As filed with the Securities and Exchange Commission on May 6, 2003.

SECURITIES AND EXCHANGE COMMISSION

Form S-1

Portfolio Recovery Associates, Inc.

120 Corporate Boulevard

Steven D. Fredrickson

Copies to:

     Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

     If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:    o

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

     If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.    o

CALCULATION OF REGISTRATION FEE

     The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

SUBJECT TO COMPLETION, DATED MAY 6, 2003

Common Stock

        This is a public offering of 3,000,000 shares of common stock of Portfolio Recovery Associates, Inc. by the selling stockholders identified in this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders.

      Our common stock is quoted on the Nasdaq National Market under the symbol “PRAA.” The last reported sale price for our common stock on the Nasdaq National Market on May 2, 2003 was $27.10 per share.

       Investing in our common stock involves risks. See “Risk Factors” beginning on page 9.

       Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

      The selling stockholders have granted the underwriters the option to purchase up to an additional 450,000 shares at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments.

The date of this prospectus is                     , 2003

Table of Contents

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PROSPECTUS SUMMARY

      You should read the following summary together with the more detailed information in this prospectus, including the section titled “Risk Factors” beginning on page 9 regarding our company and the common stock being sold in this offering.

Overview

      We are a full-service provider of outsourced receivables management. We purchase, collect and manage portfolios of defaulted consumer receivables. Defaulted consumer receivables are the unpaid obligations of individuals to credit originators, including banks, credit unions, consumer and auto finance companies, retail merchants and other providers of goods and services. We believe that the strengths of our business are our sophisticated approach to portfolio pricing, our emphasis on collection personnel and procedures and our relationships with many of the largest consumer lenders in the United States. Our proven ability to collect defaulted consumer receivables allows us to offer credit originators a complete outsourced solution to address their defaulted consumer receivables. The defaulted consumer receivables we collect are in substantially all cases either purchased from the credit originator or are collected on behalf of clients on a commission fee basis. We intend to continue to build on our strengths and grow our business through the disciplined approach that has contributed to our success to date.

      We specialize in receivables that have been charged-off by the credit originator. Since the credit originator has unsuccessfully attempted to collect these receivables, we are able to purchase them at a substantial discount to their face value. Through March 31, 2003, we have acquired 358 portfolios with a face value of $6.4 billion for $160.4 million, or 2.5% of face value, represented in more than 3.5 million customer accounts. Our success depends on our ability to purchase portfolios of defaulted consumer receivables at appropriate valuations and to collect on those receivables effectively and efficiently. To date, we have consistently been able to collect at a rate of 2.5 to 3.0 times our purchase price for defaulted consumer receivables portfolios, as measured over a five-year period, which has enabled us to generate increasing profits and cash flow.

      We use the following terminology throughout this prospectus: “cash receipts” refers to all collections of cash, regardless of the source; “cash collections” refers to collections on our owned portfolios only, exclusive of commission income and sales of finance receivables; “commissions” refers to fee income generated from our wholly-owned contingent fee subsidiary; and “cash sales of finance receivables” refers to the sales of our owned portfolios.

      We have achieved strong financial results since our formation, with cash collections and commissions growing from $5.0 million in 1997 to $81.2 million in 2002. Cash collections have increased every quarter since our formation. Over the life of our owned portfolios of defaulted consumer receivables, income recognized on finance receivables equals our cash collections on our owned portfolios of defaulted consumer receivables less the cash paid for these portfolios. Total revenue has grown from $2.8 million in 1997 to $55.8 million in 2002, a compound annual growth rate of 82%. Similarly, pro forma net income has grown from $130,000 in 1997 to $11.4 million in 2002, a compound annual growth rate of 145%. For the three month period ended March 31, 2003, cash collections and commissions were $27.1 million, revenue was $18.3 million and net income was $4.5 million, compared to cash collections and commissions of $18.4 million, revenue of $11.6 million and pro forma net income of $2.2 million for the three month period ended March 31, 2002. We were initially formed as a limited liability company and therefore had no corporate tax obligations so, for comparison purposes, we have presented pro forma financial information for periods prior to our conversion to a corporation in November 2002, which reflects income taxes assuming we had been a corporation and assuming tax rates equal to the rates that would have been in effect had we been required to report tax expenses in such years. See “Reorganization” and “Summary Consolidated Financial Data.”

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Corporate History and Initial Public Offering

      We were initially formed as Portfolio Recovery Associates, L.L.C., a Delaware limited liability company, on March 20, 1996 by four members of senior management that continue to lead us. Prior to our formation, members of the management team played key roles in the development of a defaulted consumer receivables acquisition and divestiture operation for Household Recovery Services, a subsidiary of Household International. Since our formation we have acquired and serviced portfolios of defaulted consumer receivables, and in March 2001 we commenced our third-party contingent fee collections operations to provide defaulted receivables management on a commission fee basis, receiving a percentage of the amounts collected on behalf of the client.

      On November 14, 2002, we completed our initial public offering in which we sold 3,470,000 shares of common stock and a selling stockholder sold 1,015,000 shares, at a price of $13.00 per share. In connection with our initial public offering, all of the membership units of Portfolio Recovery Associates, L.L.C. were exchanged for a single class of the common stock of Portfolio Recovery Associates, Inc., a Delaware corporation formed for purposes of our initial public offering. See “Reorganization.” A portion of the net proceeds from the offering were used for repayment of outstanding indebtedness and the payment of offering related expenses. We have also used a portion of the proceeds to purchase defaulted consumer receivables portfolios and intend to use the remaining amounts for working capital and general corporate purposes, including acquisitions of additional defaulted consumer receivables portfolios or potential possible acquisitions or development of complementary businesses, technologies or products.

Industry Overview

      The accounts receivable management industry is growing, driven by a number of industry trends, including the following:

      According to the U.S. Federal Reserve Board, as of February 2003, consumer credit, which consists of non-real estate related short- and intermediate-term credit extended to individuals, has grown 40% to $1.7 trillion from $1.2 trillion as of December 1997. According to the Consumer Bankers Association, the delinquency rate on non-mortgage consumer obligations reached its highest level in a decade at December 31, 2001, an approximately 33% increase from December 31, 2000. According to the Nilson Report, a credit card industry newsletter, credit originators outsourced an estimated $135 billion in defaulted consumer receivables for collection in 2000, nearly double the $73 billion outsourced for collection in 1990. According to Standard & Poor’s, the credit card charge-off rate for October, November and December 2002 was 6.9%, 7.1% and 7.5% of receivables, respectively. According to the American Bankers Association, the number of bank card accounts 30 or more days past due was a seasonally adjusted 4.07% during the fourth quarter of 2002 compared to 4.00% during the third quarter of 2002 and 3.88% during the fourth quarter of 2001. A total of 4.63% of bank card receivables were delinquent in the fourth quarter of 2002 compared with 4.45% during the third quarter of 2002 and 4.67% during the fourth quarter of 2001.

      The accounts receivable management industry (owned portfolio and contingent fee) is highly fragmented and competitive, consisting of approximately 6,500 consumer and commercial agencies. In recent years, the accounts receivable management industry has increased its use of technology in order to operate more effectively. We expect the increasing importance of technology and the associated increased capital requirements to cause challenges for many smaller participants lacking the required capital and management resources to implement and effectively utilize such technology to compete effectively and to continue to maintain regulatory standards.

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Competitive Strengths

      We believe we have a number of strengths which will allow us to continue to capitalize on these industry trends, including:

Growth Opportunities

      We have achieved significant historical growth while maintaining a conservative capital structure and ensuring that the level of our portfolio purchases of defaulted consumer receivables is matched by our ability to collect them effectively and efficiently. Our primary objective is to continue our controlled growth. We aim to achieve this objective through the following growth strategies:

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Risk Factors

      An investment in our common stock involves a significant degree of risk. We urge you to carefully consider all of the information described in the section entitled “Risk Factors” beginning on page 9.

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This Offering

Management Participation in Offering

      The following summary describes the participation of certain members of management in this offering as selling stockholders.

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Other Information Related to this Prospectus

      Unless otherwise indicated, all share and per share data in this document assume the underwriters do not exercise the option the selling stockholders granted to them to purchase up to an additional 450,000 shares of our common stock in this offering.

      All dollar amounts less than $1.0 million have been rounded to the nearest thousand.

      As used in this prospectus, all references to us mean Portfolio Recovery Associates, Inc. and, prior to the Reorganization, our predecessor Portfolio Recovery Associates, L.L.C. The address of our principal executive offices is 120 Corporate Boulevard, Suite 100, Norfolk, Virginia 23502, and our telephone number is (888) 772-7326. Our web site address is www.portfoliorecovery.com. You should not construe the information on our web site to be a part of this prospectus.

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Summary Consolidated Financial Data

      The following summary consolidated financial data for the years ended December 31, 2000, 2001, and 2002 have been derived from our consolidated financial statements, included elsewhere in this prospectus which have been audited by PricewaterhouseCoopers LLP. The following summary consolidated financial data for the years ended December 31, 1998 and 1999 have been derived from our audited consolidated financial statements, not included in this prospectus.

      The following summary consolidated financial data for the three months ended March 31, 2002 and 2003 have been derived from our unaudited consolidated financial statements, included elsewhere in this prospectus. These financial statements include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair statement of our financial position and results of operations for these periods.

      Operating results for the three months ended March 31, 2003 are not necessarily indicative of results that may be expected for the year ending December 31, 2003.

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RISK FACTORS

      You should carefully consider the risks described below in connection with reviewing this prospectus. If any of the events referred to below actually occur, our business, financial condition, liquidity and results of operation could suffer. In that case, the trading price of our common stock could decline and you may lose all or part of your investment. You should also refer to the other information in this prospectus, including our consolidated financial statements and the related notes.

Risks Related to Our Business

We may not be able to collect sufficient amounts on our defaulted consumer receivables to fund our operations

      Our business consists of acquiring and servicing receivables that consumers have failed to pay and that the credit originator has deemed uncollectible and has charged-off. The credit originators generally make numerous attempts to recover on their defaulted consumer receivables, often using a combination of in-house recovery efforts and third-party collection agencies. These defaulted consumer receivables are difficult to collect and we may not collect a sufficient amount to cover our investment associated with purchasing the defaulted consumer receivables and the costs of running our business.

We may not be able to purchase defaulted consumer receivables at appropriate prices, and a decrease in our ability to purchase portfolios of receivables could adversely affect our ability to generate revenue

      If one or more credit originators stops selling defaulted receivables to us and we are otherwise unable to purchase defaulted receivables from credit originators at appropriate prices, we could lose a potential source of income and our business may be harmed.

      The availability of receivables portfolios at prices which generate an appropriate return on our investment depends on a number of factors both within and outside of our control, including the following:

      Because of the length of time involved in collecting defaulted consumer receivables on acquired portfolios and the volatility in the timing of our collections, we may not be able to identify trends and make changes in our purchasing strategies in a timely manner.

      We are currently party to a “forward flow contract.” A forward flow contract is an arrangement in which we agree to purchase defaulted consumer receivables based on specific parameters from a third-party supplier on a periodic basis at a set price over a specified time period. To the extent that we are unable to renew or replace the purchased volume represented by our forward flow contract if it is cancelled, or when it expires, we could lose a potential source of income and our business may be harmed.

We experience high employee turnover rates and we may not be able to hire and retain enough sufficiently trained employees to support our operations

      The accounts receivables management industry is very labor intensive and, similar to other companies in our industry, we typically experience a high rate of employee turnover. Our annual turnover rate, excluding those employees that do not complete our six week training program, was 34% in 2002. We compete for qualified personnel with companies in our industry and in other industries. Our growth requires that we continually hire and train new collectors. A higher turnover rate among our collectors will increase our recruiting and training costs and limit the number of experienced collection personnel available to service our defaulted consumer receivables. If this were to occur, we would not be able to

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We serve markets that are highly competitive, and we may be unable to continue to successfully compete with businesses that may have greater resources than we have

      We face competition in both of the markets we serve — owned portfolio and contingent fee accounts receivable management — from new and existing providers of outsourced receivables management services, including other purchasers of defaulted consumer receivables portfolios, third-party contingent fee collection agencies and credit originators that manage their own defaulted consumer receivables rather than outsourcing them. The accounts receivable management industry is highly fragmented and competitive, consisting of approximately 6,500 consumer and commercial agencies, most of which compete in the contingent fee business.

      We face bidding competition in our acquisition of defaulted consumer receivables and in our placement of contingent fee receivables, and we also compete on the basis of reputation, industry experience and performance. Some of our current competitors and possible new competitors may have substantially greater financial, personnel and other resources, greater adaptability to changing market needs, longer operating histories and more established relationships in our industry than we currently have. In the future, we may not have the resources or ability to compete successfully. As there are few significant barriers for entry to new providers of contingent fee receivables management services, there can be no assurance that additional competitors with greater resources than ours will not enter our market. Moreover, there can be no assurance that our existing or potential clients will continue to outsource their defaulted consumer receivables at recent levels or at all, or that we may continue to offer competitive bids for defaulted consumer receivables portfolios. If we are unable to develop and expand our business or adapt to changing market needs as well as our current or future competitors are able to do, we may experience reduced access to defaulted consumer receivables portfolios at appropriate prices and reduced profitability.

We may not be successful at acquiring receivables of new asset types or in implementing a new pricing structure

      We may pursue the acquisition of receivables portfolios of asset types in which we have little current experience. We may not be successful in completing any acquisitions of receivables of these asset types and our limited experience in these asset types may impair our ability to collect on these receivables. This may cause us to pay too much for these receivables and consequently we may not generate a profit from these receivables portfolio acquisitions.

      In addition, we may in the future provide a service to clients in which clients will place defaulted consumer receivables with us for a specific period of time for a flat fee. This fee may be based on the number of collectors assigned to the collection of these receivables, the amount of receivables placed or other bases. We may not be successful in determining and implementing the appropriate pricing structure for this service, which may cause us to be unable to generate a profit from this business.

Our collections may decrease if certain types of bankruptcy filings increase

      During times of economic recession, the amount of defaulted consumer receivables generally increases, which contributes to an increase in the amount of personal bankruptcy filings. Under certain bankruptcy filings a debtor’s assets are liquidated to repay credit originators, but since the defaulted consumer receivables we service are generally unsecured we often would not be able to collect on those receivables. We cannot assure you that our collection experience would not decline with an increase in these types of bankruptcy filings. If our actual collection experience with respect to a defaulted consumer receivables portfolio is significantly lower than we projected when we purchased the portfolio, our financial condition and results of operations could deteriorate.

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Our contingent fee collections operations have a limited operating history

      Our contingent fee collections operations commenced in March 2001. These operations are in the early stages of development. Accordingly, these operations have a relatively limited operating history and their prospects must be considered in light of the risks and uncertainties facing early-stage companies. As of March 31, 2003, we have contingent fee collection arrangements with 8 credit originators or debt buyers. Our contingent fee collections operations incurred a loss in 2001 and were only slightly profitable in 2002. Although we are currently generating positive operating income for our contingent fee collections operations, our limited operating history makes prediction of future results difficult.

We may make acquisitions that prove unsuccessful or strain or divert our resources

      We intend to consider acquisitions of other companies in our industry that could complement our business, including the acquisition of entities offering greater access and expertise in other asset types and markets that we do not currently serve. We have little experience in completing acquisitions of other businesses, and we may not be able to successfully complete an acquisition. If we do acquire other businesses, we may not be able to successfully integrate these businesses with our own and we may be unable to maintain our standards, controls and policies. Further, acquisitions may place additional constraints on our resources by diverting the attention of our management from other business concerns. Through acquisitions, we may enter markets in which we have no or limited experience. Moreover, any acquisition may result in a potentially dilutive issuance of equity securities, the incurrence of additional debt and amortization of expenses related intangible assets, all of which could reduce our profitability and harm our business.

We may not be able to continually replace our defaulted consumer receivables with additional receivables portfolios sufficient to operate efficiently and profitably

      To operate profitably, we must continually acquire and service a sufficient amount of defaulted consumer receivables to generate revenue that exceeds our expenses. Fixed costs such as salaries and lease or other facility costs constitute a significant portion of our overhead and, if we do not continually replace the defaulted consumer receivables portfolios we service with additional portfolios, we may have to reduce the number of our collection personnel. We would then have to rehire collection staff as we obtain additional defaulted consumer receivables portfolios. These practices could lead to:

      Furthermore, heightened regulation of the credit card and consumer lending industry may result in decreased availability of credit to consumers, potentially leading to a future reduction in defaulted consumer receivables available for purchase from credit originators. We cannot predict how our ability to identify and purchase receivables and the quality of those receivables would be affected if there is a shift in consumer lending practices, whether caused by changes in the regulations or accounting practices applicable to credit originators, a sustained economic downturn or otherwise.

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We may not be able to manage our growth effectively

      We have expanded significantly since our formation and intend to maintain our growth focus. However, our growth will place additional demands on our resources and we cannot be sure that we will be able to manage our growth effectively. In order to successfully manage our growth, we may need to:

      Continued growth could place a strain on our management, operations and financial resources. We cannot assure you that our infrastructure, facilities and personnel will be adequate to support our future operations or to effectively adapt to future growth. If we cannot manage our growth effectively, our results of operations may be adversely affected.

Our operations could suffer from telecommunications or technology downtime or increased costs

      Our success depends in large part on sophisticated telecommunications and computer systems. The temporary or permanent loss of our computer and telecommunications equipment and software systems, through casualty or operating malfunction, could disrupt our operations. In the normal course of our business, we must record and process significant amounts of data quickly and accurately to access, maintain and expand the databases we use for our collection activities. Any failure of our information systems or software and their backup systems would interrupt our business operations and harm our business. Our headquarters is located in a region that is susceptible to hurricane damage, which may increase the risk of disruption of information systems and telephone service for sustained periods.

      Further, our business depends heavily on services provided by various local and long distance telephone companies. A significant increase in telephone service costs or any significant interruption in telephone services could reduce our profitability or disrupt our operations and harm our business.

We may not be able to successfully anticipate, manage or adopt technological advances within our industry

      Our business relies on computer and telecommunications technologies and our ability to integrate these technologies into our business is essential to our competitive position and our success. Computer and telecommunications technologies are evolving rapidly and are characterized by short product life cycles. We may not be successful in anticipating, managing or adopting technological changes on a timely basis.

      While we believe that our existing information systems are sufficient to meet our current demands and continued expansion, our future growth may require additional investment in these systems. We depend on having the capital resources necessary to invest in new technologies to acquire and service defaulted consumer receivables. We cannot assure you that adequate capital resources will be available to us at the appropriate time.

Our senior management team is important to our continued success and the loss of one or more members of senior management could negatively affect our operations

      The loss of the services of one or more of our executive officers or key employees could disrupt our operations. We have employment agreements with Steve Fredrickson, our president, chief executive officer and chairman of our board of directors, Kevin Stevenson, our senior vice president and chief financial officer, and most of our other senior executives. The agreements contain non-compete provisions that survive termination of employment. However, these agreements do not and will not assure the continued services of these officers and we cannot assure you that the non-compete provisions will be enforceable. Our success depends on the continued service and performance of our executive officers, and we cannot guarantee that we will be able to retain those individuals. The loss of the services of Mr. Fredrickson, Mr. Stevenson or one or more of our other executive officers could seriously impair our ability to continue

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Our ability to recover and enforce our defaulted consumer receivables may be limited under federal and state laws

      Federal and state laws may limit our ability to recover and enforce our defaulted consumer receivables regardless of any act or omission on our part. Some laws and regulations applicable to credit card issuers may preclude us from collecting on defaulted consumer receivables we purchase if the credit card issuer previously failed to comply with applicable law in generating or servicing those receivables. Collection laws and regulations also directly apply to our business. Additional consumer protection and privacy protection laws may be enacted that would impose additional requirements on the enforcement of and collection on consumer credit card receivables. Any new laws, rules or regulations that may be adopted, as well as existing consumer protection and privacy protection laws, may adversely affect our ability to collect on our defaulted consumer receivables and may harm our business. In addition, federal and state governmental bodies are considering, and may consider in the future, other legislative proposals that would regulate the collection of our defaulted consumer receivables. Although we cannot predict if or how any future legislation would impact our business, our failure to comply with any current or future laws or regulations applicable to us could limit our ability to collect on our defaulted consumer receivables, which could reduce our profitability and harm our business.

We utilize the interest method of revenue recognition for determining our income recognized on finance receivables, which is based on an analysis of projected cash flows that may prove to be less than anticipated and could lead to reductions in future revenues or impairment charges

      We utilize the interest method to determine income recognized on finance receivables. Under this method, each static pool of receivables we acquire is modeled upon its projected cash flows. A yield is then established which, when applied to the outstanding balance of the receivables, results in the recognition of income at a constant yield relative to the remaining balance in the pool of defaulted consumer receivables. Each static pool is analyzed monthly to assess the actual performance compared to that expected by the model. If differences are noted, the yield is adjusted prospectively to reflect the revised estimate of cash flows. If the accuracy of the modeling process deteriorates or there is a decline in anticipated cash flows, we would suffer reductions in future revenues or a decline in the carrying value of our receivables portfolios, which in either case would result in lower earnings in future periods and could negatively impact our stock price.

Risks Related to this Offering and Our Capital Structure

We have limited experience in managing a public company

      Our management team has historically operated our business as a privately held limited liability company. Until the commencement of our initial public offering on November 8, 2002, our management team had never previously had responsibility for managing a publicly traded company.

We may incur increased costs as a result of recently enacted and proposed changes in laws and regulations

      Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules proposed by the SEC and by the Nasdaq Stock Market, could result in increased costs to us as we evaluate the implications of any new rules and respond to their requirements. The new rules could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain

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Our controlling stockholder will continue to have the ability to influence the outcome of matters voted on by stockholders which will limit your rights

      Angelo, Gordon & Co., L.P. (“Angelo Gordon”), together with its affiliates, currently controls 58% of our common stock, and after this offering will control 38% of our common stock. While after this offering Angelo Gordon will no longer control a majority of our common stock, it will continue to have the ability to significantly influence the election of our directors and the outcome of votes by our stockholders on corporate matters, including mergers, sales of all or substantially all of our assets, charter amendments and other matters requiring stockholder approval. In addition, in accordance with our certificate of incorporation, so long as Angelo Gordon beneficially owns 30% or more of the outstanding common stock it will have the right to call a special meeting of the stockholders. This significant interest may have a negative impact on the market price of our common stock by discouraging third-party investors.

We cannot assure you that an active trading market will develop for our common stock or what the market price for our common stock will be in the future and, in the event that an active trading market does not develop, you may be unable to resell your shares

      Our common stock has only been traded on the Nasdaq National Market since November 8, 2002, and during this time our trading volume has been relatively light. There can be no assurance that an active trading market will develop or continue after this offering or that the market price of our common stock will not decline below the public offering price. The public offering price of our common stock may not be indicative of the market price for shares of our common stock after this offering. Prices for the shares of our common stock after this offering will be determined in the market and may be influenced by many factors, including the depth and liquidity of the market for our common stock, investor perception of us and our business, the consumer credit industry as a whole and general economic and market conditions. In the event a more active trading market does not develop for our common stock, the price at which you may resell your shares may be affected.

The market price of our shares of common stock could fluctuate significantly

      Wide fluctuations in the trading price or volume of our shares of common stock could be caused by many factors, including factors relating to our company or to investor perception of our company (including changes in financial estimates and recommendations by research analysts), but also factors relating to (or relating to investor perception of) the accounts receivable management industry or the economy in general.

The sale of a substantial number of our shares of common stock in the public market could adversely affect the market price of our shares, which in turn could negatively impact your investment in us

      Future sales of substantial amounts of our shares of common stock in the public market (or the perception that such sales may occur) could adversely affect market prices of our common stock prevailing from time to time and could impair our ability to raise capital through future sales of our common stock. Upon completion of this offering, we will have 15,100,606 shares (assuming an offering price of $27.10 per share) of common stock issued and outstanding. All of the shares being sold in this offering, including any shares sold upon the exercise of the underwriters’ over-allotment option, will be freely tradeable without restriction under the Securities Act of 1933, unless purchased by our affiliates. 4,485,000 shares of our common stock were registered in connection with our initial public offering and are freely tradeable. Upon completion of this offering, 7,615,606 (assuming an offering price of $27.10 per share) of our shares of common stock will be restricted or control securities within the meaning of Rule 144 under the Securities Act of 1933 (7,165,606 shares of common stock if the underwriters’ over-allotment option is exercised in

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      Subject to certain exceptions described under the caption “Underwriting,” we and the selling stockholders have agreed not to offer, sell or agree to sell, directly or indirectly, any shares of common stock without the permission of William Blair & Company, L.L.C. for a period of 180 days from the date of this prospectus. When this period expires we and our locked-up stockholders will be able to sell our shares in the public market, subject to the terms and provisions of Rule 144. Sales of a substantial number of such shares upon expiration, or early release, of the lock-up (or the perception that such sales may occur) could cause our share price to fall.

Our certificate of incorporation, by-laws and Delaware law contain provisions that may prevent or delay a change of control or that may otherwise be in the best interest of our stockholders

      Our certificate of incorporation and by-laws contain provisions that may make it more difficult, expensive or otherwise discourage a tender offer or a change in control or takeover attempt by a third-party, even if such a transaction would be beneficial to our stockholders. The existence of these provisions may have a negative impact on the price of our common stock by discouraging third-party investors from purchasing our common stock. In particular, our certificate of incorporation and by-laws include provisions that:

      In addition, we are subject to Section 203 of the Delaware General Corporation Law which provides certain restrictions on business combinations between us and any party acquiring a 15% or greater interest in our voting stock other than in a transaction approved by our board of directors and, in certain cases, by our stockholders. These provisions of our certificate of incorporation and by-laws and Delaware law could delay or prevent a change in control, even if our stockholders support such proposals. Moreover, these provisions could diminish the opportunities for stockholders to participate in certain tender offers, including tender offers at prices above the then-current market value of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts or speculation.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This prospectus contains certain forward-looking statements. When used in this prospectus, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend” and similar expressions are intended to identify forward-looking statements. Forward-looking statements also include statements containing a projection of cash collections, revenues, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.

      The forward-looking statements in this prospectus are based upon our management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account currently available information. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us, that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from expectations are:

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USE OF PROCEEDS

      All shares of our common stock offered by this prospectus are being offered for sale by the selling stockholders. We will not receive any portion of the net proceeds of this offering.

PRICE RANGE OF COMMON STOCK

      Our common stock is quoted on the Nasdaq National Market under the symbol “PRAA.” Public trading of our common stock commenced on November 8, 2002. Prior to that time there was no public trading market for our common stock. The following table sets forth the high and low sales prices for our common stock, as reported by the Nasdaq National Market, for the periods indicated.

      On May 2, 2003, the last reported sale price of our common stock on the Nasdaq National Market was $27.10 per share. As of May 2, 2003 there were 18 holders of record of our common stock. Based on information provided by our transfer agent and registrar, we believe that there are approximately 2,370 beneficial owners of our common stock.

DIVIDEND POLICY

      Our board of directors sets our dividend policy. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business, but we may determine in the future to declare or pay cash dividends on our common stock. Any future determination as to the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our board of directors considers relevant.

REORGANIZATION

      We were initially formed as Portfolio Recovery Associates, L.L.C., a Delaware limited liability company, on March 20, 1996. As a limited liability company, Portfolio Recovery Associates, L.L.C. was treated for income tax purposes as a partnership with taxes on income generated paid by its members. In connection with our initial public offering in November 2002, all of the membership units of Portfolio Recovery Associates, L.L.C. were exchanged for a single class of the common stock of Portfolio Recovery Associates, Inc., a new Delaware corporation. Accordingly, the members of Portfolio Recovery Associates, L.L.C. became the common stockholders of Portfolio Recovery Associates, Inc., which became the parent company of Portfolio Recovery Associates, L.L.C. and its subsidiaries. In connection with this reorganization, (i) each issued and outstanding membership unit of Portfolio Recovery Associates, L.L.C. was exchanged for one share of common stock of Portfolio Recovery Associates, Inc. and (ii) warrants to purchase 2,235,000 membership units of Portfolio Recovery Associates, L.L.C. at a weighted average exercise price of $4.30 per unit were exchanged for warrants to purchase 2,235,000 shares of common stock of Portfolio Recovery Associates, Inc. at a weighted average exercise price of $4.30 per share. Since our initial public offering, warrants to purchase an aggregate of 80,000 shares of common stock have been exercised and warrants to purchase an aggregate of 45,000 shares of common stock have been cancelled. In connection with this offering, 1,835,000 of the remaining 2,110,000 warrants will be exercised by certain of the selling stockholders.

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CAPITALIZATION

      The following table sets forth our capitalization as of March 31, 2003 on (i) an actual basis, without giving effect to the exercise of warrants in connection with this offering, and (ii) an as adjusted basis to include 1,835,000 shares of common stock which will be issued upon exercise of outstanding warrants in connection with this offering less 284,394 shares of common stock which will be tendered to pay the exercise price of such warrants (assuming an offering price of $27.10 per share). You should read the following capitalization data in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements and accompanying notes and the other financial data included elsewhere in this prospectus.

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SELECTED CONSOLIDATED FINANCIAL DATA

      The following selected consolidated financial data for the years ended December 31, 2000, 2001 and 2002 and as of December 31, 2001 and 2002 have been derived from our consolidated financial statements, included elsewhere in this prospectus which have been audited by PricewaterhouseCoopers LLP. The following selected financial data for the years ended December 31, 1998 and 1999 and for the years then ended have been derived from our audited consolidated financial statements, not included in this prospectus.

      The following selected consolidated financial data for the three months ended March 31, 2002 and 2003 have been derived from our unaudited consolidated financial statements, included elsewhere in this prospectus. These financial statements include all adjustments, consisting only of normal recurring adjustments, which we consider necessary for a fair statement of our financial position and results of operations for these periods.

      Operating results for the three months ended March 31, 2003 are not necessarily indicative of results that may be expected for the year ending December 31, 2003.