Good day everyone and welcome to today’s Asset Acceptance Capital's corporate second quarter 2008 earnings results conference call. As a reminder, today’s call is being recorded. At this time, I would like to turn the call over to Mr. Jeff Lambert on behalf of Asset Acceptance Capital. Please go ahead sir.

Good morning and welcome to Asset Acceptance Capital’s second quarter 2008 earnings conference call. On the call today are Brad Bradley our Chairman, President, and CEO; Rion Needs, our Senior Vice President and COO; and Mark Redman our Senior Vice President of Finance and CFO. Earlier this morning, we announced the company’s second quarter 2008 financial results. We also announced the appointment of Rion Needs as the President and CEO effective January 1, 2009, succeeding Brad Bradley who will retain his position as Chairman. If you have not yet received a copy of either of these press releases, please contact Patrick Kane at 616-233-0500 to have one faxed to you. The release is also available on many news sites, or it can be viewed on our corporate web site at www.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 purchase 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…

Thank you, Jeff. Good morning and welcome to our second quarter 2008 conference call. During today’s call, I will provide high-level commentary on our second quarter financial performance, a review of current macro industry trends as we see them and finally, I will conclude with a discussion of the plans and objectives we have in place as we look ahead to the remainder of the year. Following my comments, Rion Needs, our Chief Operating Officer, will provide an operational status report. Mark Redman, our Chief Financial Officer, will then provide a summary of our second quarter 2008 financials. At the conclusion of our prepared remarks, we will have a question-and-answer session. Our second quarter performance was challenging on both a revenue and net income perspective. However, there were a number of positive developments during the quarter including continued progress on operating expense management and record levels of purchasing. With the current economic slowdown, the overall supply of charge-offs from issuers continues to grow and challenges faced by some competitors had place downward pressure on demand. This dynamic resulted in a modestly improved pricing environment in the second quarter as we increased purchases to a record level of $65.3 million. At the same time, as consumers continue to face pressure from rising food and energy cost and the challenging job market, collections became more difficult in the quarter. In this environment, we focused our recovery efforts on accounts we deem most collectible while improving our operating expenses as a percentage of cash collections. Looking ahead to the remainder of 2008, we are encouraged by the opportunities presented in the current economic climate particularly with regard to both the supply and pricing of charge-offs. We continue to concentrate on growing cash collections, leveraging our associate talent, more effectively optimizing our collection capacity,…

Thank you, Brad, and thank you for your kind words. Before I begin my formal comments I’d like to share with you what an honor it is to have been selected to become the new President and CEO of Asset Acceptance. With my past experience in finance operations and business transformation, I feel I have a lot to contribute to my new role and I am excited to hit the ground running. Over the last year, I have seen our operations first hand and know where we are successful and know where we need to focus. The leadership team and I are committed to the success of our company in realizing our vision of returning value to our creditor of economy. Brad you’re certainly leaving me with big shoes to fill but rest assured I will do my best to live up to those expectations. Today, I will provide an update on several key operational initiatives which I touched on last quarter that remained top priorities for our team, as we look ahead to the remainder of 2008. During the second quarter, our senior leadership team continues to focus on how best to leverage the people processes and tools available to us to generate increased efficiency, operational excellence and continuous improvement throughout our organization. We continue to work on our overall capacity utilization and inventory management to generate improved results. Last quarter, we discussed the capacity constraints we are facing in core collections and the need to increase our overall capacity. In order to optimize our capacity, we completed a comprehensive review of our existing inventory and aligned it with our available resources to ensure optimal collections at the most advantageous margins. As indicated, we lack sufficient internal resources to liquidate our existing portfolio at expected range requiring us to…

Thanks, Rion. This morning, I will review our second quarter 2008 financial results and metrics, provide a discussion on impairments and revenue recognition, and finally I will end with our liquidity and capital structure. Starting with an overview of the financial results, in the second quarter, total cash collections declined $200,000 or 0.3% to $95.2 million compared with cash collections of $95.4 million in the second quarter of 2007. Traditional call center collections for the second quarter decreased 6.1% from the year-ago period to $42.2 million, representing 44.4% of total cash collections for the quarter compared to 47.1% of total cash collections in the prior-year period. Legal collections grew 5.4% versus the prior year second quarter to $39.9 million, representing 41.9% of total cash collections versus 39.7% of cash collections in the year-ago period. Other collections, including agency forwarding, bankruptcy and probate, increased 3.8% on a year-over-year basis to $13.1 million, accounting for the remaining 13.7% of cash collections during the second quarter 2008 compared to 13.2% of total cash collections in the second quarter of 2007. The growth in other collections continues to be driven primarily by increases in agency forwarding collections; that is, cash collections from third-party collection agencies working accounts on our behalf. During the second quarter, we generated total revenues of $56.5 million, down 14.3% from $65.9 million in the same quarter of 2007. I will go into more detail on revenue shortly. Total operating expenses improved 3.9% to $49.7 million in the second quarter of 2008 compared to total operating expenses of $51.7 million in the year-ago period. Total operating expenses were 52.2% of cash collections in the second quarter of 2008 compared with 54.1% in the same period of 2007. We saw across the border improvements in operating expenses compared to the year-ago period.…

Thank you. (Operator instructions) Our first question comes from Mark Hughes with SunTrust. Mark Hughes – SunTrust: Thank you very. To what extent did not transition the more agency collections hurt your performance in the quarter. I think you’ve alluded to it. Did you try to calculate any rough numbers?

Mark, actually you witnessed so much the movement. It was the end of capacity of our existing recourse [ph] level that caused us not to get as much cash collections as we had hoped. We just hit the saturation point and then the lead time to push it out. So we didn’t specifically quantify what that number was. Mark Hughes – SunTrust: Okay. What has been the trend lately as you’ve pursued these agreements – the commissions that you’re paying, I think, you said that the profitability on these collections was comparable to your norm. How have the commission rates been in this kind of alter [ph] market, tough collections, how much are these agencies charging?

Yes. They are holding steady right now. We aren’t seeing inflation but there clearly is pressure as new charge-offs are hitting the market. We are seeing some discussions and pressure but he haven’t seen anything flow through in our current agreements that is causing that. And obviously, there is a wide spectrum in the cost associated with those fees depending upon the type of paper. If you are pushing out past ad [ph] versus fresh paper, there are different pieces associated with it relative to the amount of work that needs to be applied to each of those paper values. So it’s a wide average and we are not seeing it dramatically change. Mark Hughes – SunTrust: Do you feel like the capacity out there is constrained to do this kind of work?

Right now, we’re not. And that is one of things that we really focused on as we rationalized our existing network. We brought on to new resource, a new partners, and we really focused to place better volumes of more predictable placements and higher paper values to really lock in the partners that we are using and ensure that we get our fair share of that capacity. So right now, we are not seeing of that. That is why we are monitoring closely to make sure we don’t become impinged by more volume in the system. Mark Hughes – SunTrust: And finally, any thoughts in terms of your outlook for amortization in the next few quarters?

I’ll go the tagline that we use from time to time that we don’t give guidance but certainly amortization rates have come up in recent quarters and frankly, over the last several years, they’ve been generally increasing. When we look at the source of our collections now, the majority of our collections are coming from the period of time of a higher priced environment. So beginning as early as 2003 but certainly as 2004 when prices began to rise up through the middle of 2007, so with the higher prices, we are expecting a lower multiples on the purchases. Unfortunately, like I said, the majority of our collections are coming from that time period now. Hopefully over time, with the improved pricing environment that we’ve seen since the middle of 2007 and continue to see and hopefully we continue to see for as long as possible. At some point in time, I would expect that we’ll see some improvement in the (inaudible) amortization rate. Offsetting that unfortunately is difficult collection environment too, so there are so many different factors that can impact that amortization rate. But when a greater proportion of our collections are coming from the lower priced portfolios and the multiples of purchased price go up, because of that or because of improving collection environment, we’ll begin to see better lower amortization rates. Mark Hughes – SunTrust: That is helpful, thank you.

Our next question comes from Hugh Miller from Sidoti & Company. Hugh Miller – Sidoti & Company: Hi, good morning.

Good morning, Hugh. Hugh Miller – Sidoti & Company: We are just wondering – some of your peers had mentioned that they were seeing a little bit of a shift in payments in full to payment plans. I was wondering if that was something that you guys were experiencing as well.

Yes, we absolutely are. In these economic times, we obviously continue to lead, we are seeking payment in full but more work to payment plans constructively to assist debtors in resolving their outstanding debt in difficult times. So we are seeing a shift in that. Hugh Miller – Sidoti & Company: Is it more than just a shift in the duration of payments received and not necessarily a shift in the overall amount of collections or are you seeing adjustment there as well?

Can you say that again? Hugh Miller – Sidoti & Company: I was just wondering if it’s just a shift in the timing or if you are noticing just a reduction in overall collections as well?

No. Right now, we are just seeing it in timing, just really putting it more into the payment plans and elongating some of those payment plans. Hugh Miller – Sidoti & Company: Okay. I was wondering if you could give a little color on the types of receivables that have impacted the ’05 and ’06 payments, were they telecom or credit card, or what they may be?

First of all, these are both aggregate pools, so they would include the vast majority of all of our purchases in each of those quarters. I don’t have the exact portfolio that make up the aggregate pools at my fingertips. But my recollection is that they are largely –or majority of the pools are made up by traditional type paper, the credit cards as opposed to any sort of a non-traditional paper that's like we saw in the Q1 ‘05 through Q3 ‘05 timeframe that is well documented the difficulties of our telecom. I mean, these are actually good performing pools and we’re very pleased with the overall performance. Unfortunately it slowed a little bit in this quarter and we thought it was prudent to recognize these impairments. Hugh Miller – Sidoti & Company: Thank you for the color there and just looking at the expense trend, obviously, you guys are trying to improve expenses as relation to collections and did see an uptick on sequential basis. Obviously, some of that may be driven by just the timing of collections and so on. But I was wondering what the goal is really on a longer term basis to really get that down to – for the overall expenses in relation to collections?

Yes. Definitely, the timing of collections in the second quarter is what spiked that up a little bit from the first quarter. But, from a target – we haven’t set a specific target but clearly we want to be clearly south of 50% to collect, and obviously down to the most efficient level that we can be without negatively impacting our collection. So we believe we still have significant room and with the implementation of our new platform, we believe that is going to pave the way to making some significant improvements as well. Hugh Miller – Sidoti & Company: Okay. Have you guys given any consideration to possibly implementing the offshore collection, some of your peers have started and looked into?

We have. We utilize today actually with some of our third-party partners, offshore resources. We have taken a little bit of a look into some of the offshore facilities from a proprietary or joint venture perspective as well to hold on to that. I might have actually a lot of experience in my former work in developing offshore capabilities, in fact started in 1994 in India, and so we will continue to place emphasis and effort there. But some of that, the labor arbitrage is definitely growing up very quickly. Over the last six years, seven years of my experience, they have actually been increasing wage inflation at a clerical level to the tune of about 13% to 16% annually, so that gap in labor arbitrage is evaporating fairly quickly but it is still a viable mechanism for us, a channel and we will be exploring that more aggressively. Hugh Miller – Sidoti & Company: Okay. Great color there and just I guess as the last question. You guys have mentioned in the past and given us just a little bit more color on the pricing environment, what you’re seeing. You did mention that pricing did improve during the quarter but may be at a slower pace but had alluded to that pricing is obviously much higher than it was on the last cycle back in 2000-2002. Can you give us your thoughts on whether or not you anticipate that we could actually see pricing head that low or is that really more of a distant possibility? Any color there would be great.

Sure. I think the way that the purchasing market, the purchasing industry has evolved in recent years that pricing at the 2000-2002 levels is probably more of a distant possibility than an expectation. Having said that, we’re in a market right now where the pricing is attractive and I believe that there is room for further contraction in pricing as more supply continues to come into the purchasing channels. Certainly, the collection environment is challenging right now but collection should hold their own as we continue to execute on our long-term business model and when the economy improves, we’re going to be in a position where we have invested in attractively priced portfolios and really stock piled inventory and based on our long-term strategies, I would expect collections despite with an improving economy. So pricing is attractive. I think there is room for further improvement as far as decreases in pricing and we’re going to continue to be selective and opportunistic as we do our diligence on all the portfolios that become available to us. Hugh Miller – Sidoti & Company: Okay. Thank you so much and I guess one just final question; I’ll head back into queue after that. You guys have mentioned obviously that you have initiatives there to try and bolster the account rep productivity through training and career development and so on. Any commentary you can give there on what you’re seeing from those efforts and what time period you might anticipate that you would then start to increase your staffing levels. Obviously right now, you’re using the outsourced capacity there but when you might look to start to ramp up internally.

It's a great question. What are we trying do is, really there is two pieces there associated with it. One is retention and we obviously want to improve retention rate before we go out and try to bring on significant incremental staff, right. Because from margin perspective, if we are churning those over at a very rapid rate, then we are just adding to our cost base and not increasing our collections or productivity associated with it. So we want to get that right, which we’ve targeted a number of issues around employer of choice, around leadership development, and all that which we are seeing pay dividends now. We are seeing modest increases in our retention rate through the first half of the year. We’ve got a lot of focus and energy on that. We expect to start ramping up those internal resources as we continue to improve retention, so that is targeted really for the back half of this year. We would hope to get that markedly improved. And the second is productivity. In productivity will obviously come as we retain people on a longer term basis. But it also comes specifically from our initiatives around our platform conversion. And so that is targeted to be completed over the next year and that is when we start or believe we will start to see really significant uptick in productivity. Hugh Miller – Sidoti & Company: And so will it be likely that you guys possibly could be increasing headcount with more of an emphasis as we head into 2009?

Yes. Hugh Miller – Sidoti & Company: Okay. Great, thank you.

John Neff from William Blair has our next question. John Neff – William Blair: Hi, thanks. And first, congratulations to Brad and to Rion.

Thanks, John.

Thanks, John. John Neff – William Blair: Probably a question for Mark, in the adjusted EBITDA calculation, can you explain change to balance of purchased receivables?

Sure. That is the amortization, impairment, and revenue compared with the other item that's called – non-cash revenue, I think, is what we call it. John Neff – William Blair: Okay. Adjusted EBITDA year to date is up 8%, free cash flow year to date is down 52%. Which do you think is a better performance gauge?

We have always looked at the adjusted EBITDA because it gives us a idea of what we are able to reinvest in paper really, whereas the free cash flow I think as you referred to it number already has the cost of the paper taken out. John Neff – William Blair: Correct. I was just looking at it from the standpoint of cash numbers plus CapEx.

Plus CapEx. They’re both healthy numbers as they were able to reinvest the paper. The metric we've always used I think is the adjusted EBITDA number. John Neff – William Blair: It’s the number of you can reinvest in portfolios?

Yes and you’re right. It does fix the asset acquisitions need to come out of there also. As I stated, we also have to pay income taxes and service debt from all of that, but we’ve always targeted the adjusted EBITDA number as the key metric for us to look at. John Neff – William Blair: Can you give us an update, what portfolios are on cost recovery besides healthcare? (inaudible) – for example, are the 2007 and 2008 to date, are those purchases all on cost recovery or are they still typically on interest method?

No. They are typically – 2007-2008 calls typically on an interest method other than the healthcare portfolios. John Neff – William Blair: Okay.

There are probably some other minor smaller purchases that we’ve made that we don’t have a reasonable basis to estimate collections that were also beyond full cost recovery basis but nothing significant. At the current time, the most other significant portfolio that's on full cost recovery is the Q1 ‘05 aggregate pool. John Neff – William Blair: Q1 ’05. Okay. All in I guess, if we were to look at your NFR balance, for example, what percentage of that roughly would be on cost recovery?

I think it is in the 6%, 7%, 8% range. It is a disclosure in our 10-Q. So we will try to look that up and find it for you. John Neff – William Blair: Okay. You said about the use of agency collections, just from a long-term perspective, do you want to use – see more of your overall cash collection mix coming from outsourced collection and also can you give us a sense for what sort of order of magnitude do you look to increase your capacity of AVN [ph] 2009 or beyond?

It is a great question, John. From a balance perspective, we always want to have a robust external network. From this standpoint, we always want to be able to be opportunistic in purchasing levels and to be able to acquire paper that we know we can liquidate by having a strong network that we can go to without having to try and ramp up resources on a short-term basis. But we want to get that to an optimal mix that we’re not at today. So our goal would be to get that more that into an 80/20 type of situation where we can take the fluctuations in the market place and pricing and supply of paper, and take those fluctuations with the external partnerships. From a ramp up perspective, we would like to – again a lot of it has to do with what our purchasing forecast is going to be. But right now as we look at our purchasing, I would tell you we want to add probably to the tune – to get that 80/20. Right now, it is probably about 500 reps or so. John Neff – William Blair: About 500.

So a significant amount. John Neff – William Blair: Yes.

We have a lot of opportunity, John. John Neff – William Blair: Yes. That certainly is a statement for what you expect from the purchasing level, 500 over one year or two years?

Probably a year or two and that is why we want to do it in a very controlled fashion, again, so that we can maintain productivity. And with the retention rates that the industry has, we are obviously trying to improve that dramatically but we want to control that growth rate which is why we want to leverage the external partners because it gives us the highest degree of efficiency while maximizing the opportunity. John Neff – William Blair: Great. And Mark, quick housekeeping, I just missed the mix of collectors one-plus year and less than one year.

To answer your other question about the carrying value under full-cost recovery, it is about $17.8 million or 5% of the carrying value as of June 30. The housekeeping, we had during the second quarter an average of 939 total FTEs, 496 for greater than year, 443 for less than a year. John Neff – William Blair: Thank you very much.

You’re welcome.

Our next question comes from Rich Shane from Jefferies & Co. Rich Shane – Jefferies & Co.: Guys, thanks for taking my questions. A couple of things here. You’d mentioned that you didn’t really think that there was any impact from the tax stimulus checks. Did you do anything tactically to take advantage of this? One of your competitors had mentioned that they basically saw collection enhancement of about one-plus percent by my calculations related to very targeted mailings by zip codes related to timing of tax stimulus checks. Did you do anything similar to that?

We did and we didn’t – when Mark made that comment, we didn’t say or Brad may – we didn’t say that there were no impact. We do not have it at the level we were expecting when the original stimulus was announced. I mean, we just saw a drop off from what our original expectations, so we did see some impact and, yes, we had a number of targeted focuses. We did zip code sorts based on when the stimulus checks were being mailed out by the IRF. We dropped the number of letter campaigns, specifically targeted both language and timing around maximizing our opportunities. We built call pools, dialing pools around the same timing in the letters, so that we reinforced with call volume right after letters hit, associated with them. So we had a very robust plan around capturing that opportunity and we did see some improvement. It just was not nearly to the volume we expected to be able to capture based on the change in the overall economic environment as they got released. Rich Shane – Jefferies & Co.: Got it. That’s very helpful. Thank you for clarifying that. Second question is when you’d made the comment that basically there was collections pressure during the quarter related to capacity issues and when we look at the purchase volumes over the last three quarters, there was a spike in the fourth quarter though was not unusual, was in line with fourth quarter of '07. Q1 of this year was actually very much a trough in terms of purchase volume and then you did see an increase in Q2. I’m curious what created the bottleneck, was it the Q2 purchasing volumes and did you see this coming strategically? How did you get in the situation where you basically apparently bought too much in context of your ability to process the loan volume or the paper volume?

Yes, this was a historical problem that predated even the fourth quarter or this year. As we discovered it and identified it near the end of last year, we recognized as you look at our historical purchasing from 2006 forward, our traditional call center because the capacity issue is in our traditional call center environment, it is not in our legal environment. So, you actually have to breakdown those numbers as far as collection reps between those two channels. What you find is that we had basically a deteriorating number of collectors with an ever escalating inventory base. As so, it was something that we actually brought forward from the past that we resolved. And then obviously, the spike in the second quarter is going to add some additional weight behind that, that we’ve already factored in through our placement strategy and our work with our outside network. Rich Shane – Jefferies & Co.: Great. Rion, thank you very much, appreciate the answers.

Our next question comes from Justin Hughes with Philadelphia Financial. Justin Hughes – Philadelphia Financial: Thanks for taking my question. I am just curious on our debt capacity. Earlier this year, you were paying down a lot of debt and generating cash. Now you are taking the debt back up and using cash. What is maximum leverage? Because I have in my notes your maximum leverage was 1.25 to equity but you’re above that now.

The constraining factor should be the consolidated indebtedness as defined to adjusted EBIDTA which I think we are closer to 1.07 on that metric right now. So there is a little bit north of 30 million of capacity as of June 30.

Thank you. And that is all the time we have for questions today. At this time, I’d like to turn conference over to Mr. Brad Bradley. Please go ahead, sir.

Thank you, operator. In summary, we are pleased with the progress we made during the second quarter in spite of the challenging market conditions and difficult collections environment. We move to improve our overall capacity management 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 roll out a series of processed reengineering and systems-related initiatives designed to increase the efficiency and the competitiveness of our people in the marketplace over the long term. Overall, it was a challenging quarter but full of operational bright spots. We remain grateful for the support and commitment of our employees, 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 third quarter 2008 conference call. Good day.

This concludes today’s presentation. Thank you for your participation and have a wonderful day.