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Investment in Receivable Portfolios, Net
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Investment in Receivable Portfolios, Net Investment in Receivable Portfolios, Net
The Company’s purchased portfolios of loans are grossed-up to their face value with an offsetting allowance and noncredit discount allocated to the individual receivables as the unit of account is at the individual loan level. Since each loan is deeply delinquent and deemed uncollectible at the individual loan level, the Company applies its charge-off policy and fully writes-off the amortized costs (i.e., face value net of noncredit discount) of the individual receivables immediately after purchasing the portfolio. The Company then records a negative allowance that represents the present value of all expected future recoveries for pools of receivables that share similar risk characteristics using a discounted cash flow approach, which ultimately equals the amount paid for a portfolio purchase and presented as “Investment in receivable portfolios, net” in the Company’s condensed consolidated statements of financial condition. The discount rate is an effective interest rate (or “purchase EIR”) based on the purchase price of the portfolio and the expected future cash flows at the time of purchase.
Receivable portfolio purchases are aggregated into pools based on similar risk characteristics. Examples of risk characteristics include financial asset type, collateral type, size, interest rate, date of origination, term, and geographic location. The Company’s static pools are typically grouped into credit card, purchased consumer bankruptcy, and mortgage portfolios. The Company further groups these static pools by geographic location. Once a pool is established, the portfolios will remain in the designated pool unless the underlying risk characteristics change. The purchase EIR of a pool will not change over the life of the pool even if expected future cash flows change.
Revenue is recognized for each static pool over the economic life of the pool. Debt purchasing revenue includes two components:
(1)     Revenue from receivable portfolios, which is the accretion of the discount on the negative allowance due to the passage of time (generally the portfolio balance multiplied by the EIR) and also includes all revenue from zero basis portfolio (“ZBA”) collections, and
(2)     Changes in recoveries, which includes
(a)     Recoveries above or below forecast, which is the difference between (i) actual cash collected/recovered during the current period and (ii) expected cash recoveries for the current period, which generally represents over or under performance for the period; and
(b)     Changes in expected future recoveries, which is the present value change of expected future recoveries, where such change generally results from (i) collections “pulled forward from” or “pushed out to” future periods (i.e.
amounts either collected early or expected to be collected later) and (ii) magnitude and timing changes to estimates of expected future collections (which can be increases or decreases).
The Company measures expected future recoveries based on historical experience, current conditions, and reasonable and supportable forecasts. Both internal and external factors may have an impact on expected future recoveries. Internal factors include operational performance, such as capacity and the productivity of our collection staff. External factors include new laws or regulations, new interpretations of existing laws or regulations, and macroeconomic conditions.
The following table summarizes the changes in the balance of investment in receivable portfolios, net during the periods presented (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Balance, beginning of period$3,035,123 $3,154,001 $3,065,553 $3,291,918 
Purchases of receivable portfolios (1)
232,652 168,188 575,164 481,094 
Collections applied to investment in receivable portfolios, net (2)
(161,037)(250,465)(567,775)(803,185)
Changes in recoveries (3)
(13,080)65,913 179,293 176,628 
Put-backs and Recalls(1,552)(1,724)(6,132)(8,081)
Deconsolidation of receivable portfolios— (7,335)— (7,335)
Disposals and transfers to assets held for sale(3,035)(1,816)(6,867)(6,128)
Foreign currency translation adjustments(112,869)(43,491)(263,034)(41,640)
Balance, end of period$2,976,202 $3,083,271 $2,976,202 $3,083,271 
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(1)The table below provides the detail on the establishment of negative allowance for expected recoveries of portfolios purchased during the periods presented:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Purchase price$232,652 $168,188 $575,164 $481,094 
Allowance for credit losses608,708 449,412 1,727,826 1,174,524 
Amortized cost841,360 617,600 2,302,990 1,655,618 
Noncredit discount834,468 786,194 2,398,775 2,228,664 
Face value1,675,828 1,403,794 4,701,765 3,884,282 
Write-off of amortized cost(841,360)(617,600)(2,302,990)(1,655,618)
Write-off of noncredit discount(834,468)(786,194)(2,398,775)(2,228,664)
Negative allowance232,652 168,188 575,164 481,094 
Negative allowance for expected recoveries - current period purchases$232,652 $168,188 $575,164 $481,094 
(2)Collections applied to investment in receivable portfolios, net, is calculated as follows during the periods presented:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Cash Collections$458,256 $566,690 $1,475,381 $1,785,578 
Less - amounts classified to revenue from receivable portfolios(297,219)(316,225)(907,606)(982,393)
Collections applied to investment in receivable portfolios, net$161,037 $250,465 $567,775 $803,185 
(3)Changes in recoveries is calculated as follows during the periods presented, where recoveries include cash collections, put-backs and recalls, and other cash-based adjustments:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Recoveries (below) above forecast$(4,880)$77,064 $51,407 $277,861 
Changes in expected future recoveries(8,200)(11,151)127,886 (101,233)
Changes in recoveries$(13,080)$65,913 $179,293 $176,628 
Recoveries above or below forecast represent over and under-performance in the reporting period, respectively. Collections during the three months ended September 30, 2022, under-performed the projected cash flows by approximately $4.9 million. The Company has experienced an unusually high level of collections resulting from changes in consumer behavior during the COVID-19 pandemic in addition to improvements in collections capabilities, and therefore increased expected future cash flows for certain pool groups in previous periods. The pandemic-related drivers of this changed behavior have normalized in recent quarters, and for the three months ended September 30, 2022, collections under-performed the projected cash flows. Collections during the nine months ended September 30, 2022, over-performed the projected cash flows by approximately $51.4 million.
When reassessing the forecasts of expected lifetime recoveries during the three months ended September 30, 2022, management considered, among other factors, historical and current collection performance, changes in consumer behavior, and the macroeconomic environment and believes that projected future cash flows for certain static pools resulted in decreased total expected recoveries. As a result, the Company has updated its forecast, resulting in changes in the timing and amount of total estimated remaining collections which in turn, when discounted to present value, resulted in a negative change in expected future recoveries of approximately $8.2 million for the three months ended September 30, 2022. This negative change in expected future recoveries, together with the positive changes recorded in previous quarters, resulted in a net positive change of expected future period recoveries of $127.9 million for the nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the Company recorded approximately $11.2 million and $101.2 million, respectively, in negative change in expected future recoveries.