Encore Capital Reports a 42% Increase in Earnings Per Share for Q2 2005

SAN DIEGO – Encore Capital Group, Inc. (Nasdaq: ECPG), a leading accounts receivable management firm, today reported consolidated financial results for the second quarter ended June 30, 2005.

For the second quarter of 2005:

• Gross collections were $70.4 million, a 23% increase over the $57.4 million in the same period of the prior year

• Total revenues were $53.8 million, a 23% increase over the $43.6 million in the same period of the prior year

• Net income was $8.1 million, a 45% increase over the $5.6 million in the same period of the prior year

• Earnings per fully diluted share were $0.34, a 42% increase over the $0.24 in the same period of the prior year.

“Our second quarter performance represented the highest levels of collections, revenues, and earnings per share in the history of the Company,” said Carl C. Gregory, III, Vice Chairman and CEO of Encore Capital Group, Inc. “The development of highly effective alternative collection channels and the use of sophisticated consumer level analytics that determine the most appropriate collection channel for each account are driving strong increases in the productivity of our collection efforts. This is particularly evident in the increased penetration of our more seasoned portfolios.”

“Importantly, during the second quarter we also took a major step towards supporting the long term growth and profitability of the Company with our unique portfolio acquisition and forward-flow agreement with Jefferson Capital. We believe this transaction mitigates the problem presented by the increasingly competitive purchase market for portfolios,” said Mr. Gregory.

Second Quarter Financial Highlights

Revenue recognized, as a percentage of collections, was 76% in the second quarter of 2005, the same percentage as in the second quarter of 2004. Consistent with recent trends, the percentage of collections recognized as revenue reflects the deeper penetration of portfolios.

Total operating expenses for the second quarter of 2005 were $31.9 million, compared with $25.4 million in the second quarter of 2004, while cost per dollar collected increased slightly from 44% to 45%.

Total interest expense was $8.4 million in the second quarter of 2005, compared to $9.0 million in the second quarter of 2004. Due to the strong collections on older portfolios that require contingent interest payments to the provider of the Company’s previous credit facility, the level of contingent interest has remained above initial expectations for 2005. The Company continues to expect a decline in contingent interest in future quarters, with the degree of decline dependent upon the rate of liquidation of the older portfolios.

In addition to the $2.8 billion portfolio purchased from Jefferson Capital, the Company spent $25.3 million to purchase approximately $874.0 million in face value of credit card and automobile deficiency portfolios.

Outlook
Management reaffirms its guidance for 2005 earnings per share of $1.25 to $1.33. This guidance reflects management’s estimate of after-tax contingent interest expense being approximately $0.25 per share during the second half of 2005.

Commenting on the outlook for the Company, Brandon Black, President and COO, said, “Our core collection business is performing well and the Jefferson Capital transaction ensures that we will have a steady supply of reasonably priced charge-offs to fuel the continued growth of this business. Furthermore, given our new $200 million credit facility with J.P. Morgan Chase, we have ample access to resources that will allow us to capitalize on a wide range of opportunities that can drive increased shareholder value in the future.”

About Encore Capital Group, Inc.
Encore Capital Group, Inc. is a systems-driven purchaser and manager of charged-off consumer receivables portfolios. More information on the company can be found at www.encorecapitalgroup.com.