Posted by & filed under Accounting Principles, All Articles, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Intermediate Accounting, Managerial Accounting.

From 2006 to 2009, the nation’s top nine debt buyers purchased almost 90 million consumer accounts with more than $140 billion in “face value.” This article details the saga of debt accounts that continue to be stolen, double-sold or otherwise exchanged without accurate supporting information by “debt collectors, including statements or copies of original signed contracts. Although regulators, like the FTC, are starting to consider more policing of this area, unfortunately consumers continue to be exploited.

1. What did the debt buyer pay for this opportunity to collect?
2. Based on the information in the intro and your answer in #1, what amount of collection would they need to generate a target gross profit of $10,000?
3. Assume that fixed expenses for a debt collector are $100,000, what amount of debts would the collector need to recover to break-even?
4. What variables did the article say were important to collecting old debt?
5. From an accounting standpoint, how should collection agencies account for paper that cannot be collected?

Halpern, J. (2014). Paper boys: Inside the dark, labyrinthine, and extremely lucrative world of consumer debt collection. The New York Times, Aug. 15 (Retrievable online at