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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

_________________

FORM 10-Q

  (Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ______________.

COMMISSION FILE NUMBER: 000-26489

ENCORE CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware
 48-1090909
(State or other jurisdiction of
incorporation or organization)		 (IRS Employer
Identification No.)
8875 Aero Drive, Suite 200
San Diego, California
 92123
(Address of principal executive offices) (Zip code)

(877) 445 – 4581
(Registrant’s telephone number, including area code)

(Not Applicable)
(Former name, former address and former fiscal year, if changed since last report)
_____________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.

Yes [X] No [   ]                      

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)

Yes [X] No [    ]                      

Indicate the number of shares outstanding of each of the issuer’s classes of stock, as of the latest practicable date.

Class Outstanding at April 25, 2005
Common Stock, $0.01 par value 22,259,424 shares





ENCORE CAPITAL GROUP, INC.INDEX
TO FORM 10-Q

    Page
PART I - FINANCIAL INFORMATION     2
Item 1 - Consolidated Financial Statements     2
Unaudited Condensed Consolidated Statements of Financial Condition     2
Unaudited Condensed Consolidated Statements of Operations     3
Unaudited Condensed Consolidated Statement of Stockholders' Equity     4
Unaudited Condensed Consolidated Statements of Cash Flows     5
Notes to Unaudited Condensed Consolidated Financial Statements     7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations     21
Item 3 - Quantitative and Qualitative Disclosures about Market Risk     35
Item 4 - Controls and Procedures     35
PART II - OTHER INFORMATION     36
Item 1 - Legal Proceedings     38
Item 6 - Exhibits     39
SIGNATURES     40
Certificate of Principal Executive Officer     41
Certificate of Principal Financial Officer     42
Index

PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements

ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)

March 31,
2005 December 31,
(Unaudited) 2004 (A)
Assets            
Cash and cash equivalents   $ 15,098   $ 9,731  
Investments in marketable securities    16,000    40,000  
Restricted cash    4,680    3,432  
Investment in receivable portfolios, net    142,069    137,963  
Property and equipment, net    3,280    3,360  
Deferred tax assets, net    78    361  
Other assets    6,230    6,295  
Total assets   $ 187,435   $ 201,142  
Liabilities and Stockholders' Equity   
Liabilities  
Accounts payable and accrued liabilities   $ 14,273   $ 17,418  
Accrued profit sharing arrangement    19,560    20,881  
Income taxes payable    2,720    -  
Notes payable and other borrowings    46,139    66,567  
Capital lease obligations    214    261  
Total liabilities    82,906    105,127  
Commitments and contingencies  
Stockholders' equity            
Preferred stock, $.01 par value, 5,000 shares  
       authorized, and no shares issued and outstanding    -    -  
Common stock, $.01 par value, 50,000 shares authorized,    
       and 22,259 shares and 22,166 shares issued and outstanding            
       as of March 31, 2005 and December 31, 2004, respectively       223    222  
Additional paid-in capital       67,928     66,788  
Accumulated earnings    36,286    28,834  
Accumulated other comprehensive income    92    171  
Total stockholders' equity    104,529    96,015  
Total liabilities and stockholders' equity   $ 187,435   $ 201,142  

(A)     Derived from the audited consolidated financial statements as of December 31, 2004

See accompanying notes to condensed consolidated financial statements

2

Index

ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)

Three Months Ended
March 31,
2005 2004
Revenues            
   Revenue from receivable portfolios   $ 50,420   $ 42,091  
   Servicing fees and other related income    56    296  
Total revenues    50,476    42,387  
Operating expenses  
   Salaries and employee benefits    12,600    11,624  
   Other operating expenses    4,642    3,422  
   Collection agency commissions    2,024    672  
   Cost of legal collections    8,356    5,502  
   Other general and administrative expense    2,158    1,653  
   Depreciation and amortization    511    443  
Total operating expenses    30,291    23,316  
Income before other income (expense)  
   and income taxes    20,185    19,071  
Other income (expense)  
   Interest expense    (8,087 )  (9,282 )
   Other income    405    155  
Total other income (expense)    (7,682 )  (9,127 )
Income before income taxes    12,503    9,944  
Provision for income taxes    (5,051 )  (3,928 )
Net income   $ 7,452   $ 6,016  
Weighted average shares outstanding    22,227    22,020  
Incremental shares from assumed conversion of options    1,353    1,423  
Adjusted weighted average share outstanding    23,580    23,443  
Earnings per share - Basic   $ 0.34   $ 0.27  
Earnings per share - Diluted   $ 0.32   $ 0.26  

See accompanying notes to condensed consolidated financial statements

3

Index

ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statement of Stockholders’ Equity
(Unaudited, In Thousands)

Accumulated
Additional Other
Common Stock Paid-In Accumulated Comprehensive
Shares Par Capital Earnings Income Total
Balance at December 31, 2004      22,166   $ 222   $ 66,788   $ 28,834   $ 171   $ 96,015  
Net income    -    -    -    7,452     - 7,452
Other comprehensive income:  
     unrealized gain on non-qualified                    
     deferred compensation plan assets    -    -    -    -    (79 )  (79 )
Comprehensive income    -    -    -    -    -     7,373
Exercise of stock options    93    1    587    -    -    588  
Tax benefits related to stock option exercises      -    -    526    -    -     526
Amortization of options issued below market    -    -    27    -    -    27  
Balance at March 31, 2005    22,259   $ 223   $ 67,928   $ 36,286   $ 92   $ 104,529




See accompanying notes to condensed consolidated financial statements

4

Index

ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, In Thousands)

Three Months Ended
March 31,
2005 2004
Operating activities            
Gross collections   $ 65,853   $ 63,996  
Less:  
   Amounts collected on behalf of third parties    (274 )  (962 )
   Amounts applied to principal on receivable portfolios    (15,160 )  (20,943 )
Servicing fees    56    296  
Operating expenses  
   Salaries and employee benefits    (15,769 )  (12,705 )
   Other operating expenses    (4,329 )  (1,656 )
   Cost of legal collections    (8,356 )  (5,502 )
   Collection agency commissions    (2,024 )  (672 )
   Other general and administrative    (2,519 )  (1,583 )
   Interest payments    (1,151 )  (538 )
   Contingent interest payments    (8,205 )  (5,793 )
   Other income    405    190  
   Increase in restricted cash    (1,248 )  (4,525 )
   Income taxes    (1,490 )  (1,410 )
Net cash provided by operating activities    5,789    8,193  
Investing activities   
Purchases of receivable portfolios    (19,523 )  (17,248 )
Collections applied to principal of receivable portfolios    15,160    20,943  
Proceeds from sales of marketable securities    24,000    1,000  
Proceeds from put-backs of receivable portfolios    258    356  
Purchases of property and equipment    (431 )  (502 )
Net cash provided by investing activities    19,464    4,549  
Financing activities   
Proceeds from notes payable and other borrowings    2,088    6,952  
Repayment of notes payable and other borrowings    (22,516 )  (20,474 )
Proceeds from exercise of common stock options    588    36  
Repayment of capital lease obligations    (46 )  (65 )
Net cash used in financing activities    (19,886 )  (13,551 )
Net increase (decrease) in cash    5,367    (809 )
Cash, beginning of period    9,731    8,612  
Cash, end of period   $ 15,098   $ 7,803  

See accompanying notes to condensed consolidated financial statements

5

ENCORE CAPITAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows (cont.) Reconciliation
of Net Income to Net Cash Provided by Operating Activities
(Unaudited, In Thousands)

Three Months Ended
March 31,
2005 2004
Net income     $ 7,452   $ 6,016  
Adjustments to reconcile net income to net cash  
    provided by operating activities:  
        Depreciation and amortization    511    443  
        Amortization of loan costs    44    11  
        Tax benefits from stock option exercises    526    261  
  &