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Wednesday, July 21, 2010

PRAA Stock Price Falling After FTC Report

- On July 12, FTC Issues Report on Reforming Debt Collection Litigation and Arbitration; Recommends Steps to Protect Consumers and Repair a Broken System (http://www.ftc.gov/opa/index.shtml).
Legislators pledge to fix state's 'broken' debt collection system (http://www.startribune.com/investigators/98380794.html) in Minnesota. Massachusetts Senate passes debt collection measure (http://www.boston.com/business/personalfinance/articles/2010/07/21/senate_passes_debt_collection_measure/). More and more states are likely to introduce legislation giving consumers more protection against debt collectors.

-The uncertainty and likely negative environment for Portfolio Recovery Associates Inc. (PRAA) is causing it's stock price to drop, and I believe it will continue to do so until support area of around $50. Unfortunately, the spread on options prices in PRAA is too wide and illiquid to put on a meaningful position. I would recommend looking for opportunities to short the stock on any strength.

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