the Company’s common stock		63	%		61	%
Weighted-average expected life of options		5 Years			5 Years

Summary of stock option activity

	Number of Shares			Option Price Per Share		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011		2,182,940		$	0.51 – $24.65	$	13.00
Granted		193,500			—		22.17
Cancelled/forfeited		—			—		—
Exercised		(122,200	)		0.51 – 20.09		6.41
Outstanding at June 30, 2012		2,254,240		$	0.51 – $24.65	$	14.14	$	34,887
Exercisable at June 30, 2012		1,366,412		$	0.51 – $24.65	$	12.39	$	23,550

Summary of restricted stock units

	Non-Vested Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		589,117		$	19.22
Awarded		318,291		$	22.63
Vested		(243,784	)	$	17.04
Cancelled/forfeited		(37,664	)	$	22.15
Non-vested at June 30, 2012		625,960		$	21.63

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Investment in Receivable Portfolios, Net (Tables)

6 Months Ended

Jun. 30, 2012

Property Tax Notes Receivable [Abstract]

Summary of accretable yield and an estimate of zero basis future cash flows

	Accretable Yield			Estimate of Zero Basis Cash Flows			Total
Balance at December 31, 2011	$	821,527		$	32,676		$	854,203
Revenue recognized, net		(119,340	)		(7,065	)		(126,405	)
Net additions to existing portfolios (1)		131,039			3,608			134,647
Additions for current purchases (1)		119,533			—			119,533
Balance at March 31, 2012	$	952,759		$	29,219		$	981,978
Revenue recognized, net		(131,624	)		(7,107	)		(138,731	)
Net additions to existing portfolios (1)		77,473			13,738			91,211
Additions for current purchases (1)		178,332			—			178,332
Balance at June 30, 2012	$	1,076,940		$	35,850		$	1,112,790

⁽¹⁾  Estimated remaining collections and accretable yield include anticipated collections beyond the 84 to 96 month collection forecast.

	Accretable Yield			Estimate of Zero Basis Cash Flows			Total
Balance at December 31, 2010	$	739,785		$	4,274		$	744,059
Revenue recognized, net		(101,709	)		(3,617	)		(105,326	)
Net additions to existing portfolios		18,715			2,948			21,663
Additions for current purchases		93,098			—			93,098
Balance at March 31, 2011	$	749,889		$	3,605		$	753,494
Revenue recognized, net		(106,961	)		(4,132	)		(111,093	)
Net additions to existing portfolios		15,575			3,900			19,475
Additions for current purchases		95,532			—			95,532
Balance at June 30, 2011	$	754,035		$	3,373		$	757,408

Summary of changes in the balance of the investment in receivable portfolios

	Three Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	741,580		$	—		$	741,580
Purchases of receivable portfolios		230,983			—			230,983
Gross collections (1)		(233,437	)		(7,107	)		(240,544	)
Put-backs and recalls (2)		(891	)		—			(891	)
Revenue recognized		131,443			6,126			137,569
Portfolio allowance reversals, net		181			981			1,162
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (3)		56.3	%		86.2	%		57.2	%

	Three Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	648,820		$	—		$	648,820
Purchases of receivable portfolios		93,701			—			93,701
Gross collections (1)		(190,901	)		(4,132	)		(195,033	)
Put-backs and recalls (2)		(798	)		—			(798	)
Revenue recognized		109,185			2,914			112,099
(Portfolio allowances) portfolio allowance reversals, net		(2,224	)		1,218			(1,006	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (3)		57.2	%		70.5	%		57.5	%

	Six Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	716,454		$	—		$	716,454
Purchases of receivable portfolios		361,446			—			361,446
Gross collections (1)		(457,380	)		(14,172	)		(471,552	)
Put-backs and recalls (2)		(1,625	)		—			(1,625	)
Revenue recognized		252,189			12,158			264,347
(Portfolio allowances) portfolio allowance reversals, net		(1,225	)		2,014			789
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (3)		55.1	%		85.8	%		56.1	%

	Six Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	644,753		$	—		$	644,753
Purchases of receivable portfolios		184,376			—			184,376
Gross collections (1)		(378,318	)		(7,749	)		(386,067	)
Put-backs and recalls (2)		(1,698	)		—			(1,698	)
Revenue recognized		216,989			5,934			222,923
(Portfolio allowances) portfolio allowance reversals, net		(8,319	)		1,815			(6,504	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (3)		57.4	%		76.6	%		57.7	%

⁽¹⁾  Does not include amounts collected on behalf of others.

⁽²⁾  Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represent accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).

⁽³⁾  Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.

Summary of change in the valuation allowance for investment in receivable portfolio

	Valuation Allowance
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Balance at beginning of period	$	109,867		$	104,169		$	109,494		$	98,671
Provision for portfolio allowances		2,116			2,553			3,875			8,648
Reversal of prior allowances		(3,278	)		(1,547	)		(4,664	)		(2,144	)
Balance at end of period	$	108,705		$	105,175		$	108,705		$	105,175

Summary of total collections by collection channel

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Legal collections	$	114,876	$	98,084	$	224,448	$	186,572
Collection sites		111,641		84,576		221,511		173,117
Collection agencies		14,043		12,421		25,629		26,411
Other		—		—		—		54
	$	240,560	$	195,081	$	471,588	$	386,154

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Discontinued Operations

6 Months Ended

Jun. 30, 2012

Discontinued Operations [Abstract]

Discontinued Operations

Note 2: Discontinued Operations

On May 16, 2012, the Company completed the sale of the assets of its bankruptcy servicing subsidiary Ascension Capital Group, Inc. (“Ascension”) to a subsidiary of American InfoSource, L.P. (“AIS”). The Company agreed to fund certain, agreed-upon operating losses in the first year of AIS’ ownership of the Ascension business, not to exceed $4.0 million. If the Ascension business becomes profitable under AIS’ ownership, the Company will be paid an earn-out equal to 30 to 40% of Ascension’s EBITDA for the first five years commencing May 16, 2012. The Company received no proceeds from the sale. Additionally, the Company recognized the entire $4.0 million loss contingency during the three months ended June 30, 2012.

The Company performed an interim goodwill impairment test for Ascension as of March 31, 2012 and concluded that the entire goodwill balance relating to Ascension of $9.9 million was impaired. Additionally, the Company wrote-off the remaining identifiable intangible assets of approximately $0.4 million relating to Ascension.

Ascension’s operations are presented as discontinued operations for the three and six months ended June 30, 2012 and 2011, in the Company’s consolidated statements of comprehensive income. The following table presents the revenue and components of discontinued operations, net of tax (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenue	$	1,892		$	4,725		$	5,704		$	9,693
(Loss) Income from discontinued operations before income taxes	$	(924	)	$	20		$	(11,942	)	$	669
Income tax benefit (expense)		362			(11	)		4,678			(263	)
(Loss) income from discontinued operations		(562	)		9			(7,264	)		406
Loss on sale of discontinued operations, before income taxes		(2,416	)		—			(2,416	)		—
Income tax benefit		586			—			586			—
Loss on sale of discontinued operations		(1,830	)		—			(1,830	)		—
Total (loss) income from discontinued operations	$	(2,392	)	$	9		$	(9,094	)	$	406

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Property Tax Notes Receivable (Tables)

6 Months Ended

Jun. 30, 2012

Property Tax Notes Receivable [Abstract]

Aging analysis of property tax notes receivable

	Current		30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total
Property tax payment agreements receivable	$	110,080	$	4,098	$	6,711	$	21,687	$	142,576

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Discontinued Operations (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2012
Discontinued Operations (Textual) [Abstract]
Maximum operating profit of discontinued business to be covered			$ 4.0
Description of payment of earn-out of EBITDA from discontinued operation			Company will be paid an earn-out equal to 30 to 40% of Ascension’s EBITDA for the first five years after closing
Recognized loss contingency	4.0
Entire goodwill balance		9.9
Wrote-off the remaining identifiable intangible assets		$ 0.4

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Stock Based Compensation (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Stock Based Compensation (Textual) [Abstract]
Stock options contractual term			10-year
Stock Based Compensation (Additional Textual) [Abstract]
Maximum number of shares available for Stock Incentive Plan	2,000,000		2,000,000
Shares available for grant	3,500,000		3,500,000
Stock-based compensation expense	$ 2,539,000	$ 1,810,000	$ 4,805,000	$ 3,575,000
Stock options intrinsic value			2,400,000	9,900,000
Weighted-average remaining contractual life, options outstanding			5 years 8 months 12 days
Weighted-average remaining contractual life, options exercisable			4 years 3 months 18 days
Reversals of compensation expense related to Performance-Based Awards			0
Stock Options [Member]
Stock Based Compensation (Textual) [Abstract]
Stock options contractual term			Ten-year
Unrecognized compensation cost	3,000,000		3,000,000
Weighted-average period in years, unrecognized compensation cost			2 years 1 month 6 days
Performance-Based Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Non-vested shares expected to vest	16,437		16,437
Non-Performance Based Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Non-vested shares expected to vest	609,523		609,523
Restricted Stock Units (RSUs) [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized compensation cost	8,700,000		8,700,000
Weighted-average period in years, unrecognized compensation cost			2 years 1 month 6 days
Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Fair value of restricted stock units and restricted stock awards vested			$ 5,600,000	$ 5,600,000
Minimum [Member] | Stock Options [Member]
Stock Based Compensation (Textual) [Abstract]
Vested period			3 years
Minimum [Member] | Performance-Based Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Vested period			1 year
Minimum [Member] | Non-Performance Based Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Vested period			1 year
Maximum [Member] | Stock Options [Member]
Stock Based Compensation (Textual) [Abstract]
Vested period			5 years
Maximum [Member] | Performance-Based Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Vested period			2 years
Maximum [Member] | Non-Performance Based Awards [Member]
Stock Based Compensation (Textual) [Abstract]
Vested period			3 years

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Condensed Consolidated Statements of Financial Condition (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets
Cash and cash equivalents	$ 15,014	$ 8,047
Accounts receivable, net	1,745	3,265
Investment in receivable portfolios, net	869,859	716,454
Deferred court costs, net	40,170	38,506
Interest Receivable	4,115
Property and equipment, net	20,161	17,796
Other assets	21,592	11,968
Goodwill	55,318	15,985
Identifiable intangible assets, net	550	462
Total assets	1,167,945	812,483
Liabilities:
Accounts payable and accrued liabilities	41,149	29,628
Deferred tax liabilities, net	15,799	15,709
Debt	702,316	388,950
Other liabilities	5,040	6,661
Total liabilities	764,304	440,948
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding
Common stock, $.01 par value, 50,000 shares authorized, 24,797 shares and 24,520 shares issued and outstanding as of June 30, 2012 and December 31, 2011, respectively	248	245
Additional paid-in capital	128,615	123,406
Accumulated earnings	277,854	249,852
Accumulated other comprehensive loss	(3,076)	(1,968)
Total stockholders' equity	403,641	371,535
Total liabilities and stockholders' equity	1,167,945	812,483
Property Tax Note Receivable
Assets
Property tax payment agreements receivable, net	$ 139,421

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Earnings per Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings per share (Textual) [Abstract]
Employee stock options to purchase excluded from computation of diluted earnings per share	391,900	209,000	300,400	125,000

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities:
Net income	$ 28,002	$ 28,454
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,660	1,862
Impairment charge for goodwill and identifiable intangible assets	10,400
Amortization of loan costs and premium on property tax payment agreements receivable	1,210	901
Stock-based compensation expense	4,805	3,575
Excess tax benefit from stock-based payment arrangements	(1,689)	(4,727)
Loss on sale of discontinued operations	2,416
(Reversal) provision for allowances on receivable portfolios, net	(789)	6,504
Changes in operating assets and liabilities, net of effects of acquisition
Other assets	298	63
Deferred court costs	(1,664)	(3,910)
Prepaid income tax and income taxes payable	(6,455)	24
Accounts payable, accrued liabilities and other liabilities	5,322	(841)
Net cash provided by operating activities	44,605	31,743
Investing activities:
Cash paid for acquisition, net of cash acquired	(185,990)
Purchases of receivable portfolios	(361,446)	(184,376)
Collections applied to investment in receivable portfolios, net	207,205	163,144
Proceeds from put-backs of receivable portfolios	1,625	1,698
Originations of property tax payment agreements receivable	(14,072)
Purchases of property and equipment	(2,595)	(1,461)
Net cash used in investing activities	(347,806)	(20,995)
Financing activities:
Payment of loan costs	(1,619)	(814)
Proceeds from senior secured notes		25,000
Proceeds from revolving credit facility	383,399	55,000
Repayment of revolving credit facility	(70,500)	(87,000)
Proceeds from exercise of stock options	2,583	1,248
Taxes paid related to net share settlement of equity awards	(2,177)	(3,388)
Excess tax benefit from stock-based payment arrangements	1,689	4,727
Repayment of capital lease obligations	(3,207)	(1,766)
Net cash provided by (used in) financing activities	310,168	(6,993)
Net increase in cash and cash equivalents	6,967	3,755
Cash and cash equivalents, beginning of period	8,047	10,905
Cash and cash equivalents, end of period	15,014	14,660
Supplemental disclosures of cash flow information:
Cash paid for interest	11,075	9,718
Cash paid for income taxes	23,108	17,814
Supplemental schedule of non-cash investing and financing activities:
Fixed assets acquired through capital lease	2,779	1,726
Property Tax Note Receivable
Investing activities:
Collections applied to property tax payment agreements receivable, net	$ 7,467

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Property Tax Notes Receivable (Details) (Property tax payment agreements receivable [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Property tax payment agreements receivable [Member]
Aging analysis of property tax notes receivable
Current	$ 110,080
30-59 Days Past Due	4,098
60-89 Days Past Due	6,711
>90 Days Past Due	21,687
Total	$ 142,576

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Debt (Tables)

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Components of debt

	June 30, 2012		December 31, 2011
Revolving credit facility	$	490,000	$	305,000
Propel facility		127,899		—
Senior secured notes		75,000		75,000
Capital lease obligations and other		9,417		8,950
	$	702,316	$	388,950

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Income Taxes (Details Textual) (USD $)	3 Months Ended			6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes (Textual) [Abstract]
Provision for income taxes	$ (12,846,000)	$ (9,475,000)		$ (24,506,000)	$ (17,824,000)
Effective tax rate	40.40%	39.10%		39.80%	38.90%
Provision for federal income taxes rate	32.70%	32.50%		32.70%	32.50%
Net benefit for state taxes rate	2.30%	2.50%		2.30%	2.50%
Blended provision for state taxes rate	6.50%	7.00%		6.50%	7.00%
Net provision for permanent book versus tax differences rate		0.40%			0.60%
Net expenses for state and federal tax accounts	1.20%			0.60%
Additional expenditure in Income taxes			600,000
Income Tax Holiday, Description				The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday for the next eight years and a 50% tax holiday for the following four years.  The impact of the tax holiday in Costa Rica for the three and six months ended June 30, 2012 was immaterial.
Unrecognized tax benefit	1,900,000			1,900,000
Net tax benefit from unrecognized tax benefits, if recognized	1,200,000			1,200,000
Undistributed earnings	$ 1,300,000			$ 3,700,000

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Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information [Abstract]

Segment Information

Note 16: Segment Information

The Company conducts business through two operating segments: portfolio purchasing and recovery and tax lien transfer. The Company’s management relies on internal management reporting processes that provide segment revenue, segment operating income, and segment asset information in order to make financial decisions and allocate resources. The operating results from the Company’s tax lien transfer segment are immaterial to the Company’s total consolidated operating results. However, total assets from this segment are significant as compared to the Company’s total consolidated assets. As a result, in accordance with authoritative guidance on segment reporting, the Company’s tax lien transfer segment is determined to be a reportable segment.

Segment operating income includes income from operations before depreciation, amortization of intangible assets, and stock-based compensation expense. The following table provides a reconciliation of revenue and segment operating income by reportable segment to consolidated results and was derived from the segment’s internal financial information as used for corporate management purposes (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Revenues:
Portfolio purchasing and recovery	$	138,731	$	111,093	$	265,136	$	216,419
Tax lien transfer		2,332		—		2,332		—
	$	141,063	$	111,093	$	267,468	$	216,419
Operating income:
Portfolio purchasing and recovery	$	41,394	$	32,343	$	79,911	$	62,111
Tax lien transfer		819		—		819		—
		42,213		32,343		80,730		62,111
Depreciation and amortization		1,420		958		2,660		1,862
Stock-based compensation		2,539		1,810		4,805		3,575
Other expense		6,420		5,334		11,663		10,802
Income from continuing operations before income taxes	$	31,834	$	24,241	$	61,602	$	45,872

Additionally, assets are allocated to operating segments for management review. As of June 30, 2012, total segment assets were $970.4 million and $202.5 million for the portfolio purchasing and recovery segment and tax lien transfer segment, respectively.

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Purchase Concentrations (Tables)

6 Months Ended

Jun. 30, 2012

Purchase Concentrations [Abstract]

Summary of concentration of initial purchase cost

	Six Months Ended June 30, 2012
	Cost			%
Seller 1	$	130,592			36.1	%
Seller 2		81,843			22.6	%
Seller 3		41,941			11.6	%
Seller 4		27,792			7.7	%
Seller 5		24,438			6.8	%
Other sellers		54,840			15.2	%
	$	361,446			100.0	%
Adjustments (1)		(254	)
Purchases, net	$	361,192

⁽¹⁾  Adjusted for Put-backs and Recalls.

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Ownership Description of Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Ownership, Description of Business and Summary of Significant Accounting Policies [Abstract]

Financial Statement Preparation

Financial Statement Preparation

The accompanying interim condensed consolidated financial statements have been prepared by Encore, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position, results of operations, and cash flows. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. Actual results could materially differ from those estimates.

Principles of Consolidation

Basis of Consolidation

Encore is a Delaware holding company whose principal assets are its investments in various wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

On May 8, 2012, the Company completed its acquisition of Propel Financial Services, LLC, BNC Retax, LLC, RioProp Ventures, LLC, and certain related affiliates (collectively, the “Propel Entities”). The condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2012 includes the results of operations of the Propel Entities only since the date of acquisition. For additional acquisition related information relating to the Propel Entities, please refer to the Company’s Current Report on Form 8-K filed with the SEC on July 24, 2012.

Reclassification

Reclassification

Certain reclassifications have been made to the condensed consolidated financial statements to conform to the current year’s presentation.

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Reconciliation of revenue and operating income from segments to consolidated
Revenues:	$ 141,063	$ 111,093	$ 267,468	$ 216,419
Operating income:	38,254	29,575	73,265	56,674
Depreciation and amortization	1,420	958	2,660	1,862
Stock-based compensation	2,539	1,810	4,805	3,575
Other expense	12,427	8,250	24,025	17,040
Income from continuing operations before income taxes	31,834	24,241	61,602	45,872
Portfolio purchasing and recovery [Member]
Reconciliation of revenue and operating income from segments to consolidated
Revenues:	138,731	111,093	265,136	216,419
Operating income:	41,394	32,343	79,911	62,111
Tax lien transfer [Member]
Reconciliation of revenue and operating income from segments to consolidated
Revenues:	2,332		2,332
Operating income:	$ 819		$ 819

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Ownership Description of Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Ownership, Description of Business and Summary of Significant Accounting Policies [Abstract]

Ownership, Description of Business and Summary of Significant Accounting Policies

Note 1: Ownership, Description of Business and Summary of Significant Accounting Policies

Encore Capital Group, Inc. (“Encore”), through its subsidiaries (collectively, the “Company”), is a leading provider of debt management and recovery solutions for consumers and property owners across a broad range of assets. The Company purchases portfolios of defaulted consumer receivables and manages them by partnering with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies, commercial retailers, auto finance companies, and telecommunication companies, which the Company purchases at deep discounts. Defaulted receivables may also include receivables subject to bankruptcy proceedings, or consumer bankruptcy receivables. In addition, through its newly acquired subsidiary, Propel Financial Services, LLC (“Propel”), the Company assists Texas property owners who are delinquent on their property taxes by paying these taxes on behalf of the property owners in exchange for payment agreements collateralized by tax liens on the property.

Portfolio purchasing and recovery

The Company purchases receivables based on robust, account-level valuation methods and employs a suite of proprietary statistical and behavioral models across the full extent of its operations. These investments allow the Company to value portfolios accurately (and limit the risk of overpaying), avoid buying portfolios that are incompatible with its methods or goals and precisely align the accounts it purchases with its operational channels to maximize future collections. As a result, the Company has been able to realize significant returns from the receivables it acquires. The Company maintains strong relationships with many of the largest credit providers in the United States, and possesses one of the industry’s best collection staff retention rates.

The Company uses insights discovered during its purchasing process to build account collection strategies. The Company’s proprietary consumer-level collectability analysis is the primary determinant of whether an account will be actively serviced post-purchase. The Company continuously refines this analysis to determine the most effective collection strategy to pursue for each account it owns. After the Company’s preliminary analysis, it seeks to collect on only a fraction of the accounts it purchases, through one or more of its collection channels. The channel identification process is analogous to a funneling system where the Company first differentiates those consumers who it believes are not able to pay from those who are able to pay. Consumers who the Company believes are financially incapable of making any payments, facing extenuating circumstances or hardships (such as medical issues), serving in the military, or currently receiving social security as their only source of income are excluded from the next step of its collection process and are designated as inactive. The remaining pool of accounts in the funnel then receives further evaluation. At that point, the Company analyzes and determines a consumer’s perceived willingness to pay. Based on that analysis, the Company will pursue collections through letters and/or phone calls to its consumers. Despite its efforts to reach consumers and work out a settlement option, only a small number of consumers who are contacted choose to engage with the Company. Those who do are often offered deep discounts on their obligations, or are presented with payment plans that are better suited to meet their daily cash flow needs. The majority of contacted consumers, however, ignore both the Company’s calls and letters, and therefore the Company must then make the difficult decision whether or not to pursue collections through legal means.

Tax lien transfer

Propel’s principal activity is originating and servicing property tax lien transfers in the state of Texas by paying real estate taxes on behalf of real property owners in exchange for payment agreements collateralized by tax liens on the property. Propel purchases the property owner’s delinquent tax obligation from the local tax authority at par value and works with the property owner to create an affordable payment plan. Tax lien transfers provide the local taxing authorities with much needed tax revenue and property owners with a longer period of time to satisfy their obligations at a lower interest rate and fee structure than what the local tax authority would charge. Based in San Antonio, Texas, Propel is the largest tax lien transfer company in Texas. Propel offers competitive rates, flexible payment terms and has the ability to fund the transaction with the property owner quickly, thus saving the property owner from incurring additional fees and interest levied by the local tax authority. Propel is subject to regulation by the Office of Consumer Credit Commissioner of the state of Texas.

Financial Statement Preparation

The accompanying interim condensed consolidated financial statements have been prepared by Encore, without audit, in accordance with the instructions to the Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of its consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States.

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position, results of operations, and cash flows. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. Actual results could materially differ from those estimates.

Basis of Consolidation

Encore is a Delaware holding company whose principal assets are its investments in various wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

On May 8, 2012, the Company completed its acquisition of Propel Financial Services, LLC, BNC Retax, LLC, RioProp Ventures, LLC, and certain related affiliates (collectively, the “Propel Entities”). The condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2012 includes the results of operations of the Propel Entities only since the date of acquisition. For additional acquisition related information relating to the Propel Entities, please refer to the Company’s Current Report on Form 8-K filed with the SEC on July 24, 2012.

Reclassification

Certain reclassifications have been made to the condensed consolidated financial statements to conform to the current year’s presentation.

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Condensed Consolidated Statements of Financial Condition (Unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Condensed Consolidated Statements of Financial Condition [Abstract]
Convertible preferred stock, par value	$ 0.01	$ 0.01
Convertible preferred stock, shares authorized	5,000	5,000
Convertible preferred stock, shares issued
Convertible preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000	50,000
Common stock, shares issued	24,797	24,520
Common stock, shares outstanding	24,797	24,520

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Other Assets

6 Months Ended

Jun. 30, 2012

Other Assets [Abstract]

Other Assets

Note 11: Other Assets

Other assets consist of the following (in thousands):

	June 30, 2012		December 31, 2011
Prepaid income tax	$	6,507	$	53
Debt issuance costs, net of amortization		4,920		4,293
Prepaid expenses		5,624		5,232
Security deposit—India building lease		1,550		1,482
Deferred compensation assets		721		722
Real estate owned		311		—
Other		1,959		186
	$	21,592	$	11,968

Deferred compensation assets represent monies held in a trust associated with the Company’s deferred compensation plan.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Jul. 16, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	ENCORE CAPITAL GROUP INC
Entity Central Index Key	0001084961
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		24,807,861

XML

Debt

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Debt

Note 12: Debt

The Company is obligated under borrowings as follows (in thousands):

	June 30, 2012		December 31, 2011
Revolving credit facility	$	490,000	$	305,000
Propel facility		127,899		—
Senior secured notes		75,000		75,000
Capital lease obligations and other		9,417		8,950
	$	702,316	$	388,950

Revolving Credit Facility

On April 10 and May 8, 2012, Encore entered into amendments to its revolving credit facility. The amendments added new lenders, appointed a new administrative agent, changed the borrowing base advance rate and the method for its calculation, increased the aggregate revolving loan commitment by $145.0 million, from $410.5 million to $555.5 million, and reset the accordion feature by an additional $100.0 million, resulting in a maximum of $655.5 million that can be borrowed under the facility. Additionally, the May 8, 2012 amendment approved the Propel Acquisition discussed in Note 3 “Business Combination.”

Loan fees and other loan costs associated with the above amendments amounted to approximately $0.9 million. These costs were included in other assets in the Company’s consolidated statements of financial condition and will be amortized over the remaining term of the facility.

Provisions of the amended revolving credit facility include:

• Interest at a floating rate equal to, at the Company’s option, either: (1) reserve adjusted LIBOR, plus a spread that ranges from 350 to 400 basis points, depending on the Company’s leverage; or (2) Alternate Base Rate (“ABR”), plus a spread that ranges from 250 to 300 basis points, depending on the Company’s leverage. ABR, as defined in the agreement, means the highest of (i) the rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City, (ii) the federal funds effective rate from time to time, plus 0.5% and (iii) reserved adjusted LIBOR for a one month interest period on the applicable date, plus 1.0%;

• $10.0 million sub-limits for swingline loans and letters of credit;

• A borrowing base equal to (1) the lesser of (i) 30%—35% (depending, as defined in the amendment, on the Company’s trailing 12-month cost per dollar collected) of eligible estimated remaining collections, initially set at 33%, and (ii) the product of the net book value of all receivable portfolios acquired on or after January 1, 2005 multiplied by 95%, minus (2) the aggregate principal amount outstanding of the Prudential senior secured notes;

• Restrictions and covenants, which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens;

• Repurchases of up to $50.0 million of Encore’s common stock, subject to compliance with certain covenants and available borrowing capacity;

• A change of control definition, which excludes acquisitions of stock by Red Mountain Capital Partners LLC, JCF FPK LLP and their respective affiliates of up to 50% of the outstanding shares of Encore’s voting stock;

• Events of default which, upon occurrence, may permit the lenders to terminate the revolving credit facility and declare all amounts outstanding to be immediately due and payable;

• An annual capital expenditure limit of $12.5 million;

• An annual rental expense limit of $12.5 million;

• An outstanding capital lease limit of $12.5 million;

• An acquisition limit of $100.0 million; and

• Collateralization by all assets of the Company, other than the assets of the Propel Entities.

At June 30, 2012, the outstanding balance on the revolving credit facility was $490.0 million, which bore a weighted average interest rate of 4.07% and 4.11% for the three and six months ended June 30, 2012, respectively. As discussed above, on April 10 and May 8, 2012, Encore entered into amendments to its revolving credit facility, thereby increasing the aggregate revolving loan commitment by $145.0 million.

Subject to compliance with the revolving credit facility, Encore is authorized by its Board to repurchase up to $50.0 million of its common stock.

Propel Facility

In connection with the Company’s Propel Acquisition, as discussed in Note 3, “Business Combination,” the Company entered into a new $160.0 million syndicated loan facility (the “Propel Facility”). The Company financed the Propel Acquisition using the Propel Facility, Encore’s existing revolving credit facility, and cash on hand. In addition to funding a portion of the acquisition the Propel Facility will be used to fund future growth at Propel.

Loan fees and other loan costs associated with the Propel Facility amounted to approximately $0.7 million. These costs were included in other assets in the Company’s consolidated statements of financial condition and are amortized over the term of the Propel Facility.

The Propel Facility has a three-year term and includes the following key provisions:

• Interest at Propel’s option, at either: (1) LIBOR, plus a spread that ranges from 300 to 375 basis points, depending on Propel’s cash flow leverage ratio; or (2) Prime Rate, which is defined in the agreement as the rate of interest per annum equal to the sum of (a) the interest rate quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate” plus (b) the Prime Rate Margin, which is a spread that ranges from 0 to 75 basis points, depending on Propel’s cash flow leverage ratio;

• A borrowing base of 90% of the face value of the tax lien collateralized notes;

• Interest payable monthly; principal and interest due at maturity;

• Restrictions and covenants, which limit, among other things, the payment of dividends and the incurrence of additional indebtedness and liens;

• Events of default which, upon occurrence, may permit the lender to terminate the Propel Facility and declare all amounts outstanding to be immediately due and payable; and

• A $40.0 million accordion feature.

The Propel Facility is collateralized by the tax lien collateralized payment agreements and requires Propel to maintain various financial covenants, including a minimum interest coverage ratio and a maximum cash flow leverage ratio.

At June 30, 2012, the outstanding balance on the Propel Facility was $127.9 million, which bore a weighted average interest rate of 3.54% for the three months ended June 30, 2012.

Senior Secured Notes

As of June 30, 2012, Encore had $75.0 million in senior secured notes with certain affiliates of Prudential Capital Group. Twenty five million dollars of the senior secured notes bear an annual interest rate of 7.375% and mature in 2018. These notes require quarterly interest only payments through May 2013. Beginning in May 2013, the notes require a quarterly payment of interest plus $1.25 million of principal. The remaining $50.0 million of the senior secured notes bear an annual interest rate of 7.75% and mature in 2017 with principal amortization beginning in December 2012. These notes require quarterly interest only payments through December 2012. Beginning in December 2012, the notes require a quarterly payment of interest plus $2.5 million of principal.

The senior secured notes are guaranteed in full by certain of Encore’s subsidiaries and are collateralized by all assets of the Company. The senior secured notes may be accelerated and become automatically and immediately due and payable upon certain events of default, including certain events related to insolvency, bankruptcy or liquidation. Additionally, the senior secured notes may be accelerated at the election of the holder or holders of a majority in principal amount of the senior secured notes upon certain events of default by Encore, including the breach of affirmative covenants regarding guarantors, collateral, most favored lender treatment or minimum revolving credit facility commitment or the breach of any negative covenant. If Encore prepays the senior secured notes at any time for any reason, payment will be at the higher of par or the present value of the remaining scheduled payments of principal and interest on the portion being prepaid. The discount rate used to determine the present value is 50 basis points over the then current Treasury Rate corresponding to the remaining average life. The covenants are substantially similar to those in the revolving credit facility. Prudential Capital Group and the administrative agent for the lenders of the revolving credit facility have an intercreditor agreement related to collateral, actionable default, powers and duties and remedies, among other topics. Certain terms of the senior secured notes were amended on May 8, 2012, to provide for the change in administrative and collateral agent, the Propel Acquisition, and the addition of the Propel Facility.

Capital Lease Obligations

The Company has capital lease obligations primarily for certain computer equipment. As of June 30, 2012, the Company’s combined obligations for these computer equipment leases were approximately $8.7 million. These lease obligations require monthly or quarterly payments through July 2016 and have implicit interest rates that range from zero to approximately 7.7%.

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenue
Revenue from receivable portfolios, net	$ 138,731	$ 111,093	$ 265,136	$ 216,419
Tax lien transfer
Interest income	2,982		2,982
Interest expense	(650)		(650)
Net interest income	2,332		2,332
Total revenue	141,063	111,093	267,468	216,419
Operating expenses
Salaries and employee benefits (excluding stock-based compensation expense)	22,651	17,129	42,689	33,796
Stock-based compensation expense	2,539	1,810	4,805	3,575
Cost of legal collections	41,024	40,686	79,659	77,195
Other operating expenses	12,427	8,250	24,025	17,040
Collection agency commissions	4,166	3,596	8,125	7,510
General and administrative expenses	18,582	9,089	32,240	18,767
Depreciation and amortization	1,420	958	2,660	1,862
Total operating expenses	102,809	81,518	194,203	159,745
Income from operations	38,254	29,575	73,265	56,674
Other (expense) income
Interest expense	(6,497)	(5,369)	(12,012)	(10,962)
Other income	77	35	349	160
Total other expense	(6,420)	(5,334)	(11,663)	(10,802)
Income from continuing operations before income taxes	31,834	24,241	61,602	45,872
Provision for income taxes	(12,846)	(9,475)	(24,506)	(17,824)
Income from continuing operations	18,988	14,766	37,096	28,048
(Loss) income from discontinued operations, net of tax	(2,392)	9	(9,094)	406
Net income	16,596	14,775	28,002	28,454
Weighted average shares outstanding:
Basic	24,919	24,433	24,850	24,384
Diluted	25,825	25,610	25,822	25,594
Basic earnings (loss) per share from:
Continuing operations	$ 0.76	$ 0.60	$ 1.49	$ 1.15
Discontinued operations	$ (0.10)	$ 0.00	$ (0.37)	$ 0.02
Net basic earnings per share	$ 0.67	$ 0.60	$ 1.13	$ 1.17
Diluted earnings (loss) per share from:
Continuing operations	$ 0.74	$ 0.58	$ 1.44	$ 1.09
Discontinued operations	$ (0.10)	$ 0.00	$ (0.37)	$ 0.02
Net diluted earnings per share	$ 0.64	$ 0.58	$ 1.08	$ 1.11
Other comprehensive loss:
Unrealized loss on derivative instruments	(2,944)	(888)	(1,822)	(52)
Income tax benefit related to unrealized gain on derivative instruments	1,154	351	714	23
Other comprehensive loss, net of tax	(1,790)	(537)	(1,108)	(29)
Comprehensive income	$ 14,806	$ 14,238	$ 26,894	$ 28,425

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Derivatives and Hedging Instruments

6 Months Ended

Jun. 30, 2012

Derivatives And Hedging Instruments [Abstract]

Derivatives and Hedging Instruments

Note 6: Derivatives and Hedging Instruments

The Company uses derivative instruments to manage risks related to interest rates and foreign currency. The Company’s outstanding interest rate swap contracts and foreign currency exchange contracts qualify for hedge accounting treatment under the authoritative guidance for derivatives and hedging.

Interest Rate Swaps

The Company may periodically enter into derivative financial instruments, typically interest rate swap agreements, to reduce its exposure to fluctuations in interest rates on variable interest rate debt and their impact on earnings and cash flows. As of June 30, 2012, the Company had six interest rate swap agreements outstanding with a total notional amount of $150.0 million. Under the swap agreements, the Company receives floating interest rate payments based on one-month reserve-adjusted LIBOR and makes interest payments based on fixed interest rates. The Company intends to continue electing the one-month reserve-adjusted LIBOR as the benchmark interest rate on the debt being hedged through its term. No credit spread was hedged. The Company designates its interest rate swap instruments as cash flow hedges.

The authoritative accounting guidance requires companies to recognize derivative instruments as either an asset or liability measured at fair value in the statement of financial position. The effective portion of the change in fair value of the derivative instrument is recorded in other comprehensive income (“OCI”). The ineffective portion of the change in fair value of the derivative instrument, if any, is recognized in interest expense in the period of change. From the inception of the hedging program, the Company has determined that the hedging instruments are highly effective.

Foreign Currency Exchange Contracts

The Company has operations in India, which exposes the Company to foreign currency exchange rate fluctuations due to transactions denominated in Indian rupees, such as employee salaries and rent expenditures. To mitigate this risk, the Company enters into derivative financial instruments, principally forward contracts, which are designated as cash flow hedges, to mitigate fluctuations in the cash payments of future forecasted transactions in Indian rupees for up to 36 months. The Company adjusts the level and use of derivatives as soon as practicable after learning that an exposure has changed. The Company reviews all exposures and derivative positions on an ongoing basis.

Gains and losses on cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged transaction is recorded in the consolidated financial statements. Once the underlying transaction is recorded in the consolidated financial statements, the Company reclassifies the accumulated other comprehensive income or loss on the derivative into earnings. If all or a portion of the forecasted transaction was cancelled, this would render all or a portion of the cash flow hedge ineffective and the Company would reclassify the ineffective portion of the hedge into earnings. The Company generally does not experience ineffectiveness of the hedge relationship and the accompanying consolidated financial statements do not include any such gains or losses.

As of June 30, 2012, the total notional amount of the forward contracts to buy Indian rupees in exchange for U.S. dollars was $27.2 million. All outstanding contracts qualified for hedge accounting treatment as of June 30, 2012. The Company estimates that approximately $1.9 million of net derivative loss included in OCI will be reclassified into earnings within the next 12 months. No gains or losses were reclassified from OCI into earnings as a result of forecasted transactions that failed to occur during the three and six months ended June 30, 2012 and 2011.

The Company does not enter into derivative instruments for trading or speculative purposes.

The following table summarizes the fair value of derivative instruments as recorded in the Company’s condensed consolidated statements of financial condition (in thousands):

	June 30, 2012				December 31, 2011
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate swaps	Other liabilities	$	(1,085	)	Other liabilities	$	(1,014	)
Foreign currency exchange contracts	Other assets		—		Other assets		168
Foreign currency exchange contracts	Other liabilities		(3,955	)	Other liabilities		(2,371	)

The following tables summarize the effects of derivatives in cash flow hedging relationships on the Company’s statements of comprehensive income during the periods presented (in thousands):

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income - Effective Portion					Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Three Months Ended June 30,							Three Months Ended June 30,						Three Months Ended June 30,
	2012			2011				2012			2011			2012		2011
Interest rate swaps	$	140		$	(1,072	)	Interest expense	$	—		$	—	Other (expense) income	$	—	$	—
Foreign currency exchange contracts		(3,120	)		242		Salaries and employee benefits		(442	)		94	Other (expense) income		—		—
Foreign currency exchange contracts		(510	)		57		General and administrative expenses		(78	)		20	Other (expense) income		—		—

	Gain or (Loss) Recognized in OCI- Effective Portion						Location of Gain or (Loss) Reclassified from OCI into Income - Effective Portion	Gain or (Loss) Reclassified from OCI into Income - Effective Portion					Location of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing	Amount of Gain or (Loss) Recognized - Ineffective Portion and Amount Excluded from Effectiveness Testing
	Six Months Ended June 30,							Six Months Ended June 30,						Six Months Ended June 30,
	2012			2011				2012			2011			2012		2011
Interest rate swaps	$	(71	)	$	(566	)	Interest expense	$	—		$	—	Other (expense) income	$	—	$	—
Foreign currency exchange contracts		(2,200	)		597		Salaries and employee benefits		(557	)		167	Other (expense) income		—		—
Foreign currency exchange contracts		(204	)		122		General and administrative expenses		(95	)		38	Other (expense) income		—		—

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 5: Fair Value Measurements

The Company accounts for certain assets and liabilities at fair value. The authoritative guidance for fair value measurements defines fair value as the price that would be received upon sale of an asset or the price paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e. the “exit price”). The guidance utilizes a fair value hierarchy that prioritizes the inputs used in valuation techniques to measure fair value into three broad levels. The following is a brief description of each level:

• Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

• Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	Fair Value Measurements as of June 30, 2012
	Level 1		Level 2			Level 3		Total
Liabilities
Interest rate swap agreements	$	—	$	(1,085	)	$	—	$	(1,085	)
Foreign currency exchange contracts		—		(3,955	)		—		(3,955	)

	Fair Value Measurements as of December 31, 2011
	Level 1		Level 2			Level 3		Total
Assets
Foreign currency exchange contracts	$	—	$	168		$	—	$	168
Liabilities
Interest rate swap agreements		—		(1,014	)		—		(1,014	)
Foreign currency exchange contracts		—		(2,371	)		—		(2,371	)

Fair values of derivative instruments included in Level 2 are estimated using industry standard valuation models. These models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign currency exchange rates, and forward and spot prices for currencies.

Financial instruments not required to be carried at fair value

The fair value of property tax payment agreements receivable is estimated by discounting the future cash flows using the current rates at which similar property tax payment agreements receivable would be made to borrowers with similar credit ratings and for the same remaining maturities. The carrying amount of property tax payment agreements receivable approximates fair value. Additionally, the carrying amount of interest receivable approximates fair value. Borrowings under the Company’s revolving credit facilities are carried at historical cost, adjusted for additional borrowings less principal repayments, which approximates fair value. For investment in receivable portfolios, there is no active market or observable inputs for the fair value estimation. The Company does not consider it practical to attempt to estimate the fair value of such financial instruments due to the excessive costs that would be incurred in doing so.

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Goodwill and Identifiable Intangible Assets

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identifiable Intangible Assets

Note 17: Goodwill and Identifiable Intangible Assets

In accordance with authoritative guidance, goodwill is tested at the reporting unit level annually for impairment and in interim periods if certain events occur indicating the fair value of a reporting unit may be below its carrying value.

As discussed in Note 2, “Discontinued Operations,” on May 16, 2012, the Company completed the sale of Ascension to AIS.

In connection with the preparation of its financial statements and based, in part, on the anticipated disposition, the Company performed an interim goodwill impairment test for Ascension as of March 31, 2012 and concluded that Ascension’s entire goodwill balance of $9.9 million was impaired. Additionally, the Company wrote-off Ascension’s remaining identifiable intangible assets of approximately $0.4 million as of March 31, 2012.

As of June 30, 2012, the Company has two reporting units that carry goodwill: portfolio purchasing and recovery and tax lien transfer. Annual testing is performed as of October 1^st for the portfolio purchasing and recovery reporting unit and as of April 1^st for the tax lien transfer reporting unit.

The Company’s acquired intangible assets are summarized as follows (in thousands):

	As of June 30, 2012							As of December 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	—	$	—		$	—	$	6,000	$	(5,538	)	$	462
Trade name and other		570		(20	)		550		—		—			—
Total intangible assets subject to amortization	$	570	$	(20	)	$	550	$	6,000	$	(5,538	)	$	462
Intangible assets not subject to amortization:
Goodwill – portfolio purchasing and recovery						$	6,047						$	6,047
Goodwill – tax lien transfer							49,271							—
Goodwill – bankruptcy servicing							—							9,938
Total goodwill						$	55,318						$	15,985

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 13: Income Taxes

The Company recorded an income tax provision of $12.8 million, reflecting an effective rate of 40.4% of pretax income from continuing operations during the three months ended June 30, 2012. The effective tax rate for the three months ended June 30, 2012 primarily consisted of a provision for federal income taxes of 32.7% (which is net of a benefit for state taxes of 2.3%), a blended provision for state taxes of 6.5%, and a provision due to the true-up of certain state and federal tax accounts of 1.2%.

The Company recorded an income tax provision of $9.5 million, reflecting an effective rate of 39.1% of pretax income from continuing operations during the three months ended June 30, 2011. The effective tax rate for the three months ended June 30, 2011 primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a blended provision for state taxes of 7.0%, and a net benefit for permanent book versus tax differences of 0.4%.

The Company recorded an income tax provision of $24.5 million, reflecting an effective rate of 39.8% of pretax income from continuing operations during the six months ended June 30, 2012. The effective tax rate for the six months ended June 30, 2012, primarily consisted of a provision for federal income taxes of 32.7% (which is net of a benefit for state taxes of 2.3%), a provision for state taxes of 6.5%, and a provision due to the true-up of certain state and federal tax accounts of 0.6%.

The Company recorded an income tax provision of $17.8 million, reflecting an effective rate of 38.9% of pretax income from continuing operations during the six months ended June 30, 2011. The effective tax rate for the six months ended June 30, 2011, primarily consisted of a provision for federal income taxes of 32.5% (which is net of a benefit for state taxes of 2.5%), a provision for state taxes of 7.0%, and a benefit for permanent book versus tax differences of 0.6%.

The Company’s subsidiary in India was operating under a tax holiday through March 31, 2011, at which time the tax holiday expired. If there had been no tax holiday for the quarter ended March 31, 2011, the Company would have expensed an additional $0.6 million in income taxes. The Company’s subsidiary in Costa Rica is operating under a 100% tax holiday for the next eight years and a 50% tax holiday for the following four years. The impact of the tax holiday in Costa Rica for the three and six months ended June 30, 2012 was immaterial.

As of June 30, 2012, the Company had a gross unrecognized tax benefit of $1.9 million that, if recognized, would result in a net tax benefit of approximately $1.2 million and would have a positive effect on the Company’s effective tax rate. During the three and six months ended June 30, 2012, there were no material changes to the unrecognized tax benefit.

During the three and six months ended June 30, 2012, the Company did not provide for United States income taxes or foreign withholding taxes on the quarterly undistributed earnings from continuing operations of its subsidiaries operating outside of the United States. Undistributed earnings of the subsidiaries during the three and six months ended June 30, 2012, were approximately $1.3 million and $3.7 million, respectively. Such undistributed earnings are considered permanently reinvested.

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Property Tax Notes Receivable

6 Months Ended

Jun. 30, 2012

Property Tax Notes Receivable [Abstract]

Property Tax Notes Receivable

Note 9: Property Tax Payment Agreements Receivable, Net

The Company’s portfolio of property tax payment agreements receivable primarily consists of payment agreements collateralized by tax liens on residential and commercial properties in the state of Texas. The tax liens are in a priority position to most other liens on the properties, including those that existed at the time the tax lien was transferred from the respective taxing authority to the Company. Repayment of residential and commercial property tax payment agreements receivable is generally dependent on the property owner. However, repayment may ultimately come through payments from other lien holders or foreclosure on the properties. Risk of loss is mitigated by the Company’s internal underwriting policies, including its policy relating to the amount of taxes it will pay relative to the value of the property. The Company will generally not originate a tax lien transfer if this percentage is in excess of 25% and, in most cases, this percentage is below 15%.

The Company evaluates the entire portfolio of property tax payment agreements receivable for impairment. The primary credit quality indicator the Company uses to evaluate its portfolio is lien to value ratio. The Company has not experienced any losses on the property tax payment agreements receivable in its portfolio. In addition, management believes, based on the fact that the tax liens that collateralize the payment agreements are in a priority position over most other liens on the properties, that it will not experience any material losses on the ultimate collection of its property tax payment agreements receivable. Therefore, no allowance has been provided for as of June 30, 2012.

The following table presents the Company’s aging analysis of property tax payment agreements receivable as of June 30, 2012. These amounts do not include the related deferred origination fees or premiums on purchased property tax payment agreements receivable (in thousands):

	Current		30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total
Property tax payment agreements receivable	$	110,080	$	4,098	$	6,711	$	21,687	$	142,576

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Property Tax Notes Receivable (Details Textual)	Jun. 30, 2012
Property Tax Notes Receivable (Textual) [Abstract]
Percentage of general origination of tax lien transfer	25.00%
Percentage of most origination of tax lien transfer	15.00%

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Stock Based Compensation

6 Months Ended

Jun. 30, 2012

Disclosure Of Compensation Related Costs Share-based Payments [Abstract]

Stock-Based Compensation

Note 7: Stock-Based Compensation

On March 9, 2009, Encore’s Board of Directors (the “Board”) approved an amendment and restatement of the 2005 Stock Incentive Plan (“2005 Plan”), which was originally adopted on March 30, 2005, for Board members, employees, officers, and executives of, and consultants and advisors to, the Company. The amendment and restatement of the 2005 Plan increased by 2,000,000 shares the maximum number of shares of the Company’s common stock that may be issued or be subject to awards under the plan, established a new 10-year term for the plan and made certain other amendments. The 2005 Plan amendment was approved by the Company’s stockholders on June 9, 2009. The 2005 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, and performance-based awards to eligible individuals. As amended, the 2005 Plan allows the granting of an aggregate of 3,500,000 shares of the Company’s common stock for awards. In addition, shares subject to options granted under the 2005 Plan that terminate or expire without being exercised will become available for grant under the 2005 Plan. The benefit provided under the 2005 Plan is compensation subject to authoritative guidance for stock-based compensation.

In accordance with authoritative guidance for stock-based compensation, compensation expense is recognized only for those shares expected to vest, based on the Company’s historical experience and future expectations. Total stock-based compensation expense during the three months ended June 30, 2012 and 2011 was $2.5 million and $1.8 million, respectively. Total stock-based compensation expense during the six months ended June 30, 2012 and 2011 was $4.8 million and $3.6 million, respectively.

The Company’s stock-based compensation arrangements are described below:

Stock Options

The 2005 Plan permits the granting of stock options to certain employees and directors of the Company. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of issuance. They generally vest over three to five years of continuous service, and have ten-year contractual terms.

The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards. All options are amortized ratably over the requisite service periods of the awards, which are generally the vesting periods.

The fair value for options granted was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions

	Six Months Ended June 30,
	2012			2011
Weighted average fair value of options granted	$	11.77		$	13.26
Risk free interest rate		0.89	%		2.0	%
Dividend yield		0.0	%		0.0	%
Volatility factor of the expected market price of the Company’s common stock		63	%		61	%
Weighted-average expected life of options		5 Years			5 Years

Unrecognized compensation cost related to stock options as of June 30, 2012, was $3.0 million. The weighted-average remaining expense period, based on the unamortized value of these outstanding stock options, was approximately 2.1 years.

A summary of the Company’s stock option activity as of June 30, 2012, and changes during the six months ended, is presented below:

	Number of Shares			Option Price Per Share		Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011		2,182,940		$	0.51 – $24.65	$	13.00
Granted		193,500			—		22.17
Cancelled/forfeited		—			—		—
Exercised		(122,200	)		0.51 – 20.09		6.41
Outstanding at June 30, 2012		2,254,240		$	0.51 – $24.65	$	14.14	$	34,887
Exercisable at June 30, 2012		1,366,412		$	0.51 – $24.65	$	12.39	$	23,550

The total intrinsic value of options exercised during the six months ended June 30, 2012 and 2011 was $2.4 million and $9.9 million, respectively. As of June 30, 2012, the weighted-average remaining contractual life of options outstanding and options exercisable was 5.7 years and 4.3 years, respectively.

Non-Vested Shares

Under the Company’s 2005 Plan, Board members, employees, officers and executives of, and consultants and advisors to, the Company are eligible to receive restricted stock units and restricted stock awards. In accordance with the authoritative guidance, the fair value of these non-vested shares is equal to the closing sale price of the Company’s common stock on the date of issuance. The total number of these awards expected to vest is adjusted by estimated forfeiture rates. As of June 30, 2012, 16,437 of the non-vested shares are expected to vest over approximately one to two years based on certain performance goals (“Performance-Based Awards”). The fair value of the Performance-Based Awards is expensed over the expected vesting period, net of estimated forfeitures. If performance goals are not expected to be met, the compensation expense previously recognized would be reversed. No reversals of compensation expense related to the Performance-Based Awards have been made as of June 30, 2012. The remaining 609,523 non-vested shares are not performance-based, and will vest over approximately one to three years of continuous service.

A summary of the status of the Company’s restricted stock units and restricted stock awards as of June 30, 2012, and changes during the six months ended, is presented below:

	Non-Vested Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2011		589,117		$	19.22
Awarded		318,291		$	22.63
Vested		(243,784	)	$	17.04
Cancelled/forfeited		(37,664	)	$	22.15
Non-vested at June 30, 2012		625,960		$	21.63

Unrecognized compensation expense related to non-vested shares as of June 30, 2012, was $8.7 million. The weighted-average remaining expense period, based on the unamortized value of these outstanding non-vested shares, was approximately 2.1 years. The fair value of restricted stock units and restricted stock awards vested during the six months ended June 30, 2012 and 2011 remained consistent at approximately $5.6 million.

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Investment in Receivable Portfolios Net

6 Months Ended

Jun. 30, 2012

Property Tax Notes Receivable [Abstract]

Investment in Receivable Portfolios, Net

Note 8: Investment in Receivable Portfolios, Net

In accordance with the authoritative guidance for loans and debt securities acquired with deteriorated credit quality, discrete receivable portfolio purchases during a quarter are aggregated into pools based on common risk characteristics. Once a static pool is established, the portfolios are permanently assigned to the pool. The discount (i.e., the difference between the cost of each static pool and the related aggregate contractual receivable balance) is not recorded because the Company expects to collect a relatively small percentage of each static pool’s contractual receivable balance. As a result, receivable portfolios are recorded at cost at the time of acquisition. The purchase cost of the portfolios includes certain fees paid to third parties incurred in connection with the direct acquisition of the receivable portfolios.

In compliance with the authoritative guidance, the Company accounts for its investments in consumer receivable portfolios using either the interest method or the cost recovery method. The interest method applies an internal rate of return (“IRR”) to the cost basis of the pool, which remains unchanged throughout the life of the pool, unless there is an increase in subsequent expected cash flows. Subsequent increases in expected cash flows are generally recognized prospectively through an upward adjustment of the pool’s IRR over its remaining life. Subsequent decreases in expected cash flows do not change the IRR, but are recognized as an allowance to the cost basis of the pool, and are reflected in the consolidated statements of comprehensive income as a reduction in revenue, with a corresponding valuation allowance, offsetting the investment in receivable portfolios in the consolidated statements of financial condition.

The Company utilizes its proprietary forecasting models to continuously evaluate the economic life of each pool. The collection forecast of each pool is generally estimated to be between 84 to 96 months based on the expected collection period of each pool. The Company often experiences collections beyond the 84 to 96 month collection forecast. As of June 30, 2012, the total estimated remaining collections beyond the 84 to 96 month collection forecast was $113.6 million.

The Company accounts for each static pool as a unit for the economic life of the pool (similar to one loan) for recognition of revenue from receivable portfolios, for collections applied to the cost basis of receivable portfolios, and for provision for loss or allowance. Revenue from receivable portfolios is accrued based on each pool’s IRR applied to each pool’s adjusted cost basis. The cost basis of each pool is increased by revenue earned and decreased by gross collections and portfolio allowances.

If the amount and timing of future cash collections on a pool of receivables are not reasonably estimable, the Company accounts for such portfolios on the cost recovery method as Cost Recovery Portfolios. The accounts in these portfolios have different risk characteristics than those included in other portfolios acquired during the same quarter, or the necessary information was not available to estimate future cash flows and, accordingly, they were not aggregated with other portfolios. Under the cost recovery method of accounting, no income is recognized until the purchase price of a Cost Recovery Portfolio has been fully recovered.

Accretable yield represents the amount of revenue the Company expects to generate over the remaining life of its existing investment in receivable portfolios based on estimated future cash flows. Total accretable yield is the difference between future estimated collections and the current carrying value of a portfolio. All estimated cash flows on portfolios where the cost basis has been fully recovered are classified as zero basis cash flows.

The following table summarizes the Company’s accretable yield and an estimate of zero basis future cash flows at the beginning and end of the period presented (in thousands):

	Accretable Yield			Estimate of Zero Basis Cash Flows			Total
Balance at December 31, 2011	$	821,527		$	32,676		$	854,203
Revenue recognized, net		(119,340	)		(7,065	)		(126,405	)
Net additions to existing portfolios (1)		131,039			3,608			134,647
Additions for current purchases (1)		119,533			—			119,533
Balance at March 31, 2012	$	952,759		$	29,219		$	981,978
Revenue recognized, net		(131,624	)		(7,107	)		(138,731	)
Net additions to existing portfolios (1)		77,473			13,738			91,211
Additions for current purchases (1)		178,332			—			178,332
Balance at June 30, 2012	$	1,076,940		$	35,850		$	1,112,790

⁽¹⁾  Estimated remaining collections and accretable yield include anticipated collections beyond the 84 to 96 month collection forecast.

	Accretable Yield			Estimate of Zero Basis Cash Flows			Total
Balance at December 31, 2010	$	739,785		$	4,274		$	744,059
Revenue recognized, net		(101,709	)		(3,617	)		(105,326	)
Net additions to existing portfolios		18,715			2,948			21,663
Additions for current purchases		93,098			—			93,098
Balance at March 31, 2011	$	749,889		$	3,605		$	753,494
Revenue recognized, net		(106,961	)		(4,132	)		(111,093	)
Net additions to existing portfolios		15,575			3,900			19,475
Additions for current purchases		95,532			—			95,532
Balance at June 30, 2011	$	754,035		$	3,373		$	757,408

During the three months ended June 30, 2012, the Company purchased receivable portfolios with a face value of $6.0 billion for $231.0 million, or a purchase cost of 3.8% of face value. The estimated future collections at acquisition for these portfolios amounted to $407.4 million. During the six months ended June 30, 2012, the Company purchased receivable portfolios with a face value of $8.9 billion for $361.4 million, or a purchase cost of 4.0% of face value. The estimated future collections at acquisition for these portfolios amounted to $643.6 million.

During the three months ended June 30, 2011, the Company purchased receivable portfolios with a face value of $3.0 billion for $93.7 million, or a purchase cost of 3.1% of face value. The estimated future collections at acquisition for these portfolios amounted to $185.9 million. During the six months ended June 30, 2011, the Company purchased receivable portfolios with a face value of $5.9 billion for $184.4 million, or a purchase cost of 3.1% of face value. The estimated future collections at acquisition for these portfolios amounted to $364.3 million.

All collections realized after the net book value of a portfolio has been fully recovered (“Zero Basis Portfolios”) are recorded as revenue (“Zero Basis Revenue”). During the three months ended June 30, 2012 and 2011, Zero Basis Revenue was approximately $6.1 million and $2.9 million, respectively. During the six months ended June 30, 2012 and 2011, approximately $12.2 million and $5.9 million were recognized as Zero Basis Revenue, respectively.

The following tables summarize the changes in the balance of the investment in receivable portfolios during the following periods (in thousands, except percentages):

	Three Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	741,580		$	—		$	741,580
Purchases of receivable portfolios		230,983			—			230,983
Gross collections (1)		(233,437	)		(7,107	)		(240,544	)
Put-backs and recalls (2)		(891	)		—			(891	)
Revenue recognized		131,443			6,126			137,569
Portfolio allowance reversals, net		181			981			1,162
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (3)		56.3	%		86.2	%		57.2	%

	Three Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	648,820		$	—		$	648,820
Purchases of receivable portfolios		93,701			—			93,701
Gross collections (1)		(190,901	)		(4,132	)		(195,033	)
Put-backs and recalls (2)		(798	)		—			(798	)
Revenue recognized		109,185			2,914			112,099
(Portfolio allowances) portfolio allowance reversals, net		(2,224	)		1,218			(1,006	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (3)		57.2	%		70.5	%		57.5	%

	Six Months Ended June 30, 2012
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	716,454		$	—		$	716,454
Purchases of receivable portfolios		361,446			—			361,446
Gross collections (1)		(457,380	)		(14,172	)		(471,552	)
Put-backs and recalls (2)		(1,625	)		—			(1,625	)
Revenue recognized		252,189			12,158			264,347
(Portfolio allowances) portfolio allowance reversals, net		(1,225	)		2,014			789
Balance, end of period	$	869,859		$	—		$	869,859
Revenue as a percentage of collections (3)		55.1	%		85.8	%		56.1	%

	Six Months Ended June 30, 2011
	Accrual Basis Portfolios			Zero Basis Portfolios			Total
Balance, beginning of period	$	644,753		$	—		$	644,753
Purchases of receivable portfolios		184,376			—			184,376
Gross collections (1)		(378,318	)		(7,749	)		(386,067	)
Put-backs and recalls (2)		(1,698	)		—			(1,698	)
Revenue recognized		216,989			5,934			222,923
(Portfolio allowances) portfolio allowance reversals, net		(8,319	)		1,815			(6,504	)
Balance, end of period	$	657,783		$	—		$	657,783
Revenue as a percentage of collections (3)		57.4	%		76.6	%		57.7	%

⁽¹⁾  Does not include amounts collected on behalf of others.

⁽²⁾  Put-backs represent accounts that are returned to the seller in accordance with the respective purchase agreement (“Put-Backs”). Recalls represent accounts that are recalled by the seller in accordance with the respective purchase agreement (“Recalls”).

⁽³⁾  Revenue as a percentage of collections excludes the effects of net portfolio allowances or net portfolio allowance reversals.

The following table summarizes the change in the valuation allowance for investment in receivable portfolios during the periods presented (in thousands):

	Valuation Allowance
	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Balance at beginning of period	$	109,867		$	104,169		$	109,494		$	98,671
Provision for portfolio allowances		2,116			2,553			3,875			8,648
Reversal of prior allowances		(3,278	)		(1,547	)		(4,664	)		(2,144	)
Balance at end of period	$	108,705		$	105,175		$	108,705		$	105,175

The Company currently utilizes various business channels for the collection of its receivables. The following table summarizes the total collections by collection channel (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Legal collections	$	114,876	$	98,084	$	224,448	$	186,572
Collection sites		111,641		84,576		221,511		173,117
Collection agencies		14,043		12,421		25,629		26,411
Other		—		—		—		54
	$	240,560	$	195,081	$	471,588	$	386,154

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Deferred Court Costs, Net

6 Months Ended

Jun. 30, 2012

Deferred Court Costs, Net [Abstract]

Deferred Court Costs, Net

Note 10: Deferred Court Costs, Net

The Company contracts with a nationwide network of attorneys that specialize in collection matters. The Company generally refers charged-off accounts to its contracted attorneys when it believes the related debtor has sufficient assets to repay the indebtedness and has, to date, been unwilling to pay. In connection with the Company’s agreement with the contracted attorneys, it advances certain out-of-pocket court costs (“Deferred Court Costs”). The Company capitalizes Deferred Court Costs in its consolidated financial statements and provides a reserve for those costs that it believes will ultimately be uncollectible. The Company determines the reserve based on its analysis of court costs that have been advanced and those that have been recovered. Deferred Court Costs not recovered within three years of placement are fully written-off. Collections received from these debtors are first applied against related court costs with the balance applied to the debtors’ account.

Deferred Court Costs for the three-year deferral period consist of the following as of the dates presented (in thousands):

	June 30, 2012			December 31, 2011
Court costs advanced	$	238,887		$	228,977
Court costs recovered		(65,937	)		(60,017	)
Court costs reserve		(132,780	)		(130,454	)
	$	40,170		$	38,506

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Debt (Details Textual) (USD $)	1 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2012		Apr. 30, 2012	Jun. 30, 2012		Jun. 30, 2012		Mar. 31, 2012	Jun. 30, 2011	May 08, 2012	Apr. 10, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Loan fees and other loan costs	$ 21,592,000			$ 21,592,000		$ 21,592,000						$ 11,968,000
Proceeds from senior secured notes	75,000,000								25,000,000
Capital lease obligations	9,417,000			9,417,000		9,417,000						8,950,000
Revolving credit facility, amount outstanding	490,000,000			490,000,000		490,000,000
Debt (Textual) [Abstract]
Borrowing base description						A borrowing base equal to (1) The lesser of (i) 30% - 35% (depending, as defined in the amendment, on the Company’s trailing 12-month cost per dollar collected) of eligible estimated remaining collections, initially set at 33%, and (ii) The product of the net book value of all receivable portfolios acquired on or after January 1, 2005 multiplied by 95%, minus (2) The aggregate principal amount outstanding of the senior secured notes
Percentage to be added to base rate for alternate base rate						0.50%
Percentage to be added to adjusted base rate for alternate base rate						1.00%
Debt instrument base rate period						1 month
Percentage of eligible estimated remaining collections						33.00%
Percentage of multiplying factor						95.00%
Percentage of acquisitions excluded						50.00%
Annual capital expenditure limit	12,500,000			12,500,000		12,500,000
Repurchase of common stock						50,000,000
Annual rental expense limit	12,500,000			12,500,000		12,500,000
Outstanding capital lease limit	12,500,000	[1]		12,500,000	[1]	12,500,000	[1]
Acquisition limit	100,000,000			100,000,000		100,000,000
Revolving credit facility, interest rate				4.07%				4.11%
Revolving credit facility, maximum borrowing capacity										555,500,000	410,500,000
Revolving credit facility, aggregate borrowing base	145,000,000			145,000,000		145,000,000
Revolving credit facility, description of variable rate basis						Interest at a floating rate equal to, at the Company’s option, either: (1) Reserve adjusted LIBOR, plus a spread that ranges from 350 to 400 basis points, depending on the Company’s leverage; or (2) Alternate Base Rate (“ABR”), plus a spread that ranges from 250 to 300 basis points, depending on the Company’s leverage. ABR, as defined in the agreement, means the highest of (i) The rate of interest publicly announced by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City, (ii) The federal funds effective rate from time to time, plus 0.5% and (iii) Reserved adjusted LIBOR for a one month interest period on the applicable date, plus 1.0%;
Additional amount of commitments from lenders			145,000,000
Sub-limits for swingline loans and letter of credit	10,000,000			10,000,000		10,000,000
Revolving credit facility, accordion feature											100,000,000
Debt instrument description of discount rate						The discount rate used to determine the present value is 50 basis points over the then current Treasury Rate corresponding to the remaining average life
Capital lease obligations, maximum percentage						7.70%
Capital lease obligations, minimum percentage						0.00%
Financing acquisition through syndicated loan facility	160,000,000			160,000,000		160,000,000
Borrowing base of the face value of the tax lien collateralized notes	90.00%			90.00%		90.00%
Propel Facility, accordion feature	40,000,000			40,000,000		40,000,000
Maximum Borrowing Capacity including Accordion Facility After Amendment										655,500,000
Propel Facility, Term of Facility						3 years
2011 Senior Secured Notes [Member]
Debt Instrument [Line Items]
Loan fees and other loan costs										900,000
Proceeds from senior secured notes	25,000,000
Senior secured notes, stated percentage	7.375%			7.375%		7.375%
Senior secured notes, maturity date	2018
Senior secured notes, periodic principal repayment	1,250,000
Senior secured notes, date of first required payment	May 10, 2013
Frequency of repayment, Senior Secured Notes								Quarterly
2010 Senior Secured Notes [Member]
Debt Instrument [Line Items]
Proceeds from senior secured notes	50,000,000
Senior secured notes, stated percentage	7.75%			7.75%		7.75%
Senior secured notes, maturity date	2017
Senior secured notes, periodic principal repayment	2,500,000
Senior secured notes, date of first required payment	Dec. 17, 2012
Propel Facility [Member]
Debt Instrument [Line Items]
Loan fees and other loan costs	700,000			700,000		700,000
Weighted average interest rate	3.54%			3.54%		3.54%
Revolving credit facility, amount outstanding	127,900,000			127,900,000		127,900,000
Minimum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate, One						3.50%
Basis spread on variable rate, Two						2.50%
Interest at Propels option at LIBOR, plus a spread	3.00%			3.00%		3.00%
Interest at Propels option at Prime, plus a spread	0.00%			0.00%		0.00%
Maximum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate, One						4.00%
Basis spread on variable rate, Two						3.00%
Interest at Propels option at LIBOR, plus a spread	3.75%			3.75%		3.75%
Interest at Propels option at Prime, plus a spread	0.75%			0.75%		0.75%
Computer Equipment [Member]
Debt Instrument [Line Items]
Capital lease obligations	$ 8,700,000			$ 8,700,000		$ 8,700,000

[1]

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Purchase Concentrations (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Summary of concentration of initial purchase cost
Purchases, gross	$ 361,446
Adjustments	(254)
Purchases, net	361,192
Percentage of purchase concentration	100.00%
Seller 1 [Member]
Summary of concentration of initial purchase cost
Purchases, gross	130,592
Percentage of purchase concentration	36.10%
Seller 2 [Member]
Summary of concentration of initial purchase cost
Purchases, gross	81,843
Percentage of purchase concentration	22.60%
Seller 3 [Member]
Summary of concentration of initial purchase cost
Purchases, gross	41,941
Percentage of purchase concentration	11.60%
Seller 4 [Member]
Summary of concentration of initial purchase cost
Purchases, gross	27,792
Percentage of purchase concentration	7.70%
Seller 5 [Member]
Summary of concentration of initial purchase cost
Purchases, gross	24,438
Percentage of purchase concentration	6.80%
Other Sellers [Member]
Summary of concentration of initial purchase cost
Purchases, gross	$ 54,840
Percentage of purchase concentration	15.20%

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Debt (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Components of debt
Revolving credit facility	$ 490,000	$ 305,000
Senior secured notes	75,000	75,000
Capital lease obligations and other	9,417	8,950
Debt and capital lease obligations, total	702,316	388,950
Propel Facility [Member]
Components of debt
Revolving credit facility	$ 127,899

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Other Assets (Tables)

6 Months Ended

Jun. 30, 2012

Other Assets [Abstract]

Components of other assets

	June 30, 2012		December 31, 2011
Prepaid income tax	$	6,507	$	53
Debt issuance costs, net of amortization		4,920		4,293
Prepaid expenses		5,624		5,232
Security deposit—India building lease		1,550		1,482
Deferred compensation assets		721		722
Real estate owned		311		—
Other		1,959		186
	$	21,592	$	11,968

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Stock Based Compensation (Details 1) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Summary of stock option activity
Outstanding at December 31, 2011	2,182,940
Granted	193,500
Cancelled/forfeited
Exercised	(122,200)
Outstanding at June 30, 2012	2,254,240
Exercisable at June 30, 2012	1,366,412
Option Price Per Share, Granted
Weighted Average Exercise Price, Outstanding at December 31, 2012	$ 13.00
Weighted Average Exercise Price, Granted	$ 22.17
Weighted Average Exercise Price, Cancelled/forfeited
Weighted Average Exercise Price, Exercised	$ 6.41
Weighted Average Exercise Price, Outstanding at June 30, 2012	$ 14.14
Weighted Average Exercise Price, Exercisable at June 30, 2012	$ 12.39
Aggregate Intrinsic Value, Outstanding at June 30, 2012	$ 34,887
Aggregate Intrinsic Value, Exercisable at June 30, 2012	$ 23,550
Minimum [Member]
Summary of stock option activity
Option Price Per Share, Outstanding at December 31, 2011	$ 0.51
Option Price Per Share, Cancelled/forfeited
Option Price Per Share, Exercised	$ 0.51
Option Price Per Share, Outstanding at June 30, 2012	$ 0.51
Option Price Per Share, Exercisable at June 30, 2012	$ 0.51
Maximum [Member]
Summary of stock option activity
Option Price Per Share, Outstanding at December 31, 2011	$ 24.65
Option Price Per Share, Cancelled/forfeited
Option Price Per Share, Exercised	$ 20.09
Option Price Per Share, Outstanding at June 30, 2012	$ 24.65
Option Price Per Share, Exercisable at June 30, 2012	$ 24.65

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 15: Commitments and Contingencies

Litigation

The Company is involved in disputes and legal actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions based on the Fair Debt Collection Practices Act (“FDCPA”), comparable state statutes, the Telephone Consumer Protection Act (“TCPA”), state and federal unfair competition statutes, and common law causes of action. The violations of law alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate assertions of fact in support of its collection actions, and/or has acted improperly in connection with its efforts to contact consumers. These cases are frequently styled as supposed class actions. In addition, from time to time, the Company is subject to litigation and other actions by governmental bodies, including formal and informal investigations relating to its collection activities by the Federal Trade Commission, state attorneys general, and other governmental bodies, with which the Company cooperates.

There has been no material development in any of the legal proceedings disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

In certain legal proceedings, the Company may have recourse to insurance or third party contractual indemnities to cover all or portions of its litigation expenses, judgments or settlements. In accordance with authoritative guidance, the Company records loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum estimated liability. The Company continuously assesses the potential liability related to the Company’s pending litigation and revises its estimates when additional information becomes available. The Company’s legal costs are recorded to expense as incurred.

Purchase Commitments

In the normal course of business, the Company enters into forward flow purchase agreements and other purchase commitment agreements. As of June, 2012, the Company has entered into agreements to purchase receivable portfolios with a face value of approximately $1.3 billion for a purchase price of approximately $58.6 million. The Company has no purchase commitments extending past one year.

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Business Combination (Tables)

6 Months Ended

Jun. 30, 2012

Business Combination [Abstract]

Components of the preliminary purchase price allocation for propel

Purchase price:
Cash paid	$	186,814
Estimated purchase price adjustment		725
Total estimated purchase price	$	187,539
Allocation of purchase price:
Cash	$	824
Accounts receivable		1,049
Interest receivable		3,679
Property tax payment agreements receivable		132,978
Fixed assets		461
Other assets		860
Liabilities assumed		(2,153	)
Identifiable intangible assets		570
Goodwill		49,271
Total net assets acquired	$	187,539

Future results of operations of the combined companies

	Three Months Ended June  30,				Six Months Ended June  30,
	2012		2011		2012		2011
Consolidated pro forma revenue	$	143,109	$	115,168	$	273,975	$	224,277
Consolidated pro forma income from continuing operations		21,557		15,205		40,708		29,126

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Derivatives and Hedging Instruments (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 Swap_Agreement
Derivatives and Hedging Instruments (Textual) [Abstract]
Cash payments of future forecasted transactions in Indian rupees maximum	up to 36 Months
Notional amount of the forward contracts to buy Indian rupees	$ 27.2
Net derivative loss included in OCI will be reclassified into earnings	1.9
Gains or losses were reclassified from OCI into earnings	0
Number of interest rate swap agreements outstanding	6
Interest rate swap agreements [Member]
Derivative [Line Items]
Notional amount of derivative instruments	$ 150.0

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Business Combination (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	May 08, 2012
Purchase price:
Cash paid	$ 186,814	$ 186,800
Estimated purchase price adjustment	725
Total estimated purchase price	187,539
Allocation of purchase price:
Cash	824
Accounts receivable	1,049
Interest receivable	3,679
Property tax payment agreements receivable	132,978
Fixed assets	461
Other assets	860
Liabilities assumed	(2,153)
Identifiable intangible assets	570
Goodwill	49,271
Total net assets acquired	$ 187,539

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Accumulated Earnings	Accumulated Other Comprehensive (Loss) Income
Balance at Dec. 31, 2011	$ 371,535	$ 245	$ 123,406	$ 249,852	$ (1,968)
Balance, Shares at Dec. 31, 2011		24,520
Net income	28,002			28,002
Other comprehensive loss:
Unrealized loss on derivative instruments, net of tax	(1,108)				(1,108)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes	(1,177)	3	(1,180)
Exercise of stock options and issuance of share-based awards, net of shares withheld for employee taxes, Shares		227
Stock-based compensation	4,805		4,805
Tax benefit related to stock-based compensation	1,584		1,584
Balance at Jun. 30, 2012	$ 403,641	$ 248	$ 128,615	$ 227,854	$ (3,076)
Balance, Shares at Jun. 30, 2012		24,797

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Note 4: Earnings per Share

Basic earnings per share is calculated by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and restricted stock units.

The components of basic and diluted earnings per share are as follows (in thousands, except earnings per share):

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Income from continuing operations	$	18,988		$	14,766	$	37,096			28,048
(Loss) income from discontinued operations, net of tax		(2,392	)		9		(9,094	)		406
Net income available for common stockholders	$	16,596		$	14,775	$	28,002		$	28,454
Weighted average common shares outstanding – basic		24,919			24,433		24,850			24,384
Dilutive effect of stock-based awards		906			1,177		972			1,210
Weighted average common shares outstanding – diluted		25,825			25,610		25,822			25,594
Basic earnings (loss) per share from:
Continuing operations	$	0.76		$	0.60	$	1.49		$	1.15
Discontinued operations	$	(0.10	)	$	0.00	$	(0.37	)	$	0.02
Net basic earnings per share	$	0.67		$	0.60	$	1.13		$	1.17
Diluted earnings (loss) per share from:
Continuing operations	$	0.74		$	0.58	$	1.44		$	1.09
Discontinued operations	$	(0.10	)	$	0.00	$	(0.37	)	$	0.02
Net diluted earnings per share	$	0.64		$	0.58	$	1.08		$	1.11

Employee stock options to purchase approximately 391,900 and 300,400 shares of common stock during the three and six months ended June 30, 2012, respectively, and employee stock options to purchase approximately 209,000 and 125,000 shares of common stock during the three and six months ended June 30, 2011, respectively, were outstanding but not included in the computation of diluted earnings per share because the effect on diluted earnings per share would be anti-dilutive.

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Investment in Receivable Portfolios, Net (Details Textual) (USD $)	3 Months Ended		6 Months Ended		9 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Sep. 30, 2011 Minimum [Member]	Sep. 30, 2011 Maximum [Member]
Investment In Receivable Portfolios Net (Textual) [Abstract]
Collection forecast estimated on receivable portfolios					84 months	96 months
Investment in Receivable Portfolios Net (Additional Textual) [Abstract]
Investment in receivable portfolios collection forecast estimate	$ 113,600,000		$ 113,600,000
Percentage of face value on purchase cost	3.80%	3.10%	4.00%	3.10%
Estimated future collections at acquisition for receivable portfolios	407,400,000	185,900,000	643,600,000	364,300,000
Zero Basis Revenue	6,100,000	2,900,000	12,200,000	5,900,000
Purchase price of receivable portfolios	231,000,000	93,700,000	361,400,000	184,400,000
Face value of receivable portfolios	$ 6,000,000,000	$ 3,000,000,000	$ 8,900,000,000	$ 5,900,000,000

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Segment Information (Details Textual) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Segment Information (Textual) [Abstract]
Assets	$ 1,167,945	$ 812,483
Portfolio purchasing and recovery [Member]
Segment Information (Textual) [Abstract]
Assets	970,400
Tax lien transfer [Member]
Segment Information (Textual) [Abstract]
Assets	$ 202,500

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Components of basic and diluted earnings per share

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Income from continuing operations	$	18,988		$	14,766	$	37,096			28,048
(Loss) income from discontinued operations, net of tax		(2,392	)		9		(9,094	)		406
Net income available for common stockholders	$	16,596		$	14,775	$	28,002		$	28,454
Weighted average common shares outstanding – basic		24,919			24,433		24,850			24,384
Dilutive effect of stock-based awards		906			1,177		972			1,210
Weighted average common shares outstanding – diluted		25,825			25,610		25,822			25,594
Basic earnings (loss) per share from:
Continuing operations	$	0.76		$	0.60	$	1.49		$	1.15
Discontinued operations	$	(0.10	)	$	0.00	$	(0.37	)	$	0.02
Net basic earnings per share	$	0.67		$	0.60	$	1.13		$	1.17
Diluted earnings (loss) per share from:
Continuing operations	$	0.74		$	0.58	$	1.44		$	1.09
Discontinued operations	$	(0.10	)	$	0.00	$	(0.37	)	$	0.02
Net diluted earnings per share	$	0.64		$	0.58	$	1.08		$	1.11

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Goodwill and Identifiable Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of acquired intangible assets

	As of June 30, 2012							As of December 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	—	$	—		$	—	$	6,000	$	(5,538	)	$	462
Trade name and other		570		(20	)		550		—		—			—
Total intangible assets subject to amortization	$	570	$	(20	)	$	550	$	6,000	$	(5,538	)	$	462
Intangible assets not subject to amortization:
Goodwill – portfolio purchasing and recovery						$	6,047						$	6,047
Goodwill – tax lien transfer							49,271							—
Goodwill – bankruptcy servicing							—							9,938
Total goodwill						$	55,318						$	15,985

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Purchase Concentrations

6 Months Ended

Jun. 30, 2012

Purchase Concentrations [Abstract]

Purchase Concentrations

Note 14: Purchase Concentrations

The following table summarizes purchases by seller sorted by total aggregate cost (in thousands, except percentages):

	Six Months Ended June 30, 2012
	Cost			%
Seller 1	$	130,592			36.1	%
Seller 2		81,843			22.6	%
Seller 3		41,941			11.6	%
Seller 4		27,792			7.7	%
Seller 5		24,438			6.8	%
Other sellers		54,840			15.2	%
	$	361,446			100.0	%
Adjustments (1)		(254	)
Purchases, net	$	361,192

⁽¹⁾  Adjusted for Put-backs and Recalls.