For years, the stereotypical image of debt collection involved a telephone.
A collector called.
Then called again.
Letters followed.
Perhaps a settlement offer arrived.
If the account went unpaid long enough, maybe someone eventually mentioned a lawsuit.
That model is changing.
For many of the country’s largest debt buyers, litigation is no longer merely a last resort. It has become a deliberately funded collection channel.
Consumers are increasingly encountering lawsuits filed by companies such as:
Midland Funding.
Portfolio Recovery Associates.
LVNV Funding.
Jefferson Capital.
Cavalry SPV.
Crown Asset Management.
Velocity Investments.
And the available evidence suggests that collection litigation is becoming increasingly important to the economics of the debt-buying industry.
The National Consumer Law Center described the United States in late 2025 as experiencing “soaring numbers of debt collection suits.” In Massachusetts alone, recent court data showed consumer debt collection cases increasing approximately 60% in only two years.
There is not one simple explanation.
Instead, several powerful economic forces are coming together at the same time:
Consumers accumulated enormous amounts of credit-card debt.
Charge-offs increased.
Banks have more defaulted accounts available to sell.
Large debt buyers have been aggressively purchasing those accounts.
Technology has reduced the cost of collecting them.
And perhaps most importantly, major debt buyers have concluded that spending money on lawsuits can produce attractive future returns.
That combination is helping turn America’s state courts into an increasingly important part of the consumer-debt collection system.
First, What Is a Debt Buyer?
A debt buyer is different from an ordinary collection agency.
A traditional collection agency may collect a debt on behalf of the bank, credit-card issuer, medical provider, or other company that still owns it.
A debt buyer generally purchases the debt itself.
Imagine a bank has 100,000 credit-card accounts that consumers have stopped paying.
Eventually the bank charges those accounts off.
That does not necessarily mean the debts disappear.
Instead, the bank may package large numbers of accounts into a portfolio and sell that portfolio to a company specializing in defaulted consumer debt.
The buyer might pay only a fraction of the total face value of the accounts.
Its business model is then straightforward:
Collect more than it paid, after expenses.
Companies such as Encore Capital Group, through Midland Credit Management and Midland Funding, and PRA Group, through Portfolio Recovery Associates, operate this model on an enormous scale.
Encore’s 2025 annual report described it as the largest debt buyer in the United States and reported approximately $1.95 billion in U.S. collections during 2025 alone.
At that scale, debt collection is no longer simply about sending letters.
It becomes portfolio management.
Reason No. 1: There Is More Bad Debt Available to Buy
Debt buyers need inventory.
And banks have recently had plenty of it.
Credit-card balances grew dramatically after the pandemic, and delinquencies increased as consumers faced higher prices, higher interest rates, and increasingly expensive revolving debt.
The Federal Reserve has noted that credit-card and automobile-loan delinquencies rose from the extremely low levels seen during the pandemic to levels not observed since around the Great Financial Crisis before beginning to flatten during 2025.
Charge-off rates have also remained elevated.
Among the 100 largest commercial banks, the seasonally adjusted credit-card charge-off rate was approximately 4.27% in the first quarter of 2025, after reaching approximately 4.5% during parts of 2024. Even in the first quarter of 2026, it remained approximately 3.67%.
Encore Capital summarized the environment candidly in its 2025 annual report.
The company said near-record revolving consumer credit balances combined with credit-card charge-off rates near their highest level in a decade had created a favorable supply environment for portfolio purchases.
Translated into ordinary English:
Banks have a lot of charged-off credit-card debt to sell.
That means debt buyers have more accounts available to purchase.
More accounts eventually mean more potential collection activity.
And some percentage of those accounts will become lawsuits.
Reason No. 2: The Biggest Debt Buyers Are Buying Aggressively
The second factor is equally important.
Large debt buyers are not sitting on the sidelines.
They are buying.
PRA Group purchased approximately $1.2 billion in portfolios during 2025, its third-highest annual investment level in company history. By the end of the year, PRA estimated that its existing portfolios would generate approximately $8.6 billion in future collections.
Encore/Midland has likewise reported strong portfolio-purchasing conditions and growing collections.
That creates a pipeline.
Today’s portfolio purchase does not necessarily become tomorrow morning’s lawsuit.
Typically, accounts move through a collection lifecycle.
The debt buyer may first send letters.
It may attempt digital communications.
It may offer settlements.
It may offer payment plans.
It may attempt telephone collection.
Some consumers pay.
Some dispute the account.
Some demonstrate financial hardship.
Others do nothing.
Eventually, selected accounts may be moved into the legal collection channel.
So when debt buyers purchase record or near-record amounts of debt today, they are also creating the inventory from which lawsuits may emerge months or years later.
Reason No. 3: Debt Buyers Have Learned That Litigation Works
Perhaps the clearest evidence comes directly from the debt buyers themselves.
PRA Group has repeatedly told investors that it is intentionally spending more money on legal collections because it expects that spending to produce future cash collection growth.
During the first quarter of 2026, PRA’s operating expenses increased approximately $16.2 million from the prior-year quarter.
Approximately $15.1 million of that increase came from higher legal collection costs intended to support future collection growth.
Three months later, the same thing happened again.
PRA’s second-quarter operating expenses increased approximately $16 million, with about $15 million of the increase again attributable to legal collection costs intended to support future cash collections.
This is a remarkable disclosure.
The company is essentially telling investors:
We are spending more money on legal collections today because we expect those expenditures to generate cash later.
That is not a reluctant last resort.
That is capital allocation.
Lawsuits Have Become an Investment Channel
Think about what this means economically.
Suppose a debt buyer analyzes 100,000 accounts.
Historical data may tell the company that a certain group of those accounts has a particularly strong likelihood of producing money through litigation.
The company can estimate:
filing fees,
service costs,
lawyer expenses,
administrative expenses,
expected settlement rates,
default judgment rates,
post-judgment recoveries,
and how long collections are likely to continue.
If the expected recoveries exceed the expected cost by enough, litigation makes financial sense.
The debt buyer does not need every lawsuit to succeed.
It needs the entire portfolio of lawsuits to produce an attractive return.
That is a completely different way of thinking about litigation than most consumers experience it.
For the consumer, the lawsuit is deeply personal.
For the debt buyer, it can be a row in a spreadsheet.
Reason No. 4: Legal Collections Are Actually Producing More Money
PRA isn’t simply spending money and hoping litigation works.
It says its collection growth is already being driven in meaningful part by legal collections.
PRA reported $2.1 billion in total cash collections during 2025, an increase of approximately 13% from the previous year. The company specifically said the increase was driven by growing cash generation from investments in its U.S. legal collections channel, along with strong European performance.
In Q1 2026, PRA again said cash-collection growth was driven by increased cash generation from its U.S. legal investments.
And in Q2 2026, the company said collections were benefiting from continued strength in both its U.S. legal and digital collection channels.
Encore/Midland shows a similar pattern.
Midland Credit Management’s U.S. legal collections increased from approximately:
$526 million in 2023
to
$561 million in 2024
to
$663 million in 2025.
That is more than half a billion dollars per year being generated through one company’s legal collection channel.
It is difficult to look at those numbers and conclude that lawsuits are merely peripheral to the debt-buying business.
Reason No. 5: Digital Collection Has Made Litigation More Efficient
At first glance, the rise of digital debt collection might seem like it should reduce lawsuits.
In reality, it may do the opposite.
Digital collection is cheap.
A debt buyer can use online account portals, automated payment offers, email, permitted text communications, letters, and other technology to reach enormous numbers of consumers without assigning a human collector to every account.
That allows the company to quickly identify which accounts will resolve voluntarily.
The consumer who accepts a settlement offer exits the pipeline.
The consumer who enters a payment plan exits the pipeline.
The consumer who responds and explains financial hardship can potentially be handled differently.
What remains is a narrower pool of unresolved accounts.
Those accounts can then be analyzed for litigation.
PRA’s disclosures illustrate exactly this simultaneous strategy.
In Q2 2026, communication expenses declined because PRA was using more cost-efficient digital collection strategies, while legal collection costs increased by approximately $15 million.
So the evolution is not:
Digital collection instead of lawsuits.
It may be:
Cheap digital collection first, targeted litigation second.
Reason No. 6: Default Judgments Make Mass Litigation Economically Attractive
There is another uncomfortable reality behind debt-collection lawsuits:
Many consumers do not respond.
Some are afraid.
Some do not understand the paperwork.
Some believe they cannot afford a lawyer.
Some think an old debt cannot really result in a lawsuit.
Some never open the mail.
Others plan to deal with it later and miss the deadline.
If the defendant does not respond, the plaintiff may seek a default judgment.
The Consumer Financial Protection Bureau’s December 2025 credit-card market report specifically discusses default judgments as a major component of debt litigation and explains that, once judgment is obtained, creditors may use mechanisms including wage garnishment, bank-account levies, and property liens where permitted by law.
From a debt buyer’s perspective, default dramatically changes lawsuit economics.
A contested lawsuit can involve:
discovery,
motions,
evidentiary disputes,
witnesses,
hearings,
and possibly trial.
A default case may require much less attorney time.
That makes large-volume litigation considerably more scalable.
Reason No. 7: A Judgment May Produce Money for Years
Why spend $300 or $500 pursuing a relatively small debt?
Because the debt buyer may not be thinking only about today’s bank balance.
A judgment may remain enforceable for years, depending on applicable state law and renewal rules.
The CFPB has documented how recoveries from litigated accounts can continue accumulating for years following judgment. Its 2025 credit-card report showed cumulative litigation recoveries continuing to increase as judgment vintages aged.
That matters.
Suppose a consumer cannot pay today.
The consumer may later:
get a better job,
accumulate money in a bank account,
sell property,
seek financing,
refinance a home,
or simply decide to resolve the judgment.
A debt buyer can potentially collect years after the original lawsuit was filed.
That makes the economics fundamentally different from a simple collection call asking for immediate payment.
Reason No. 8: Debt Buyers Are Getting Bigger and More Sophisticated
The debt-buying industry itself is also consolidating.
The largest companies have access to capital, massive databases, predictive models, sophisticated compliance operations, digital collection systems, and national networks of collection law firms.
Scale makes litigation easier.
The same debt buyer may file thousands of very similar lawsuits.
The same law firms can handle large volumes.
Documents can be transmitted electronically.
Cases can be monitored centrally.
Settlements can be automated.
Defaults can be identified systematically.
Post-judgment accounts can be tracked for years.
The lawsuit therefore becomes one component of an industrial collection process.
For the consumer, the case may involve $4,000.
For the plaintiff, it may be lawsuit number 8,347 in a portfolio strategy.
Are Lawsuits Really Rising Everywhere?
It is important to be precise.
There is no single real-time national database containing every consumer debt lawsuit filed in every state court.
So it would be too broad to say that every state has experienced exactly the same increase.
But several indicators point in the same direction.
The National Consumer Law Center described debt-collection lawsuits as surging in its December 2025 nationwide report.
Massachusetts court data reported in March 2026 showed approximately a 60% increase in consumer debt cases in two years.
Major public debt buyers report increasing legal collections.
PRA is substantially increasing legal collection spending.
Encore/Midland’s legal collections have increased materially.
And large debt buyers have been purchasing enormous amounts of new defaulted debt.
None of those facts alone proves a uniform nationwide increase in filings.
Together, however, they provide compelling evidence that court-based collection is becoming increasingly important within the consumer-debt recovery system.
Why Consumers Should Care
The most important consequence is simple:
Do not assume a collection account will remain a collection account forever.
A quiet account can become a lawsuit.
A digital settlement offer can eventually become a summons.
A debt buyer may stop calling and still be actively evaluating whether litigation makes financial sense.
And once a lawsuit has actually been filed, ignoring it can be costly.
A debt-buyer complaint is not itself proof that the plaintiff deserves judgment.
Depending on the case, possible issues may include:
- whether the plaintiff actually owns the account;
- whether the chain of title is adequate;
- whether the claimed balance is correct;
- whether the records are admissible;
- whether the statute of limitations has expired;
- whether the defendant is the correct person;
- whether payments or credits were properly applied;
- whether arbitration rights exist; and
- whether applicable consumer-protection laws have been followed.
But those issues generally need to be raised before judgment.
A Lawsuit Changes the Relationship
Before suit, the debt buyer generally wants the consumer to voluntarily pay.
After judgment, applicable law may give the creditor additional tools.
That distinction explains why debt buyers are willing to spend money on litigation.
A successful lawsuit can turn an unsecured claim into an enforceable judgment.
The CFPB identifies potential judgment-enforcement tools including wage garnishment, bank levies, and property liens, subject to state law and applicable exemptions.
Many consumers have protected income or assets, and judgment-enforcement laws vary tremendously from state to state.
But from the creditor’s perspective, obtaining judgment can materially improve the likelihood of eventual recovery.
The Lawsuit Is Not an Accident
This may be the most important takeaway.
When a large debt buyer files a lawsuit, the case may look routine.
The complaint may be short.
The amount may be only a few thousand dollars.
The law firm’s name may be unfamiliar.
But behind that lawsuit may be an extraordinarily sophisticated economic system.
A portfolio was purchased.
The account was analyzed.
Collection methods were attempted.
Data was gathered.
The expected recovery was calculated.
The account was placed into a legal channel.
A filing fee was paid.
And the company expects that enough lawsuits like this one will produce enough settlements, judgments, and long-term recoveries to justify the expense.
PRA Group is effectively telling its investors exactly that.
In 2026, it is spending millions more on legal collections because it expects those expenditures to generate future cash.
That may be the clearest explanation for why consumers should expect debt-buyer litigation to remain significant.
More Debt. More Buyers. Better Technology. More Litigation.
There is no single reason debt-buyer lawsuits are rising.
It is a convergence.
Consumers accumulated enormous amounts of revolving debt.
Credit-card delinquencies and charge-offs increased from pandemic-era lows.
Banks produced more charged-off accounts.
Large debt buyers purchased substantial portfolios.
Those buyers became better at using data to predict which accounts will pay.
Digital collection reduced the cost of resolving easy accounts.
Legal departments and collection-law-firm networks became increasingly scalable.
Default judgments kept litigation economically attractive.
And years of collection data demonstrated that judgments can continue producing recoveries long after a lawsuit is filed.
In other words:
The supply of collectible debt increased at the same time the debt buyers became better at collecting it.
The courthouse is increasingly part of that process.
If You Are Sued, Do Not Become Part of the Default-Judgment Statistics
Consumers should not panic simply because Midland Funding, Portfolio Recovery Associates, LVNV Funding, Jefferson Capital, Cavalry, or another debt buyer files a lawsuit.
But they should not ignore it either.
Determine the response deadline.
Review the account.
Identify the original creditor.
Look at the amount claimed.
Preserve old statements and payment records.
Determine whether the account was disputed.
Review whether arbitration may apply.
And consider obtaining legal advice before judgment is entered.
The debt buyer may have purchased your account as one small piece of a portfolio containing thousands—or millions—of debts.
To the company, the lawsuit may be a calculated investment.
To you, it is your money, your wages, your bank account, and your financial life.
That makes responding to it worth considerably more than simply tossing the complaint into a drawer and hoping it goes away.
Because the numbers coming from the debt-buying industry tell us something very clearly:
These companies are not moving away from the courthouse.
For some of the country’s largest debt buyers, they are investing more heavily in getting there.
This article is for general educational purposes only and does not constitute legal advice. A collection lawsuit does not establish that a debt is valid or that the plaintiff is entitled to judgment. Statutes of limitation, court procedures, arbitration rights, exemptions, wage-garnishment rules, bank-attachment laws, evidentiary requirements, and available defenses vary by jurisdiction and individual circumstances. Anyone served with a debt-collection lawsuit should consider consulting an attorney regarding the specific case and applicable response deadline.
