Image: PRA Group.

For a long time, debt-collection specialist PRA Group (NASDAQ:PRAA) sported impressive growth, taking full advantage of opportunities to take on the much-hated task of having to collect unpaid debts from those who hadn't followed through on their financial obligations. Lately, though, the company has run into some headwinds that have held back its growth.

Coming into PRA Group's third-quarter financial report on Thursday, investors had hoped that the debt collector would be able to reaccelerate its growth. Instead, PRA Group delivered a nasty surprise, with both revenue and net income falling from year-ago levels. Let's look more closely at how PRA Group did recently, and what lies ahead for the debt-collection company.

PRA Group shrinks
PRA Group's third-quarter results continued a worsening trend that had started in previous quarters. Total revenue fell 4%, to $229.4 million, dramatically missing expectations for growth of nearly 9%. Even worse, PRA Group's net income dropped by nearly two-thirds from year-ago levels, to $17.4 million. Even after accounting for extraordinary items, adjusted earnings of $0.99 per share were $0.17 below the consensus forecast among investors.

Looking more closely at the numbers, PRA Group's weakness comes from several different areas. The strong dollar has had an impact on the debt-collector's results, with cash collections rising just 2% in absolute terms, but climbing more than 5% on a constant-currency basis. The company's core segments were the best performers, with the Americas seeing 11.5% growth, and Europe climbing more than 14%. Yet the insolvency market was the big laggard for PRA Group, with the Americas insolvency-related revenue plunging by more than a fourth from year-ago levels.

PRA Group's pace of acquiring new finance receivables continued to accelerate during the third quarter, even though it couldn't match the extremely high levels from the year-ago quarter. New purchases concentrated on Europe, making up more than two-thirds of the total PRA Group spent, while activity in the Americas actually slowed from year-ago levels.

CEO Steve Fredrickson continued to play up PRA Group's successes. "Many of the same trends that have been prevalent throughout the last year continued in the third quarter," Fredrickson said, noting that cash collections in U.S. call centers remained robust. The acquisition of Aktiv Kapital continues to pay off for PRA Group, having led to the dramatic growth in Europe that investors have seen recently.

How can PRA Group get back on a faster growth trajectory?
Perhaps the best news for long-term PRA Group investors is that at least some of the big hit to its net income came from a big one-time charge related to the company's settlement with the Consumer Financial Protection Bureau. Under the deal, PRA Group agreed to refund $19 million to customers, and pay penalties of $8 million, and stop collection activity on about $3 million in debt. That showed up as a $28.8 million increase in other operating expenses, hitting the bottom line by $0.45 per share.

PRA Group nevertheless recognizes that its recent share-price performance warranted a response, and so the company implemented a $125 million stock buyback program. Repurchases of 133,000 shares during the third quarter cost the company just $7.7 million. Investors can expect an uptick in buyback activity under the new program as long as share prices remain at relatively low levels.

With the CFPB dispute behind it, PRA Group is in a better position to look forward and seek ways to return to a better growth path. So far, investors haven't lost their enthusiasm about the debt collector's long-term prospects, but it's reasonable to believe that after a couple of disappointing quarters in a row, the onus is on PRA Group to deliver stronger results to close out 2015 if it wants to restore confidence fully.

The son of PRA Group's CEO is currently employed by The Motley Fool. Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PRA Group. The Motley Fool has the following options: short December 2015 $60 puts on PRA Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.