What changed in this filing

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Item 1. Business

2021-02-24 compared with 2020-02-26 · 198 added, 122 removed, 262 unchanged (55% of the section changed)

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We also have additional international investments and operations as we have explored new asset classes and geographies including:

(1) our investments in non-performing loans in Colombia, Peru, Mexico and Brazil;

(1) our investments in non-performing loans in Colombia, Peru and Mexico;

and (2) an investment in Encore Asset Reconstruction Company (“EARC”) in India.

We refer to these additional international operations as our Latin America and Asia-Pacific (“LAAP”) operations.

In August 2019, we completed the sale of Baycorp, which specialized in the management of non-performing loans in Australia and New Zealand and was previously a component of LAAP.

To date, operating results from LAAP have not been significant to our total consolidated operating results.

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In June 2013, we completed our merger with Asset Acceptance Capital Corp., which was another leading provider of debt recovery solutions in the United States.

In July 2013, by acquiring a majority ownership interest in the indirect holding company of CCM, Janus Holdings S.a r.l., we acquired control of CCM.

In July 2013, by acquiring a majority ownership interest in the indirect holding company of CCM, Janus Holdings S.à r.l., we acquired control of CCM.

In February 2014, CCM acquired Marlin Financial Group Limited, a leading acquirer of non-performing consumer debt in the United Kingdom.

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Analytic Strength.

We believe that success in our business depends on our ability to establish and maintain an information advantage.

We believe that success in our business depends on our ability to establish and maintain an information and data advantage.

Leveraging an industry-leading financially distressed consumer database, our in-house team of statisticians, business analysts, and software programmers have developed, and continually enhance, proprietary behavioral and valuation models, custom software applications, and other business tools that guide our portfolio purchases.

Moreover, our collection channels are informed by powerful statistical models specific to each collection activity, and each year we deploy significant capital to purchase credit bureau and customized consumer data that describe account level and macroeconomic factors related to credit, savings, and payment behavior.

Consumer Intelligence.

We have been able to leverage over 20 years of data, insights, modeling and operational integration.

Each year we invest significant capital to purchase credit bureau and customized consumer data that describe account level and macroeconomic factors related to credit, savings, and payment behavior.

This robust data accumulation from our collection channels and other sources supports our direct mail, call center and digital collection efforts and our market-leading proprietary scorecards for legal placements.

We leverage these and other powerful statistical models to drive each collection activity.

We have made significant progress in developing our digital collection strategies, which we continue to optimize along with our collections websites.

In developing our digital platform, we have allowed consumers to access account information, supporting documents and perform payments online.

By leveraging direct mail, email and search engines we have bolstered data accumulation and collections payments through our digital platform.

Innovation and investment in digital collection technology and speech analytics have enhanced our ability to collect and enabled us to quickly adapt to the varying operating conditions resulting from the COVID-19 pandemic, as they provide real-time insights that help optimize our interaction with consumers, as well as valuable information for training purposes.

Consumer Intelligence and Principled Intent.

Across the full extent of our operations, we strive to treat consumers with respect, compassion and integrity.

From affordable payment plans to hardship solutions, we work with our consumers as they attempt to return to financial health.

We are committed to having a dialogue that is honorable and constructive and hope to play an important and positive role in our consumers’ financial recovery.

We believe that our interests and those of the financial institutions from which we purchase portfolios are closely aligned with the interests of government agencies seeking to protect consumer rights.

To demonstrate our commitment to conducting business ethically, we developed our Consumer Bill of Rights.

Its articles govern the principled treatment we aim to provide consumers.

Operating with a consumer-first approach has built trust among consumers and issuers of consumer credit, allowing us to improve liquidation and maintain purchasing supply.

We expect to continue to invest in infrastructure and processes that support consumer advocacy and financial literacy while promoting an appropriate balance between corporate and consumer responsibility.

At the core of our analytic approach is a focus on characterizing our consumers’ willingness and ability to repay their financial obligations.

In this effort, we apply tools and methods from statistics, psychology, economics, and management science across the full extent of our business.

During portfolio valuation, we use an internally developed and proprietary family of statistical models that determines the likelihood and expected amount of payment for each consumer within a portfolio.

Subsequently, the expectations for each account are aggregated to arrive at a portfolio-level liquidation solution and a valuation for the entire portfolio is determined.

In this effort, we apply tools and methods from statistics, economics, and management science across the full extent of our business.

During portfolio valuation, we use internally developed proprietary statistical models that determine the likelihood and expected amount of collections from each consumer within a portfolio.

Subsequently, the expectations for each account are aggregated to arrive at a portfolio-level liquidation model and a valuation for the entire portfolio is determined.

During the collection process, we apply a number of proprietary operational frameworks to match our collection approach to an individual consumer’s payment behavior.

Our data collection practices and analytics processes are designed with consumer experience in mind.

Over time we have adjusted our execution to optimize lifetime liquidation with a high-touch, focused approach.

We connect with the consumer through extended conversations and offer expanded interaction and payment options.

Our analytics infrastructure provides insights to consumer sentiment, allowing us to tailor our communication and collections efforts to each consumer.

This sustained consumer focus and other operational enhancements have led to improved liquidation effectiveness and fair consumer treatment.

Regulatory Expertise .

Both the U.S.

and UK markets have established regulatory systems and compliance requirements, benefiting scaled market participants such as Encore.

Issuers of consumer debt sell charged-off receivables to a select universe of trusted buyers, further necessitating a robust compliance and regulatory framework.

As the cost of compliance increases, economies of scale are important to the provision of cost effective credit management services.

Our established regulatory framework uniquely positions us to capture new portfolios and realize cost-efficiencies.

Although MCM and Cabot both operate in developed and established credit markets, fundamental differences exist between the two from the standpoint of the regulatory approach being followed.

environment is governed by a rules-based approach which details specific rules on how the company should conduct operations when interacting with consumers.

The UK landscape is principles-based in nature;

outcomes and principles are set by the regulators.

Parties under their purview are responsible for determining how to appropriately achieve the stated outcomes and principles.

We have strategically structured our compliance infrastructure at MCM and Cabot to account for these key market-specific factors.

Many credit providers seek to do business with credit management companies that provide consistent, compliant and consumer-focused services to protect the credit provider’s own reputation.

Encore’s established regulatory and compliance programs are a key differentiator that enables the Company to successfully and efficiently demonstrate its expertise to credit providers.

MCM averages approximately 35 issuer audits and due diligence exercises per year and has achieved certification from all major U.S.

issuers who sell their charged-off accounts to third parties.

Cabot also maintains a leading track record of regulatory approval and was the first large UK-based credit management service company to receive full FCA authorization.

Strong Capital Stewardship .

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We are a market leader in portfolio purchasing and recovery in the United States and one of the largest credit management services providers in Europe.

This operational scale combined with cost efficiency is central to our collection and purchasing strategies.

We experience considerable cost advantages, stemming from our operations in India and Costa Rica and the development and implementation of operational models that enhance profitability.

We believe that we are the only company in our industry with successful collection platforms in India and Costa Rica.

This cost-saving, first-mover advantage helps to reduce our call center variable cost-to-collect.

Principled Intent.

Across the full extent of our operations, we strive to treat consumers with respect, compassion, and integrity.

From affordable payment plans to hardship solutions, we work with our consumers as they attempt to return to financial health.

We are committed to dialogue that is honorable and constructive and hope to play an important and positive role in our consumers’ financial recovery.

We believe that our interests, and those of the financial institutions from which we purchase portfolios, are closely aligned with the interests of government agencies seeking to protect consumer rights.

We expect to continue investing in infrastructure and processes that support consumer advocacy and financial literacy while promoting an appropriate balance between corporate and consumer responsibility.

This operational scale combined with cost efficiency is central to our purchasing and collection strategies.

We also experience considerable cost advantages stemming from our scale and focus on collecting in a cost-efficient manner.

Our operations in India and Costa Rica have been critical to achieving these improvements.

We are one of the only companies in the industry with a successful, late stage collection platform in India, which has helped to reduce our call center variable cost-to-collect while maintaining our quality standards.

Competitive Advantage.

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(1) a large and consistent flow of purchasing opportunities;

(2) a strong regulatory framework with barriers to entry that support issuers to outsource or sell;

(2) a strong regulatory framework that creates advantages for firms with sufficient financial and operational capabilities ;

(3) a high degree of sophistication and data availability;

and (4) stable long term returns and resilience in the event of macroeconomic disruption.

In addition, we are strengthening our presence in Spain, France, Portugal and Ireland, each of which we believe shares a number of these same attractive market characteristics.

Balance Sheet Strength .

We are focused on strengthening our balance sheet while delivering strong financial and operational results.

This includes increasing our cash flow through efficient collection operations and applying excess cash flows to reduce our debt, which allows us to grow estimated remaining collections and earnings while at the same time reducing financial leverage.

We are focused on optimizing our balance sheet while delivering strong financial and operational results.

This includes increasing our cash flow generation through efficient collection operations and applying excess cash toward reducing our debt, reducing financial leverage.

In addition, through our new global funding structure established in September 2020, we have reduced our funding costs, enhanced our access to capital markets and increased our financial flexibility, particularly with respect to our ability to allocate capital to our markets with the best risk-adjusted returns.

Our Priority Framework

We have tailored our strategy to optimize our ability to achieve and maintain strong returns throughout the credit cycle.

With respect to our balance sheet, we will strive to maintain financial flexibility and operate with leverage in a range that we believe benefits the company, and we also target a strong debt rating.

Our capital allocation priorities include portfolio purchases at attractive returns, strategic merger and acquisition (M&A) consideration, and the return of capital to stockholders.

Purchasing Approach

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A “forward flow” contract is a commitment to purchase receivables over a duration that is typically three to twelve months, but can be longer, with specifically defined volume, frequency, and pricing.

Typically, these forward flow contracts have provisions that allow for early termination or price re-negotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract.

Typically, these

forward flow contracts have provisions that allow for early termination or price renegotiation should the underlying quality of the portfolio deteriorate over time or if any particular month’s delivery is materially different than the original portfolio used to price the forward flow contract.

In the U.S., where we have the ability in many of our forward flow contracts to terminate upon a certain specified amount of notice, we generally attempt to secure forward flow contracts for receivables because a consistent volume of receivables over a set duration can enable us to more accurately forecast and plan our operational needs.

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Formal approval process.

Once we have determined the estimated value of the portfolio and have completed our qualitative due diligence, we present the purchase opportunity to our investment committee, which either sets the maximum purchase price for the portfolio based on an Internal Rate of Return (“IRR”) and at times also on other strategic objectives, or declines to bid.

Members of the investment committee vary based on the type, amount and jurisdiction of the purchase opportunity, but include our Chief Executive Officer and Chief Financial Officer for all material purchases.

Members of the investment committee vary based on the type, amount, IRR and jurisdiction of the purchase opportunity, but include our Chief Executive Officer and Chief Financial Officer for all material purchases.

We believe long-term success is best achieved by combining a diversified asset sourcing approach with an account-level scoring methodology and a disciplined evaluation process.

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Account managers assess our consumers’ willingness and capacity to pay.

They attempt to work with consumers to evaluate sources and means of repayment to achieve a full or negotiated lump sum settlement or develop payment programs customized to the individual’s ability to pay.

They attempt to work with consumers to evaluate sources and means of repayment to achieve a lump sum settlement or develop payment programs customized to the individual’s ability to pay.

In cases where a payment plan is developed, account managers encourage consumers to pay through automatic payment arrangements.

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• Legal Action .

We generally refer accounts for legal action where the consumer has not responded to our direct mail efforts or our calls and it appears the consumer is able, but unwilling, to pay their obligations.

We generally refer accounts for legal action when the consumer has not responded to our direct mail efforts or our calls and it appears the consumer is able, but unwilling, to pay their obligations.

When we decide to pursue legal action, we place the account into our internal legal channel or refer them to our network of retained law firms.

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We have made significant progress in developing our digital strategies and continue to analyze and optimize our digital strategies and our collection website.

Currently consumers can access their account information, supporting documents and make payments through our website.

Currently consumers can access their account information, view supporting documents and make payments through our website.

We leverage direct mail, email, and search engines to promote our digital channel to our consumers.

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We employ a variety of collections strategies from the point of purchase, tailored to both the type of account and the consumer’s financial strength.

For paying accounts, we seek to engage with the consumers to transfer across their payment stream to us and understand their detailed financial situation.

For paying accounts, we seek to engage with the consumers to transfer their payment stream to us and understand their detailed financial situation.

For non-paying accounts, we apply a segmentation framework tailoring our communication and contact intensity in line with our assessment of their credit bureau data, the size of their debt, and whether we have an existing relationship with them from other accounts.

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Information Technology

Technical Infrastructure.

Our internal network has been configured to be redundant in areas that support critical functions, at our core office sites.

This redundancy has been implemented within the local area network and the data center network and includes fully redundant Multiprotocol Label Switching (MPLS) networks.

We have the capability to handle high transaction volume in our server network architecture with scalability to meet and exceed our future growth plans.

Redundancy, coupled with seamless scalability and our high-performance infrastructure, will allow for rapid business transformation and growth.

Omni-Channel Enabled Dialer Technology.

Our call centers employ the use of upgraded dialer technology that expands our ability to service the consumer in their preferred channel of communication.

This technology allows additional call volume capacity and greater efficiency through shorter wait times and an increase in the number of live contacts.

This technology helps maximize account manager productivity and further optimizes the yield on our portfolio purchases.

Additionally, the use of predictive dialing technology helps us comply with applicable federal and state laws in the United States that restrict the time, place and manner in which debt collectors can call consumers.

Recognizing mobile phone dialing has a different set of legal restrictions, we utilize a distinctly different platform for non-consented mobile phones in order to comply with all laws while providing a framework for us to maximize contact with our consumers.

Computer Hardware.

We have made significant improvements in our data centers, and now have redundancy in support of continued growth.

We use a robust computer platform to perform our daily operations, including the collection efforts of our global workforce.

Our custom software applications are integrated within our database server environment allowing us to process transaction loads with speed and efficiency.

The computer platform offers us reliability and expansion opportunities.

Furthermore, this hardware incorporates state of the art data security protection.

We back up our data utilizing a tapeless configuration, and copies are replicated between our two co-location data centers.

We also mirror our production data to a remote location to give us full protection in the event of the loss of our primary data center.

To improve the integrity and reliability of our computer platform, we regularly engage outside auditors specializing in information technology and cybersecurity to examine both our operating systems and disaster recovery plans.

Our Technology.

We strive to utilize best of breed technologies throughout our business from our core collection platforms and decision engines to our enterprise wide predictive dialer capability.

Using these industry leading platforms in conjunction with certain company-specific integrations, provides us with an overall solution that enables us to both interact with consumers in their preferred manner, such as telephone calls, SMS, email, web chat, etc., as well as monitor such consumer interactions for compliance with applicable rules and regulations.

Process Control.

To provide assurance that our entire infrastructure continues to operate efficiently and securely, we have developed a strong process and control environment.

To provide assurance that our technology solutions continue to operate efficiently and securely, we have developed strong process and control environments.

These governance, risk management, and control protocols govern all areas of the enterprise:

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and (4) IT governance, risk and controls.

We invest in cybersecurity and advanced technologies, including next generation threat prevention and threat intelligence solutions, to protect our organization and consumer and

proprietary data throughout its life cycle.

We invest in cybersecurity and advanced technologies, including next generation threat prevention and threat intelligence solutions, to protect our organization and consumer and proprietary data throughout its life cycle.

We believe that our adoption and implementation of leading security frameworks for the financial services industry and the regulatory environments and geographies in which we operate demonstrates our commitment to cybersecurity and information security.

To ensure the integrity and reliability of our environment, we periodically engage outside auditors specializing in cybersecurity to examine and test our technical posture as well as our detection and response capabilities.

To ensure the integrity and reliability of our environment, we periodically engage outside auditors specializing in information technology and cybersecurity to examine and test our operating systems, technical posture as well as our detection and response capabilities, including our disaster recovery plans.

The consumer credit recovery industry is highly competitive in the United States, the United Kingdom and throughout Europe.

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Government Regulation

There have been various governmental actions taken, or proposed, in response to the COVID-19 pandemic, such as limiting debt collection efforts and encouraging or requiring extensions, modifications or forbearance, with respect to certain loans and fees.

In addition, in certain jurisdictions courts have closed and/or government actions have affected the litigation process.

Government actions have not been consistent across jurisdictions and the efficacy and ultimate effect of such actions is not known.

We continue to monitor federal, state and international regulatory developments in relation to COVID-19 and their potential impact on our operations.

MCM (United States)

Our operations in the United States are subject to federal, state, and municipal statutes, rules, regulations, and ordinances that establish specific guidelines and procedures that debt purchasers and collectors must follow when collecting consumer accounts.

It is our policy to comply with the provisions of all applicable laws in all of our recovery activities.

Our failure to comply with these laws could have a material adverse effect on us to the extent that they limit our recovery activities or subject us to fines or penalties in connection with such activities.

The federal Fair Debt Collection Practices Act (“FDCPA”) and comparable state and local laws establish specific guidelines and procedures that debt collectors must follow when communicating with consumers, including the time, place and manner of the communications, and prohibit unfair, deceptive, or abusive debt collection practices.

debt purchasing business and collection activities are subject to federal, state, and municipal statutes, rules, regulations, and ordinances that establish specific requirements and procedures that debt purchasers and collectors must follow when collecting consumer accounts, including requirements to obtain and maintain relevant licenses in certain U.S.

states in which we conduct our activities.

It is our policy to comply with the provisions of all applicable laws in all of our recovery activities, including any applicable state licensing requirements.

Our failure to comply with these laws or to maintain relevant state licenses could have a material adverse effect on us to the extent that they limit our recovery activities or subject us to fines or penalties in connection with such activities.

The federal Fair Debt Collection Practices Act (“FDCPA”) and comparable state and local laws establish specific requirements and procedures that debt collectors must follow when communicating with consumers, including the time, place and manner of the communications, and prohibit unfair, deceptive, or abusive debt collection practices.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act of 2010 (the “Dodd-Frank Act”), Congress transferred the Federal Trade Commission’s (“FTC”) role of administering the FDCPA to the Consumer Financial Protection Bureau (“CFPB”) , along with certain other federal statutes, and gave the CFPB authority to implement regulations under the FDCPA.

The FTC and the CFPB share enforcement responsibilities under the FDCPA.

In addition to the FDCPA, the federal laws that directly or indirectly apply to our business (including the regulations that implement these laws) include the following:

Dodd-Frank Act, including the Consumer Financial Protection Act (Title X of the Dodd-Frank Act, “CFPA”) Servicemembers’ Civil Relief Act

Electronic Fund Transfer Act Telephone Consumer Protection Act (“TCPA”)

Equal Credit Opportunity Act Truth In Lending Act

Fair Credit Billing Act U.S.

In addition to the FDCPA, the federal laws that directly or indirectly apply to our business (including the regulations that implement these laws) include, but are not limited to, the following:

• Dodd-Frank Act, including the Consumer Financial Protection Act (Title X of the Dodd-Frank Act, “CFPA”)

• Servicemembers’ Civil Relief Act

• Electronic Fund Transfer Act and the CFPB’s Regulation E

• Telephone Consumer Protection Act (“TCPA”)

• Equal Credit Opportunity Act and the CFPB’s Regulation B

• Truth In Lending Act and the CFPB’s Regulation Z

• Fair Credit Billing Act

Bankruptcy Code

Fair Credit Reporting Act (“FCRA”) Wire Act

Federal Trade Commission Act (“FTCA”) Credit CARD Act

Gramm-Leach-Bliley Act Foreign Corrupt Practices Act

• Fair Credit Reporting Act (“FCRA”) and the CFPB’s Regulation V

• Federal Trade Commission Act (“FTCA”)

• Credit CARD Act

• Gramm-Leach-Bliley Act and the CFPB’s Regulation P

• Foreign Corrupt Practices Act

• Health Insurance Portability and Accountability Act

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It contains comprehensive provisions governing the oversight of financial institutions, some of which apply to us.

Among other things, the Dodd-Frank Act established the CFPB, which has broad authority to implement and enforce “federal consumer financial law,” as well as authority to examine financial institutions, including credit issuers that may be sellers of

receivables and debt buyers and collectors such as us, for compliance with federal consumer financial law.

The CFPB has authority to prevent unfair, deceptive, or abusive acts or practices by issuing regulations or by using its enforcement authority without first issuing regulations.

The Dodd-Frank Act also authorizes state officials to enforce regulations issued by the CFPB and to enforce the CFPA general prohibition against unfair, deceptive, and abusive acts or practices.

The CFPB’s authorities include the ability to issue regulations under all significant federal statutes that affect the collection industry, including the FDCPA, FCRA, and others.

In May 2019, the CFPB issued a Notice of Proposed Rulemaking (“NPRM”) regarding debt collection.

The NPRM proposes rules related to, among other things:

disclosures by debt collectors to consumers;

requirements for debt validation;

use of newer technologies (text, voicemail and email) to communicate with consumers;

and limits relating to telephonic communications.

The industry and public had a 90-day period to comment on the proposed rules, which was extended by 30 days.

The CFPB will evaluate any comments and issue the final rules.

It is anticipated that the final rules will be issued in early to mid 2020, with an effective date one year after the final rules are issued.

The CFPB has broad authority to prevent unfair, deceptive, or abusive acts or practices by issuing regulations or by using its enforcement authority without first issuing regulations.

State Attorneys General and state financial regulators have authority to enforce the CFPA’s general prohibitions against unfair, deceptive, or abusive acts or practices, as well as state-specific prohibitions against unfair or deceptive acts or practices.

Additionally, the FTCA prohibits unfair and deceptive acts or practices in connection with a trade or business and gives the FTC enforcement authority to prevent and redress violations of this prohibition.

The Dodd-Frank Act also gave the CFPB supervisory and examination authority over a variety of institutions that may engage in debt collection, including us.

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The CFPB also has authority to obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief), costs, and monetary penalties ranging from $5,000 per day for ordinary violations of federal consumer financial laws to $25,000 per day for reckless violations and $1 million per day for knowing violations.

In addition, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations implemented under Title X of the Dodd-Frank Act, the Dodd-Frank Act empowers state Attorneys General and state regulators to bring civil actions to remedy violations of state law.

The CFPB has been active in its supervision, examination and enforcement of financial services companies, including bringing enforcement actions, imposing fines and mandating large refunds to customers of several financial institutions for practices relating to debt collection practices.

On September 9, 2015, we entered into a consent order (the “Consent Order”) with the CFPB in which we settled allegations arising from our practices between 2011 and 2015.

We will continue to cooperate and engage with the CFPB and work to ensure compliance with the Consent Order, which terminates in September 2020.

In addition, we are subject to ancillary state attorney general investigations related to similar debt collection practices.

The CFPB and the FTC continue to devote substantial attention to debt collection activities, and, as a result, the CFPB and the FTC have brought multiple investigations and enforcement actions against debt collectors for violations of the FDCPA and other applicable laws.

Continued regulatory scrutiny by the CFPB and the FTC over debt collection practices may result in additional investigations and enforcement actions against the debt collection industry.

In September 2015, we entered into a consent order (the “2015 Consent Order”) with the CFPB in which we settled allegations arising from our practices between 2011 and 2015.

On September 8, 2020, the CFPB filed a lawsuit alleging that we violated the 2015 Consent Order.

In the lawsuit, the CFPB alleged that we did not perfectly adhere to certain operational provisions of the 2015 Consent Order, leading to alleged violations of federal consumer financial law.

On October 15, 2020, we entered into a stipulated judgment (“Stipulated Judgment”) with the CFPB to resolve the lawsuit.

The Stipulated Judgment requires us to, among other things:

(1) continue to follow a narrow subset of the operational requirements contained in the 2015 Consent Order, all of which have long been part of our routine practices;

(2) pay a $15.0 million civil monetary penalty;

and (3) provide redress of approximately $9,000 to 14 affected consumers, which is in addition to approximately $70,000 of redress that we had previously voluntarily provided.

In connection with the Stipulated Judgment, the CFPB has formally terminated the 2015 Consent Order.

We recorded an after-tax charge of $15.0 million for the year ended December 31, 2020 as a result of the Stipulated Judgment.

Additionally, we are subject to ancillary state Attorney General investigations related to similar debt collection practices.

For example, in 2018, we also entered into settlement agreements with the Attorneys General of 42 U.S.

states and the District of Columbia in connection with our debt collection and litigation practices.

On October 30, 2020, the CFPB issued final rules in the form of new Regulation F to implement the Fair Debt Collection Practices Act, which rules restate and clarify prohibitions on harassment and abuse, false or misleading representations, and unfair practices by debt collectors when collecting consumer debt.

The rules included provisions related to, among other things, the use of newer technologies (text, voicemail and email) to communicate with consumers and limits relating to telephonic communications.

On December 18, 2020, the CFPB also issued an additional debt collection final rule focused on consumer disclosures.

This final rule amends Regulation F to provide additional requirements regarding validation information and disclosures provided at the outset of debt collection communications, prohibit suits and threats of suits regarding time-barred debt, and identify actions that must be taken before a debt collector may report information about a debt to consumer reporting agencies.

The rules will each become effective on November 30, 2021.

Based on our preliminary assessment of the rules, we believe that the new rules will not have a material incremental effect on our operations.

In addition, the CFPB has issued guidance in the form of bulletins on debt collection and credit furnishing activities generally, including one that specifically addresses representations regarding credit reports and credit scores during the debt collection process, another that focuses on the application of the CFPA’s prohibition of unfair, deceptive, or abusive acts or practices on debt collection and another that discusses the risks that in-person collection of consumer debt may create in violating the FDPCA and CFPA.

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As a result, certain commercial relationships we maintain may be disrupted or impacted by changes in third-parties’ business practices or perceptions of elevated risk relating to the debt collection industry.

Our activities are also subject to federal and state laws concerning identity theft, privacy, data security, the use of automated dialing equipment, and other laws related to consumers and consumer protection.

Our activities are also subject to federal and state laws concerning identity theft, data privacy, and cybersecurity.

The Gramm-Leach-Bliley Act and its implementing regulations require us generally to protect the confidentiality of our consumers’ nonpublic personal information and to disclose to our consumers our privacy policy and practices, including those regarding sharing consumers’ nonpublic personal information with third parties.

In addition, the FCRA requires us to prevent identity theft and to securely dispose of consumer credit reports.

Certain state laws impose similar or stricter privacy obligations as well as obligations to provide notification of security breaches of personal information to affected individuals, consumer reporting agencies, businesses and governmental agencies.

The applicable regulatory framework for privacy and cybersecurity issues is evolving and uncertain.

For example, the California Consumer Privacy Act (“CCPA”), which became effective January 1, 2020, imposes more stringent requirements on certain businesses with respect to California data privacy.

The CCPA includes provisions that give California residents expanded rights to access and delete certain personal information, opt out of certain personal information sharing, and receive detailed information about how certain personal information is used.

Compliance with any new or developing privacy laws in the United States, including any state or federal laws, may require significant resources and subject us to a variety of regulatory and private sanctions.

Our activities are also subject to federal and state laws concerning the use of automated dialing equipment, and other laws related to consumers and consumer protection.

In response to petitions filed by third parties, in July 2015, the Federal Communications Commission (“FCC”) released a declaratory ruling interpreting the TCPA, which could impact the way consumers may be contacted on their cellular phones and could impact our operations and financial results.

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In addition to the federal statutes detailed above, many states have general consumer protection statutes, laws, regulations, or court rules that apply to debt purchasing and collection.

In a number of states and cities, we must maintain licenses to perform debt recovery services and must satisfy related bonding requirements.

It is our policy to comply with all material licensing and bonding requirements.

Our failure to comply with existing licensing requirements, changing interpretations of

existing requirements, or adoption of new licensing requirements, could restrict our ability to collect in regions, subject us to increased regulation, increase our costs, or adversely affect our ability to collect our receivables.

In a number of states and cities, we must maintain licenses to perform debt recovery services and must satisfy ongoing compliance and bonding requirements.

It is our policy to comply with all material licensing, compliance and bonding requirements.

Our failure to comply with existing requirements, changing interpretations of existing requirements, or adoption of new requirements, could subject us to a variety of regulatory and private sanctions.

These could include license suspension or revocation;

orders or injunctive relief, including orders providing for rescission of transactions or other affirmative relief;

and monetary relief, including restitution, damages, fines and/or penalties.

In addition, failure to comply with state licensing and compliance requirements could restrict our ability to collect in regions, subject us to increased regulation, increase our costs, or adversely affect our ability to collect our receivables.

State laws, among other things, also may limit the interest rate and the fees that a credit originator may impose on our consumers, limit the time in which we may file legal actions to enforce consumer accounts, and require specific account information for certain collection activities.

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These laws and regulations, and others similar to the ones listed above, as well as laws applicable to specific types of debt, impose requirements or restrictions on collection methods or our ability to enforce and recover certain of our receivables.

Effects of the law, including those described above, and any new or changed laws, rules, or regulations, and reinterpretation of the same, may adversely affect our ability to recover amounts owing with respect to our receivables or the sale of receivables by creditors and resellers.

Effects of the law, including those described above, and any new or changed laws, rules, or regulations, and reinterpretation of

the same, may adversely affect our ability to recover amounts owing with respect to our receivables or the sale of receivables by creditors and resellers.

Cabot (Europe)

Our operations in Europe are affected by foreign statutes, rules and regulations.

It is our policy to comply with these laws in all of our recovery activities.

Our operations in Europe are affected by local statutes, rules and regulations.

It is our policy to comply with these laws in all of our recovery activities in Europe, where applicable.

Financial Conduct Authority Regulation.

debt purchase and services collections businesses are principally regulated by the Financial Conduct Authority (“FCA”), the UK Information Commissioner’s Office (“ICO”) and the UK Office of Communications (“OFCOM”).

Cabot has two regulated entities in the UK, the debt purchase brand Cabot Credit Management Group Limited (“CCMG”) and the servicing brand Wescot.

UK debt purchase and services collections businesses are principally regulated by the Fin ancial Conduct Authority (“FCA”), the UK Information Commissioner’s Office and the UK Office of Communications.

Cabot has three regulated entities in the UK:

the debt purchase brand Cabot Credit Management Group Limited (“CCMG”) , the servicing brand Wescot and its law firm, Mortimer Clarke Solicitors (“ Mortimer Clarke ”).

The FCA regards debt collection as a “high risk” activity primarily due to the potential impact that poor practice can have on already vulnerable consumers and as a result maintains a high focus on the sector.

The FCA Handbook sets out the FCA rules and other provisions.

Firms wishing to carry on regulated consumer credit activities must comply with all applicable sections of the FCA Handbook, including Customer Treatment principles, as well as the applicable consumer credit laws and regulations.

The FCA Handbook sets out the FCA rules and other provis ions.

Firms wishing to carry on regulated consumer credit activities must comply with all applicable sections of the FCA Handbook, including “Treating Customers Fairly” principles, as well as the applicable consumer credit laws and regulations.

The FCA also publishes guidance on various topics from time to time that it expects firms to comply with.

In the context of the COVID-19 pandemic, the FCA has made it clear by way of its guidance to consumer credit and debt management firms that it expects such firms to adjust policies and lending and collection practices as necessary to accommodate customers that may be experiencing financial difficulties as a result of the COVID-19 pandemic.

The FCA has applied its rules to consumer credit firms in a number of areas, including its high-level principles and conduct of business standards.

The FCA has significant powers and given the FCA has only been responsible for regulating consumer credit since April 2014, it is likely that the regulatory requirements applicable to the debt purchase industry will continue to increase, as the FCA deepens its understanding of the industry through continued supervision.

The FCA has significant powers and , as the FCA deepens its understanding of the industry through continued supervision , it is likely that the regulatory requirements applicabl e to the debt purchase industry will continue to increase.

In addition, it is likely that the compliance framework that will be needed to continue to satisfy the FCA requirements will demand continued investment and resources in our compliance governance framework.

A recent key regulatory change program is the implementation of Senior Managers and Certification Regime (‘‘SMCR’’) for UK operations.

These requirements duplicate those that are already in place for UK based Banks and are designed to drive accountability and risk ownership within businesses.

This directly impacted CCMG’s senior management team and the wider requirements will affect the majority of colleagues who will need to be aware and adhere to the required standards of conduct.

One particularly significant regulatory change program was the implementation of the Senior Managers and Certification Regime (“SMCR”) for UK operations in December 2019.

These requirements are designed to drive accountability and risk ownership within businesses.

This directly impacted CCMG’s senior management team and the wider requirements, which are required to be fully implemented by March 31, 2021, affect the majority of colleagues who need to be aware and adhere to the required standards of conduct.

Companies authorized by the FCA must be able to demonstrate that they meet the threshold conditions for authorization and comply on an ongoing basis with the FCA’s high level standards for authorized firms, such as its Principles for Business (including the principle of ‘‘treating customers fairly’’), and rules and guidance on systems and controls.

In addition to the full authorization of its business with the FCA, CCMG and Wescot have appointed certain individuals who have significant control or influence over the management of the respective businesses, known as Senior Management Function Managers (“SMF Managers”), and are jointly and severally liable for the acts and omissions of the respective businesses and their business affairs.

In addition to the full authorization of its business with the FCA, CCMG, Wescot and Mortimer Clarke have appointed certain individuals who have significant control or influence over the management of the respective businesses, known as Senior Management Function Managers (“SMF Managers”).

SMF Managers are subject to statements of principle and codes of practice established and enforced by the FCA.

The FCA has the ability to, among other things, impose significant fines, ban certain individuals from carrying on trade within the financial services industry, impose requirements on a firm’s permission, cease certain products from being collected upon and in extreme circumstances remove permissions to trade.

In addition to the permissions granted as part of this FCA authorization, in February 2017, CCMG was granted a variation of permissions from the FCA in order to administer regulated mortgage contracts.

In addition to the permissions granted originally as part of its FCA authorization, in February 2017, CCMG was granted a variation of permissions from the FCA in order to administer regulated mortgage contracts.

Consumer protection.

The Consumer Credit Act of 1974 (and its related regulations) (the “U.K.

Consumer Credit Act”) and the U.K.

Consumer Rights Act 2015 set forth requirements for the entry into and ongoing management of consumer credit arrangements in the United Kingdom.

The Consumer Credit Act of 1974 (and its related regulations) (the “UK Consumer Credit Act”) and the UK Consumer Rights Act 2015 set forth requirements for the entry into and ongoing management of consumer credit arrangements in the United Kingdom.

A failure to comply with these requirements can make agreements unenforceable or can result in a requirement that charged and collected interest be repaid.

The FCA is in the process of reviewing the provisions of the U.K.

Consumer Credit Act, with a view to consider implementing rules into its handbook to replace the legislation.

The FCA undertook a review of the provisions of the UK Consumer Credit Act and published its Final Report in March 2019 which set out its views on whether the repeal of certain UK Consumer Credit Act provisions would adversely affect the appropriate degree of protection for consumers.

The UK Government is now tasked with deciding whether to implement any of the FCA’s recommendations.

Data protection.

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and new supervisory authorities, including a European Data Protection Board (“EDPB”).

CCMG has made the required changes in its UK operations across its debt purchasing and servicing businesses to meet the requirements of the GDPR.

A Data Protection Officer has been appointed and is supported by Privacy Champions at each UK site to promote and enforce good data protection practices.

The regulatory regime in the Republic of Ireland has been subject to significant changes in recent years.

In July 2015, the Irish Parliament introduced the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (the “2015 Act”), which requires credit servicing firms to be regulated by the Central Bank of Ireland to ensure regulatory protection for consumers following the sale of consumer loan portfolios to unregulated entities.

Cabot Financial Ireland is authorized by the Central Bank of Ireland under Part V of the Central Bank Act 1997 as amended by the 2015 Act as a Credit Servicing Firm.

As a result, Cabot Financial Ireland is subject to the Central Bank of Ireland’s supervisory and enforcement regime and is subject to various regulatory consumer protection codes.

Cabot Financial Ireland was already obligated to ensure compliance with these codes through its contractual agreements to service loans on behalf of various Irish financial institutions and is audited on a regular basis against such obligations.

In June 2016, the United Kingdom held a referendum in which voters approved the United Kingdom’s withdrawal from the European Union, commonly referred to as “Brexit.” The United Kingdom formally exited the European Union on January 31, 2020 and a transition period is in place until December 31, 2020 during which time the United Kingdom will remain in both the EU customs union and single market and follow EU rules.

There is a significant lack of clarity over the terms of the United Kingdom’s future relationship with the European Union after this date.

Brexit could, among other outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union, undermine bilateral cooperation in key policy areas and significantly disrupt trade between the United Kingdom and the European Union.

Given the lack of comparable precedent, it is unclear what financial, trade and legal implications Brexit will have and how it will affect us.

In addition, the other markets in which we currently operate (including Spain, Italy, Poland and Portugal) are subject to local laws and regulations, and we have implemented compliance programs to facilitate compliance with all applicable laws and regulations in those markets.

The GDPR was further enhanced in the UK

through new UK specific legislation in the form of an updated UK Data Protection Act 2018.

Cabot made required changes in its UK operations across its debt purchasing and servicing businesses to meet the requirements of GDPR.

Data Protection Officer(s) have been appointed and are supported by Privacy Champions at each European/UK site to promote and enforce good data protection practices.

The regulatory regime in Ireland has been subject to significant changes in recent years.

In July 2015, the Irish Parliament introduced the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (as amended, the “2015 Act”), which requires credit servicing firms to be regulated by the Central Bank of Ireland to ensure regulatory protection for consumers following the sale of consumer loan portfolios to unregulated entities.

Cabot Financial (Ireland) Limited is authorized by the Central Bank of Ireland under Part V of the Central Bank Act 1997 as amended by the 2015 Act as a Credit Servicing Firm.

As a result, Cabot Financial (Ireland) Limited is subject to the Central Bank of Ireland’s supervisory and enforcement regime and is subject to various regulatory consumer protection codes.

Cabot Financial (Ireland) Limited was already obligated to ensure compliance with these codes through its contractual agreements to service loans on behalf of various Irish financial institutions and is audited on a regular basis against such obligations.

In June 2016, the United Kingdom held a referendum in which voters approved the United Kingdom’s withdrawal from the European Union, commonly referred to as “Brexit.” The United Kingdom formally exited the European Union on January 31, 2020 although an agreement was not reached until the end of the allocated transition period in December 2020.

Even though an agreement has been reached there remains a significant lack of clarity over the terms of the United Kingdom’s future relationship with the European Union in certain key areas not least Financial Services where a temporary additional transition period has been assigned while negotiations continue.

The full impact of Brexit has yet to be felt and could, among other outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union, undermine bilateral cooperation in key policy areas and significantly disrupt trade between the United Kingdom and the European Union.

In addition, the other markets in which we currently operate (including Spain, Italy, Poland and Portugal) are subject to local laws and regulations, and we continue to review the required risk and compliance programs to facilitate compliance with applicable laws and regulations in those markets.

Our operations outside the United States are subject to the U.S.

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companies and their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in order to obtain an unfair advantage, to help, obtain, or retain business.

As of December 31, 2019, we had approximately 7,300 employees worldwide.

None of our employees in North America are represented by a labor union or subject to the terms of collective bargaining agreements.

We have employees in Spain who are represented by collective bargaining agreements.

We believe that our relations with our employees in all locations are good.

Human Capital Management

As of December 31, 2020, we had 7,725 employees, of which approximately 20% were in the United States and 80% were in our international locations.

We have no employees in North America represented by a labor union or subject to the terms of collective bargaining agreements.

We have employees in Spain and the United Kingdom who are represented by collective bargaining agreements.

We believe that our relations with our employees in all locations are positive.

Our approach to human capital management starts with a strong foundation anchored in our commitment to values and ethics.

Attracting, developing and retaining talent is critical to executing our strategy and our ability to compete effectively.

We believe in the importance of creating a diverse and inclusive work environment for our employees, supporting their well-being with fair and market-competitive pay and benefits, and investing in their growth and development.

We also value feedback from our employees and regularly survey them to understand how they feel about the company and subsequently take appropriate actions and employ employee engagement best practices to improve their work experience.

Commitment to Values and Ethics

We hold our employees to the highest ethical practices and decision making as guided by our Standards of Business Conduct (the “Standards”), which embody Encore’s Mission, Vision and Values, provide guidance on specific behaviors, and set the foundation for ethical decision making.

Our Standards reflect our commitment to operating in a fair, honest, responsible and ethical manner and provide direction for reporting complaints in the event of alleged violations of our policies (including through our Employee Compliance Hotline).

Diversity and Inclusion

At Encore, we are committed to cultivating an inclusive culture that reflects our consumers and our communities, where our actions and mindset ensure every individual can thrive.

We see advancing Diversity and Inclusion as a journey that we will continually work on to build a better Encore for our employees and other stakeholders.

We value diverse viewpoints and inclusive experiences and strive for balanced representation in our overall organization.

We foster a culture of respect and inclusion in various ways, including offering unconscious bias and diversity training, tracking gender diversity, and celebrating

diversity through global cultural appreciation initiatives.

As of December 31, 2020, approximately 50% of our total workforce were women.

Financial, Health and Mental Well-Being

We strive to retain and attract the most talented employees by taking a holistic approach to well-being.

This includes competitive compensation and benefits in the form of base salary, short-term incentives, opportunities for long-term incentives, retirement and financial support, and recognition programs as part of our financial well-being offerings.

We also provide competitive benefits that include comprehensive health and welfare insurance, generous time-off and leave, and programs such as Employee Assistance Program, paid time off for volunteering activities, and wellness incentives to support the health and mental well-being of our employees.

In response to the global COVID-19 pandemic, we implemented programs and services that we determined were in the best interest of our employees, their families, our consumers and business partners, as well as the communities in which we operate.

These include continued work-from-home arrangements for a majority of our employees, reimbursement of certain home office related expenses, enhanced information technology (IT) support, backup childcare, enhanced medical insurance coverage, activities and programs supporting mental health, and regular communications and updates to employees.

Growth and Development

We are committed to actively fostering a learning culture and investing in ongoing professional and career development for our employees.

We empower managers and employees with collective accountability for developing themselves and others, and promote ongoing dialogue, coaching, feedback, and improvement through our performance management practices.

We offer employees an extensive number of programs and tools for their personal and professional development including instructor-led training courses, leadership development programs, on-demand virtual learning, individual development planning, mentoring, roles-based functional and technical training, compliance training, peer learning opportunities, and tuition reimbursement programs.

We also aligned our talent and succession planning framework at a global level to support the development of our internal talent pipeline for current and future organizational needs, and to provide an overall health gauge of our global talent pool.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business