PRA GROUP INC

OVERVIEW

PRA Group Inc. is a global financial services company with operations in the Americas, Europe and Australia. Our primary business is the purchase, collection and management of portfolios of nonperforming loans. The accounts we purchase are primarily the unpaid obligations of individuals owed to credit originators. We purchase nonperforming loans at a discount to face value for both our Core and Insolvency portfolios. Our Core operation specializes in purchasing and collecting nonperforming loans, which are sold by credit originators when they choose not to pursue, or have been unsuccessful in, collecting the full balance owed. Our Insolvency operation consists primarily of purchasing and collecting on nonperforming loans where the customer is involved in a bankruptcy or similar proceeding. We also purchase and provide fee-based services for class action claims recoveries in the U.S.

PORTFOLIO PURCHASING

To identify purchasing opportunities, our global investment team continuously engages with known and potential sellers, including major banks, consumer finance companies, auto finance providers and other creditors. The types of Core and Insolvency nonperforming loans we purchase include general purpose and private label credit cards, consumer loans, auto loans, overdrafts and small business loans. In valuing these loans, we consider several factors, including the type of asset, the age since charge-off, the geographic region, the sellers' selection criteria and collections activity up to the time of sale. We leverage our extensive data set and modeling experience to determine the price we bid for a portfolio, which considers projected future cash collections, the estimated cost to collect, financing costs and the current market environment. All purchases are subject to approval by the applicable investment committee(s).

Credit originators sell nonperforming loans in either single portfolio transactions, referred to as spot sales, or through pre-arranged sales of multiple portfolios over time, referred to as forward flow sales. Under forward flows, portfolios are purchased on a periodic basis at a negotiated price over a specified term, typically ranging from six to 12 months. In addition, forward flow agreements contain provisions establishing specific criteria for the loans to be purchased, and many allow for termination and/or price renegotiation should the underlying quality of the portfolio deteriorate over time.

Nonperforming loan portfolios are sold through formal sales processes. Typically, the sellers assemble a portfolio and request prices from specific bidders. The bidders form part of a panel of potential buyers that have qualified to participate through a process that includes review of any or all of the following: experience, reputation, financial standing, operating procedures, business practices, customer treatment and compliance oversight. Portfolios can also be sold on an exclusive basis directly to a seller's preferred buyer.

PORTFOLIO COLLECTIONS

Core operation

Our collection efforts are driven by a combination of internally staffed call centers and external vendors. As part of recent initiatives to enhance the performance of our U.S. business, we expanded our use of offshore collectors and conducted a successful work-from-home pilot program for a portion of our collections operations, which led to a planned reduction in the number of collection sites in the U.S. from six to three. Whether accounts are being serviced by internal staff or external vendors, except for accounts placed with a third-party debt collection agency, we utilize our proprietary models to proportionally direct work efforts to those customers most able and willing to pay, and ultimately, to achieve the highest correlation to profitable collections from our call activities.

Another important component of our collection efforts involves legal recovery and the judicial collection of balances from customers who we generally believe have the ability to settle their obligations, but who are unwilling to pay. There are some markets, especially in the Nordic countries, where the collection process follows a prescribed and time-sensitive set of legal actions, but in the majority of instances, we are able to use models and analysis to identify accounts with a higher propensity to pay. We do not begin our collections activity with the legal collections channel, but consider using it if and when our customers do not engage with us voluntarily, and we determine whether to commence legal action to judicially collect based on the characteristics of an account and the applicable local collection laws. The legal process can take an extended period of time and requires an upfront investment in court filing costs, but usually generates net cash collections that likely would not have been realized otherwise. We utilize a combination of internal resources (attorneys and supporting staff), external law firms and other third-party vendors to perform legal recovery and judicial collections.

Insolvency operation

Accounts that are in an insolvent or bankrupt status are managed by our Insolvency operations team. These accounts fall under insolvency plans such as Individual Voluntary Arrangements ("IVAs") and Trust Deeds in the United Kingdom ("UK"), Consumer Proposals in Canada and various forms of bankruptcy plans in the U.S., Canada, Germany and the UK. We file claims or claim transfers securing our creditor rights under these plans, and we actively manage these accounts through the entire life cycle of the insolvency proceeding to ensure that we participate in any distributions to creditors. The accounts we manage are derived from two sources: (1) purchased portfolios of insolvent nonperforming loans and (2) Core nonperforming loans when our customers file for protection under insolvency or bankruptcy laws after we purchase the accounts.

These accounts are managed under the relevant country's insolvency or bankruptcy codes and may have an associated payment plan that generally ranges from three to seven years. Accounts that are purchased while insolvent can be purchased at any stage of the insolvency or bankruptcy plan life cycle. Accounts sold close to the filing of the insolvency or bankruptcy plan may take months to generate cash flows, while accounts sold years after the filing of the insolvency or bankruptcy plan typically generate cash flows immediately.

Digital channels

We utilize digital platforms to support our inbound collection efforts, and where permitted by local regulations, our outbound communications. Our digital channels allow us to serve our customers in a way that many of them prefer, providing convenient, user-friendly platforms for receiving information, making payments, accessing account information, viewing documents and contacting account representatives.

Seasonality

In all of the countries in which we operate, customer payment patterns can be impacted by multiple factors, including seasonal employment trends, income tax refunds and holiday spending habits.

COMPETITION

Competition is derived primarily from other debt purchasers that either manage their own nonperforming loans or outsource such services. In the U.S., regulatory complexity and burdens, combined with seller preferences for experienced portfolio purchasers, create barriers to successful entry for new competitors, resulting in a fairly stable competitive landscape. In Europe, diverse regulatory environments create varying levels of competition, with some markets being more competitive than others. In Brazil, there are a small number of large purchasers of nonperforming loans, whose experience and access to capital creates barriers to entry for new competitors. We compete with other debt purchasers on a number of individual factors, including price, reputation, industry experience and long-term performance. We believe that our competitive strengths include our:

•diverse global presence, with portfolios in 18 countries;

•strong and longstanding relationships with credit originators globally;

•strong capital position;

•extensive data set informing our proprietary underwriting process and disciplined approach to bidding;

•comprehensive compliance program;

•reputation from previous portfolio purchase transactions;

•customer service; and

•ability to efficiently and effectively collect on various asset types.

GOVERNMENT REGULATION

We are subject to a variety of federal, state, local and international laws, some of which establish specific guidelines and procedures for the collection, use, retention, security and transfer of personal information that debt collectors must follow when collecting on customer accounts. The most significant government regulations that impact our business are discussed below. For further discussion about how these regulations may impact our business, refer to Item 1A. Risk Factors.

United States

We are subject to supervision by the CFPB, which has primary regulatory authority over consumer debt collection in the U.S and is responsible for enforcing numerous financial statutes and regulations. After the recent change in presidential administration, there have been some indications that the regulatory and enforcement activities of the CFPB may change, but the extent to which these or other future developments may impact our business remains uncertain.

Significant laws and regulations applicable to our U.S. business include the following:

•Fair Debt Collection Practices Act, which imposes certain obligations and restrictions on the practices of debt collectors, including specific restrictions regarding the time, place and manner of communications.

•Fair Credit Reporting Act, which obligates credit information providers to verify the accuracy of information provided to credit reporting agencies and investigate consumer disputes concerning the accuracy of such information.

•Gramm-Leach-Bliley Act ("GLBA"), which requires that certain financial institutions, including collection companies, develop policies to protect the privacy of consumers' private financial information and provide notices to consumers advising them of their privacy policies.

•Electronic Funds Transfer Act, which regulates electronic fund transfer transactions, including a consumer’s right to stop payments on a pre-approved fund transfer and to receive certain documentation of the transaction.

•Telephone Consumer Protection Act, which, along with similar state laws, places certain restrictions on the use of pre-recorded messages and certain automated dialing equipment that places telephone calls to consumers.

•Servicemembers Civil Relief Act, which gives U.S. military service personnel relief from credit obligations they may have incurred prior to entering military service and may also apply in certain circumstances to obligations and liabilities incurred by a servicemember while serving on active duty.

•Health Insurance Portability and Accountability Act, which provides standards to protect the confidentiality of patients' personal healthcare and financial information in the U.S.

•U.S. Bankruptcy Code, which prohibits certain contacts with consumers after the filing of bankruptcy petitions and dictates what types of claims will or will not be allowed in a bankruptcy proceeding, including how such claims may be discharged.

•Americans with Disabilities Act, which requires that telecommunications companies operating in the U.S. take steps to ensure functionally equivalent services are available for their consumers with disabilities and to accommodate consumers with disabilities through, for example, implementation of telecommunications relay services.

•Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd Frank Act"), which restructured the regulation and supervision of the financial services industry in the U.S. and created the CFPB.

At the state and local levels, we are subject to a variety of statutes and regulations. These state and local rules regulate, among other things, collection activity, data collection and use, legal recovery and post-judgment processes, and licensing and bonding.

International

Our non-U.S. businesses are also subject to regulation by various regulators, including central banks and other regulatory bodies such as the UK Financial Conduct Authority, Swedish Financial Supervisory Authority, German Federal Financial Supervisory Authority, Bank of Italy, Polish Financial Supervision Authority and Australian Securities & Investments Commission.

Significant laws and regulations applicable to our international businesses include the following:

•U.S. Foreign Corrupt Practices Act ("FCPA"), UK Bribery Act and Similar Laws, which prohibit certain payments to governmental officials and other individuals.

•International data protection and privacy laws, which include relevant country specific legislation in the UK and other European countries where we operate that regulate the processing of information related to individuals, including the obtaining, holding, use, or disclosure of such information; the Personal Information Protection and Electronic Documents Act, which aims to protect personal information that is collected, used, or disclosed in certain circumstances for purposes of electronic commerce in Canada; the GDPR, which regulates the processing and free movement of personal data within the European Union ("EU") and the transfer of such data outside the EU; and in the UK, the Data Protection Act 2018, which implements the EU General Data Protection Regulation in the UK.

•EU Directive 2021/2167 (the "Directive"), which creates a regulatory framework for the sale, purchase, and servicing of EU nonperforming loans and requires "credit servicing" to be subject to authorization and oversight processes. EU member states are required to establish regulatory frameworks for authorizations and registrations of all credit servicers and to set standards for consumer protection and fitness and propriety standards for business owners, among other things.

•Consumer Credit Act 1974 (and its related regulations); Unfair Terms in Consumer Contracts Regulations of 1999; and the Financial Conduct Authority's Handbook of rules and guidance, which include the:

•Consumer Credit Sourcebook, which governs regulated and consumer credit agreements and collection activities in the UK;

•Consumer Duty, which sets higher and clearer standards of consumer protection across financial services in the UK and requires firms to act to deliver good outcomes for customers; and

•Senior Managers and Certification Regime, which aims to reduce harm to consumers and strengthen market integrity in the UK by imposing additional obligations on certain individuals who have significant control or influence over the management of UK businesses to ensure accountability for their conduct and competence.

Our non-US businesses are subject to the tax laws and regulations of the countries in which they are organized and operate. Foreign governments from time-to-time consider legislation that could impact our business activities or the amount of taxes that we pay. For example, in 2021, as part of its Global Anti-Base Erosion Model Rules (Pillar Two), the Organization for Economic Cooperation and Development (“OECD”) recommended a minimum 15% tax on the income of large multinational enterprises in each jurisdiction in which they operate. Many of the jurisdictions in which we have operations, including the UK, EU, Canada and Australia, have enacted legislation to begin implementing Pillar Two for tax years beginning in 2024. Other jurisdictions, including Brazil, are taking steps to adopt Pillar Two for tax years beginning in 2025. In addition, certain of our EU and UK subsidiaries are subject to capital adequacy, liquidity, and other requirements imposed by regulators.

HUMAN CAPITAL MANAGEMENT

Our Company’s values and culture are central to our ability to attract, hire and retain talented employees. Our human capital management objectives are grounded in our commitment to these values and ethics and are focused on supporting employee health, safety and wellness and furthering talent development, performance management and engagement.

Commitment to values and ethics

We strive to foster a culture of respect and responsibility through a common set of values and commitments among all our employees referred to as "C.A.R.E.S", which stands for Committed, Accountable, Respectful, Ethical and Successful. Our C.A.R.E.S values guide how we treat each other, how we relate to our customers and the responsibilities we have to other key stakeholders such as our stockholders, sellers and regulators. These values are also reflected in our Code of Conduct.

Total rewards and safety

We are committed to creating a workplace that promotes the health, safety and wellness of our employees. We offer a comprehensive total rewards program, which includes competitive pay and bonus structures, health and wellness benefits, retirement plans and an employee assistance program. In 2024, our U.S. business received the “Safe Workplace Certification” from the Center of Personal Protection and Safety, which demonstrates our commitment to the physical safety of our employees.

Talent development and engagement

We believe that talent development, performance management and engagement of our employees are key to our future success. We offer tuition reimbursement assistance and have a robust suite of training and development offerings for employees across the globe, many available in multiple languages. Our performance management framework is designed to foster accountability, encourage interactive discussions about performance and expand the skills and capabilities of our employees. We conduct an annual employee survey to measure engagement and inform action plans to address employee concerns and celebrate accomplishments. We believe that our employees are one of our greatest assets and encourage them to be their best and to be themselves, which fosters an inclusive workplace that values diverse experiences, perspectives and abilities.

Our workforce

As of December 31, 2024, we employed 3,115 full-time equivalents globally, with approximately 71% of our workforce located in the Americas and Australia and 29% in Europe. None of our employees in North America are represented by a union or covered by a collective bargaining agreement. In Europe, we work closely with works councils, and in countries where it is the customary local practice, such as Finland and Spain, we have collective bargaining agreements.

Available Information

We make available on or through our website, www.pragroup.com, certain reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC Filings"). We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at: www.sec.gov.

The information contained on, or that can be accessed through our website, is not, and shall not be deemed to be a part of this Form 10-K or incorporated into any of our other SEC Filings.

Reports filed with, or furnished to, the SEC are also available free of charge upon request by contacting our corporate office at:

Attn: Investor Relations

120 Corporate Boulevard, Suite 100

Norfolk, Virginia 23502