Welcome to today’s Asset Acceptance Capital Corporation first quarter 2008 earnings results conference call. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Noel Ryan, Director of Investor Relations.

Welcome to Asset Acceptance Capital’s first quarter 2008 earnings conference call. On the call today are Brad Bradley, our Chairman, President and CEO; Rion Needs, Senior Vice President and COO; Mark Redman, our Senior Vice President of Finance and CFO. Earlier this morning, we announced the company’s first quarter 2008 financial results. If you have not yet received a copy of the press release, please contact Patrick Kane at 616-233-0500 and have one faxed to you. The release is also available on many news sites, or it can be viewed at our corporate website at assetacceptance.com. Before I turn the call over to management to comment on our results, I would like to remind you that this conference call contains certain statements, including the company’s plans and expectations regarding its operating strategies, charge-offs, receivables and costs, which are forward-looking statements and are made pursuant to the Safe Harbor provision of the Securities Litigation Reform Act of 1995. These forward-looking statements reflect the company’s views at the time such statements are made with respect to the company’s future plans, objectives, events, portfolio and purchases and pricing, collections and financial results such as revenues, expenses, income, earnings per share, capital expenditures, operating margins, financial position, expected results of operation and other financial items, as well as industry trends and observations. In addition, words such as estimate, expect, intend, should, could, will and variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. There are number of factors, many of which are beyond the company’s control which can cause the actual results and outcomes to differ materially from those described…

Today, I will give you an update on several key operational initiatives, which I touched on for the first time last quarter, which remain top priorities for our team, as we look ahead the remainder of 2008. Exiting 2007, our senior leadership team continues to focus on how best to leverage the people process and tools available to us to generate increased efficiency, operational excellence and continuous improvement throughout our organization. During the first quarter, our ongoing efforts translated into the addition of key personnel, measurable improvements in cost rationalization, improved collection and expense forecasting, enhanced inventory management and capacity planning, and further progress towards our implementation and adoption of advanced tool and technologies designed to increase our ability to leverage our competitive advantages in the marketplace. These efforts resulted in improving our cost to collect to 50% for the quarter. However, due to the deferral of some of the legal collection expenses and seasonality of our collections, we anticipate giving back some of those gains over the balance of the year. As most of you are aware, legal collections have continued to grow as a percentage of our overall collections mix in recent quarters, finding new more efficient ways of utilizing the legal channel to collect on an ever increasing volume of purchased receivables has never been more critical. So when Diane Kondrat, a 16-year veteran of Asset Acceptance and VP of our Legal Collections Department announced last year her intention to retire in the summer of 2008, our team set out to identify a suitable replacement that could help lead the legal collection department during the next stage of transition and process reengineering. In addition to identifying an individual capable of overseeing operations for the entire legal department, we also wanted to identify candidate who could act as…

I’ll review our first quarter 2008 financial results and metrics provide a discussion on revenue recognition, and finally, I will end with our liquidity and capital structure. Starting with the overview of the financial results, in the first quarter, total cash collections increased 4.6% to $100.3 million compared with cash collections of $95.9 million in the first quarter of 2007. Traditional call center collections for the first quarter declined 1.6% from the year-ago period to $47.5 million, representing 47.4% of total cash collections for the quarter compared to 50.4% of total cash collections in the prior-year period. Legal collections grew 6.4% versus the prior year first quarter to $38.2 million representing 38.1% of total cash collections versus 37.4% of cash collections in the year-ago period. Other collections, including agency forwarding, bankruptcy and probate, increased 24.9% on a year-over-year basis to $14.6 million accounting for the remaining 14.5% of cash collections during the first quarter 2008 compared to 12.2% of total cash collections in the first quarter of 2007. The growth in other collections continue to be driven primarily by increases in agency forwarding collections; that is, collections from third-party collection agencies working accounts on our behalf. We generated total revenues of $64.4 million in the first quarter 2008, down 4.4% from $67.3 million in the same quarter of 2007. I will go into more detail on the revenue shortly. Total operating expenses declined 2.3% to $50.1 million in the first quarter 2008 compared to total operating expenses of $51.3 million in the year-ago period. Total operating expenses were 50.0% of cash collections in the first quarter 2008 compared with 53.4% in the same period of 2007. The year-over-year variances in operating expenses when measured as a percentage of cash collections were driven primarily by decreased salaries and benefits expense, collection…

(Operator Instructions) Your first question comes from Mark Hughes - SunTrust.

You had that nice drop in collections expense and I think you talked about the shift in strategy more towards outsourced services. How much of that decline sequentially was from cutting, say, upfront spending on the legal channel versus savings that will be more sustainable going forward?

Mark, on that one, the lion’s share of it was in the legal expense, which is partially a deferral and part of it was our ability to actually reforecast, the forecasting model that we developed for both revenues and expenses we’re much more accurate now being able to tie those two together, which has increased our ability to have a lower expense base and increased debt collections associated with them. So part of it is just the deferral, which you will see come through in the balance of the year, and about half of it is due to a greater efficiencies in our forecasting.

Now once you get caught up and you are fully ramped up with these external relationships, relative to last year, should the cost structure be similar? I think you’ve mentioned at one point, you might see a little drop in productivity because of the more outsourcing or increased outsourcing. What should we think about in terms of the costs, again once you get this fully up and running?

On a marginal basis, we expect that the outsource on traditional call centers will actually improve slightly, and then on legal, it will actually improve pretty significantly because we are able to more closely tie the expenses and the revenues with that relationship. So, we in the past, we’ve discussed the fact that on the legal channel, we have to incur the legal expenses well in advance of the associated revenues, which leaves us this timing gap, with the relationship we now have, we’ll actually be able to compress those two together.

And Mark, I would add to that too, we are always trying to find smarter, better, more efficient ways of operating the business and I think we are focused on that. The drop from 53% to 50% is more than we expect to be able to accomplish in a year-over-year basis, but we are focused on trying to continually make improvements in our operations.

You have got a nice pick up in the agency forwarding collections, third-party collections. Are you placing accounts with the third parties that you had previously not worked that would just be sitting in inventory so to speak or these accounts that you would have worked internally, but now you are just shifting them to the external service here?

No. For the first quarter, it’s predominantly accounts that were lower on our prioritization, so, were not being worked as aggressively as the balance of our inventory. Moving forward as I alluded to we will be shifting and looking to move more because the volume that we have today to get greater penetration around our total inventory out to agency forwarding.

Your next question comes from Sameer Gokhale - Keefe, Bruyette & Woods. Sameer Gokhale - Keefe, Bruyette & Woods: Mark on the table where you show the monthly yield for the ‘08 purchases in Q1. It looks like the monthly yield is 1.38% compared to 2.5% for purchases made in ‘07. Given that it seems like in recent months, pricing seems to have improved on a year-over-year basis, the decline in the yield, is that more indicative of like a mix shift and something going on there or maybe something else. Can you just provide some commentary on that please?

Well, Sameer, I also compare it to the yields that we assigned on 2000 in purchases in the first quarter of 2007 which was 1.5% versus the 1.4%. So, I don’t see it as a dramatic change in yields being assigned. We want to start and make sure that we are starting at yields that we are comfortable with assigning. And if we over time are able to outperform those yields then we will raise them and that’s what you are seeing that’s happened on the 2007 pool. A year ago, their average yield, as I just said, it was about 1.5%, now it’s 2.5%. So, we are beginning to gradually raise yields there. Sameer Gokhale - Keefe, Bruyette & Woods: In terms of the mix again of one plus year and less than one plus year collectors in Q1 of ‘08 versus Q1 of ‘07, can you just go over those numbers again please?

The total account representatives this year is 901, 495 with more than a year, 406 with less than a year. A year ago, there was a total of 921 with 623 more than a year and 298 less than a year. Sameer Gokhale - Keefe, Bruyette & Woods: We look at this quarter’s numbers and clearly there have been some strides made in terms of the operating efficiencies and the outlook going forward. You expect pricing to be continuing to improve going forward, is this the inflection point that investors should be looking for in terms of earnings going forward? I know, you don’t provide specific guidance but, in a general sense, is this the inflection point that you think you have reached at this point or is it still out a few more quarters, just some commentary would be terrific.

I believe there is a mix of positive and negative news. Right now, obviously some of the operational improvements are positive. The pricing is a positive. However, there is uncertainty over the collection environment. And I think everyone is taking up a wait and see position and I am not going to try to predict for investors when they should begin investing. Yes, there’s a mix of good and bad. Now, if we saw these decreasing prices with a continuing good collection environment, obviously I would probably be more positive than I would be right now.

Your next question comes from Hugh Miller - Sidoti & Company. Hugh Miller - Sidoti & Company: If I heard correctly you were saying that roughly half of the reduction in the collection expense was with regards to a deferment and half of it was just greater forecasting efficiency. Is that correct?

Yes, roughly, those are just directional. We haven’t actually quantified the exact contribution to each of those. Hugh Miller - Sidoti & Company: And can you help me explain what’s driving the reduction in cost relative to the deferment? You mentioned just greater forecasting efficiencies, but what exactly is driving that cost reduction?

There’s two things. One of them is we’ve implemented predictive modeling that’s helping us identify higher probable success with accounts that move into the legal channel. So therefore, we are getting a higher recovery rate associated with those accounts moving in. And two is the reforecasting capability that we have today has made less to look at what the desired collection rate is and when do we need to incur those expenses. So, we are able to smooth those out more than we’ve done in the past. So because on a legal channel, you are paying well in advance six to eight months on average in advance for the collections because of the lead time of filing the case, going through the courts and then getting to a garnishment or a collection, that timing in the past has caused us to push more on the expense base and therefore create more lumpy results. Whereas now we are able to actually smooth those out, which has dropped some of our projected costs when we need to spend in the current period. Hugh Miller - Sidoti & Company: But that would be more of a deferment, the actual cost reduction is just more in your ability to see that the right accounts have a better success rate, correct?

That’s correct. Hugh Miller - Sidoti & Company: Can you talk a little about the purchases in the quarter and possibly give us some sense as to what percentage was made after the resolution of the debt covenant issues? Nathaniel F. (Brad) Bradley IV: Yes. I’ll talk about the purchasing in the quarter. I’m not sure I can provide you with the numbers that occurred post the resolution. Hugh, that’s really not usual for purchasing to be inconsistent on a quarter-to-quarter basis and we’ve certainly seen that historically in the debt purchasing market. If the market continues to improve, we are seeing improvements in supply that are apparent in the increasing delinquency and charged-off rates and there is a lot of supply that has yet to reach the market. We are adhering to a more selective, more opportunistic approach. We want to seek out and close on the best deals that are available in the marketplace. With the improved pricing, we feel as if we are getting more for our money. We are seeing some good quality deal flow in the first quarter and even during the month of April. And as I mentioned in my prepared comments, we fully expect and are confident that we are going to hit our purchasing objectives by the end of the year. Hugh Miller - Sidoti & Company: And I believe on the last quarter, you had given a little bit of insight as to what you may have been seeing on a year-over-year basis with regards to pricing just in a broader range, but can you give us a sense from the first quarter, what types of pricing you were seeing relative to the year prior? And possibly also and just some thoughts on where you think the potential for the decline may be? Nathaniel F. (Brad) Bradley IV: I talked to Deb about what we are seeing in terms of pricing reductions and I am not sure these are actually year-over-year percentages, but we’ve seen prices move as much as 25% to 40% on portfolios and where it’s going to bottom out is certainly yet to be seen and I would be reluctant to make any predictions on that. Hugh Miller - Sidoti & Company: The season collectors figures that you have put out there, obviously, noticing just a little bit of a decline there and the percentage that are one year plus. Can you talk a little bit about what may be driving that turnover? Is it possibly because of the challenging collection environment and whether or not you anticipate that over time that will impact possibly the productivity levels on a go-forward basis?

We really don’t try and talk about the turnover on an individual quarter basis. We will talk about on an annual basis in our 10-K. However, as Mark alluded to our occupancy improvement, we did have a significant shift between our Wixom office and Maryland office that we closed last year that would have been open this time, and not open for this time a year ago and closed this year. So that had an impact on those. We don’t specifically talk about the quarter. Hugh Miller - Sidoti & Company: Any color you might be able to give us on the impairment on the ‘04 vintage and then also the reversals for the ‘03 and the prior vintages there.

I can give you a little of color. The reversals are on a couple of our more significant portfolio purchases from those vintages that we’ve had, obviously, mixed collection results on, and have recently become more confident in our ability to reverse some of the impairments that we have taken on those pools than we have been. The 2004 vintage impairments, I believe continue to result from the lack of aggregation of those pools, just typical volatility that exist when pools are being accounted for on a standalone basis. Hugh Miller - Sidoti & Company: And on the ‘04?

That last comment about the volatility was the ‘04.

Your next question comes from Rich Shane - Jefferies & Co. Rich Shane - Jefferies & Co.: You mentioned your purchasing targets for 2008 and that you still feel confident that you will achieve them. Can you give us some range to what your targets are for 2008? Is it up, down, flat to 2007? Nathaniel F. (Brad) Bradley IV: I am sorry Rick, but that’s just not something that we are prepared to disclose. We would consider that guidance and we just don’t give guidance. Rich Shane - Jefferies & Co.: Going forward, if those targets change, will you at least let us know that throughout the year? Nathaniel F. (Brad) Bradley IV: I think that that falls into the same category. Rich Shane - Jefferies & Co.: In terms of what’s going on with the revolving facility, how much capacity do you officially have left and as you were working through the covenant issues, were there any changes that were made in terms of advanced rates or anything that we should be thinking about?

The changes in the covenants that were made were to give us a little bit more room on the covenant. So, instead of being at a for example, a 2.5 total liabilities to tangible network covenant requirement, right now, we are at a 3-to-1 ratio. Probably, what I would consider the only negative implication from the issue was the fact that we increased our borrowing rates by 25 basis points. So, the spread increased by 25 basis points. In terms of capacity, as of March 31, there was probably $50 million, little more than $50 million of bulk capacity to borrow on the most restrictive of the various covenants. Rich Shane - Jefferies & Co.: I am still confused by the temporary deferral of the legal expenses. Is what you are saying that as you have gained confidence in your modeling of legal collections, that you are more comfortable matching legal expenses to those collections and so, even though you incurred those expenses from a cash perspective, you are just going to smooth out how you actually recognize them through the P&L or you are saying that you are actually not making some of those investments right now and deferring it and what will cause you to get back into it if it’s the latter?

It’s actually the latter. Is that we actually did defer some expenses that we historically were forecasting to make, while we developed or refined our forecasting capabilities. So, some of those expenses were literally, we just postponed the activity into the back part of the year. Rich Shane - Jefferies & Co.: And there was no change in terms of the recognition policy on legal expenses?

No.

Your next question comes from Ashley Hemphill - William Blair.

We’ve talked a lot about the pricing environment and your expectation for prices to continue to decline and I was just wondering if you could give us an idea given the $63 million purchased in the fourth quarter, what that indicates for the leaser buying in the first quarter. Was that an indictment that maybe the portfolios you purchased in the fourth quarter were at higher prices than you expect to purchase in the future or were the supply demand dynamics more favorable at the end of the year or just maybe some color there? Nathaniel F. (Brad) Bradley IV: Well, again Ashley, the purchasing opportunities can be somewhat lumpy and we have had a record quarter in the fourth quarter 2007. We are very pleased with the portfolios that we invested in the fourth quarter that did not have a bearing on our thought processes for investing in the first quarter of 2008. We are obviously active in the market on a daily basis and doing the best that we can to try to monitor what the thresholds may be in any given portfolio, any given debt sale that we are participating in. And we just believe that prices are going to continue to come down. We are very happy with the portfolios that we invested in, in the first quarter of 2008. We feel as if we received good value for our investments. We are working the relationships that we have with debt sellers. We are monitoring the activity of the debt sellers and making sure that we understand the strategies that they may be implementing in this market as they look at how they can get the best recoveries on their bad debt portfolios. So, I wouldn’t read too much into the fact that we had a record purchasing quarter followed up by a moderate purchasing quarter. Again, it’s not unusual to see that type of inconsistency. We are trying to make the best investments that we possibly can during this time of improving pricing and improving supply. And our MO is certainly to grow our purchasing, to grow our company and to grow our earnings and we are trying to do that in the smartest possible way.

I know you talked about the stimulus checks coming out. I am wondering if you did any focused marketing or any efforts made to collect some of that money as it comes in?

We absolutely have. We had timed some of our letter activity to go out in conjunction with receipt of those stimulus packages and we are using talk ops and we’ve incorporated language into our talk ops that help identify that opportunity with our debtors to resolve some of these past issues. So, we anticipate getting our fair share of that opportunity.

Mark, can you give me a little more information on the impairment of intangible assets? What is that from exactly?

What happened in the first quarter is with our acquisition of PARC, our medical debt collection arm; we had made the decision in the first quarter to cease our operations around contingency collection. We have a robust purchasing environment in the medical field as well as the physicianal field and given the mix of our inventory, right now we felt that we were better suited to deploy our resource against our own inventory and future inventory that we could acquire rather than pursue collections on behalf of hospitals and other entities. So, we made that decision to exit that business, and as a result, we had a intangible asset on the books, reflective of customer relationships at the time of the acquisition. And so, per accounting requirements, we wrote that intangible asset off.

So any clarification in terms of what exactly went wrong with that acquisition? Was it just ill-timed?

No. There was no issue or impairment associated with the acquisition. It was purely a decision to cease that activity which was contingent collections which during the acquisition, a portion of the purchase price was ascribed to those customer relationships and therefore, capitalized on the books as an intangible asset and our decision to cease that activity accounting, our regulations required us to write that off. There is nothing related to the value and/or performance of the acquisition. It purely is a decision to refocus those energies to what we believe will be a higher margin business or a higher margin opportunity with our resource.

You have a follow-up question from Mark Hughes - SunTrust.

In terms of the legal activity, am I right in understanding that the pace of lawsuits and your pursuit of debtors has not slowed in this transition; it’s just the timing of the expense recognition that has changed. Is that right?

Well, in the first quarter, actually, some of the deferral of that expense was really a slowdown in suits that were referred into the system for collection. That’s what the deferral really represents. But, no, on a going forward basis, we are not slowing that activity at all. In fact as you can tell from the growth rate, what we talked about in looking at shifting to outsource partners, we anticipate that that volume will keep at that pace and continue to grow. So, it was just a momentary slowdown, if you want to call it that associated with our ability to improve our predicted modeling and also our forecasting of the revenues and expenses.

Your next question comes from Justin Hughes - Philadelphia Financial.

I wanted to talk about the zero basis revenue that you brought in. I think it was a record level this quarter and I know you lengthened your curves last year, should we continue to see that go up or will the lengthened curve different modeling, will that start to trend down at some point?

Well, once again, I am not going to give you too much projections there in accordance with our policy not to give guidance. But the items that impact the zero basis collections, obviously, I think, as we have extended lives, you would expect to have less zero basis collections because we have pools that are going to collect for seven years. We had a five-year accounting life on it. Obviously, you had two years of zero basis collections. Now if we have a seven-year life on it, you have no zero basis collections. Another item impacting zero basis collections would be aggregation. So without aggregation, you have more pools that are going to amortize before their expected for life, and we started aggregating our pools in 2005. So, as you get further out from the 2004 and prior year’s pools, we will have more of our pools on a aggregated basis, and so I think that will generate less zero basis collections than you would have if you weren’t aggregating. So there is some factors that I think are tending to push for lower zero basis collections than we would have had otherwise.

So, before when you were doing the five-year forecast, you were really almost building in two years of zero, now you are doing seven years at seven years, theoretically if you are 100% accurate, there will be zero basis.

Correct.

There has been a lot of headlines about the arbitration process, and I think state of California is suing the National Arbitration Forum, one that you have used in the past. Can you give us some color there and also of your $38 million of legal collections. How much of that is actually from courts and how much of it is from arbitration?

Yes. I don’t have those numbers on me as to what the split would be between arbitration. All I can say in general, we don’t engage in arbitration nearly as much as our normal collection process. As to the actual changes in California law or statutes or the suits that’s pending there, we don’t have any impact associated with that more constantly assessing the changing legal environment across all of the states and we monitor that on a regular basis and enact strategies to ensure it doesn’t have a negative impact on us. But right now at this point, there is nothing that’s currently that we are involved in that’s making us change our strategies or rethink the way that we are processing our work.

There is no way that the state or any other state could actually come after you, right? They would just go after the arbitration firm?

Yes. Again, without detail about it, I think, to provide you with a legal opinion that I am clearly not justified giving you.

Your final question comes from David Nierenberg - Nierenberg Investments.

Rion, judging by the sheer number of questions about the change in legal expense, let me try to ask what I hope might be a concluding clarifying question. I am going to come all the way back to the first time you characterized that because people seems to be having trouble understanding how much of the savings in the first quarter is merely a deferral which will pop up later in the year, and how much could be characterized as a more permanent and on-going savings from lessons learnt about efficiency. What I think I heard you say was that you would roughly attribute that 50% of the savings to deferral and 50% to more permanent efficiency. Is that correct?

Yes, in general. That is it. And then combined with that is also this external relationship that we entered into, that will allow us to continue the accelerated and the expanded legal process, but more closely match our expenses and revenues than we’ve done historically, which will have also compensating impact.

Mark, in your last quarterly call, you were good enough to give us a mid-quarter glimpse into whether or not you have continued after the end of the December quarter, continued reducing your indebtedness. And I wonder if you would be good enough now that today is the last day of April, if you could tell us if you have continued working down your notes payable balance since March 31 and if so to what level?

David, I am going to decline to do that. I think that the situation and the reason for doing that in the first quarter was a special circumstance surrounding the debt covenant violation and the need just to let investors understand, where we stood as of that point in time with respect to the debt obligation and in coordination with the whole thing. If you have spent enough time, you could back in and understand where we were in relation to the debt covenants and that the actual amount that we had paid down we were really back in compliance with the covenants, although having violated it as of December 31.

What I am really driving at is this, Mark, if you think about the total valuation of the company on an enterprise basis combining market cap and indebtedness minus cash, it looks to me that between 12/31 and 3/31, the company has managed during that one brief quarter to reduce net indebtedness from $181 to a $151 which is a change of $30 million which maintaining a constant total enterprise values suggest that the equity value has organically grown by $1 per share in that quarter alone. So congratulations.

That does conclude our question-and-answer session. Nathaniel F. (Brad) Bradley IV : In summary, we are pleased with the progress we made during the first quarter. We did a good job of continuing to grow cash collections through increased use of our legal and third-party collections channels. We effectively managed our operating cost as a percentage of cash collections and we continue to generate strong cash flows from operations, all while remaining profitable in an uncertain macro economic climate. In addition, we continue to rollout a series of processed reengineering, and IS-related initiatives designed to increase the efficiency and the competitiveness of our people in the marketplace over the long term. Overall, it was a productive quarter and a good start to the year and we remain grateful for the support of our associates, investors, and partners, each of whom remain central to our future success. That concludes our conference call today. Thank you for joining us. We look forward to speaking with you during our second quarter 2008 conference call. Good day.