Asset Acceptance Capital Corp., a buyer and collector of charged-off consumer debt, announced that it will close its Cleveland collections office. The closing is expected to reduce the company’s operating expenses by approximately $3 million per year, according to a company statement.
The company will incur an estimated $1.5 million loss related to the closing, essentially restructuring charges during the fourth quarter of 2010. The loss includes employee termination benefits, contract termination costs for the remaining lease payments on the Cleveland office, accelerated depreciation and other exit costs.
The employee termination benefits, contract termination costs and other exit costs will require an outlay of cash of approximately $1.4 million, while non-cash charges are estimated at $0.1 million, according to the company.
The Cleveland office closing follows the company's October announcement that it was shutting down its Chicago office. At the time, the company expected to incur an estimated $1.1 million loss in restructuring charges, see story.
Asset Acceptance also announced that it will incur a charge of approximately $5.3 million during the fourth quarter resulting from the termination for performance of a relationship with a third-party service provider. The charge relates to a cash settlement payment to reimburse the third party for court costs incurred on the company’s behalf that the third party would otherwise have recovered through commissions in future periods.
The company expects the action to provide operating expense savings of approximately $7.5 million in total over the next three years.
Rion Needs, president and CEO at Asset Acceptance, said, “These actions reflect our continued efforts to further streamline our operations and aggressively align our cost structure to improve our competitive positioning and enhance shareholder value. Collection efforts previously housed in the Cleveland office will be transferred to other offices throughout our collections network. We anticipate that these actions will favorably impact overall profitability and productivity without sacrificing top-line collections.”