Form 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------

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

                  For the quarterly period ended June 30, 1998
                                                 -------------

                                       OR

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

                For the transition period from           to            
                                               ---------    ---------

                          Commission file number         333-16867
                                                         ---------

                           Outsourcing Solutions Inc.
           -----------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Delaware                                     58-2197161
 ------------------------------------------            -----------------------
      (State or other jurisdiction of                      (I.R.S. Employer
       incorporation or organization)                     Identification No.)

    390 South Woods Mill Road, Suite 350
           Chesterfield, Missouri                                63017
 ------------------------------------------            -----------------------
  (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:  (314) 576-0022
                                                     --------------

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

                          Yes  X    No
                             -----     -----
As of June 30, 1998, the following shares of the Registrant's  common stock were
issued and outstanding:


Voting common stock                                    3,477,126.01
Class A convertible nonvoting common stock               391,740.58
Class B convertible nonvoting common stock               400,000.00
Class C convertible nonvoting common stock             1,040,000.00
                                                       -------------
                                                       5,308,866.59
                                                       ============

Transitional Small Disclosure       (check one):   Yes [   ]   No    [ X ]
                              -----                     ---           ---


<PAGE>




                           OUTSOURCING SOLUTIONS INC.
                                AND SUBSIDIARIES



                                      INDEX


Part I. Financial Information

    Item 1.       Financial Statements

                  Condensed Consolidated Balance Sheets
                  June 30, 1998 (unaudited) and
                  December 31, 1997.......................................     3


                  Condensed Consolidated Statements of
                  Operations for the three and six months
                  ended June 30, 1998 and 1997 (unaudited)................     4


                  Condensed Consolidated Statements of Cash
                  Flows for the six months ended June 30, 1998
                  and 1997 (unaudited)....................................     5


                  Notes to Condensed Consolidated Financial
                  Statements (unaudited)..................................     6


    Item 2.       Management's Discussion and Analysis of
                  Financial Condition and Results of Operations...........     9

Part II.      Other Information..........................................     12


<PAGE>


<TABLE>


                  OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands except share and per share amounts)


<CAPTION>
                                                       June 30,   December 31,
                                                         1998        1997
                                                      Unaudited     Audited
<S>                                                  <C>          <C>        
ASSETS

CURRENT ASSETS:

  Cash and cash equivalents                          $  14,818    $   3,217
  Cash and cash equivalents held for clients            27,212       20,762
  Current portion of purchased loans
    and accounts receivable portfolios                  40,537       42,915
  Accounts receivable - trade, less allowance
    for doubtful receivables of $1,385 and $438         39,220       27,192
  Other current assets                                   7,540        2,119
                                                     ----------   ----------
    Total current assets                               129,327       96,205

PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS      23,009       19,537
PROPERTY AND EQUIPMENT, net                             45,334       32,563
INTANGIBLE ASSETS, net                                 426,581      219,795
DEFERRED FINANCING COSTS, net                           14,100       12,517
OTHER ASSETS                                               453        1,073
                                                     ----------   ----------
TOTAL                                                $ 638,804    $ 381,690
                                                     ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable - trade                           $   7,347    $   6,977
  Collections due to clients                            27,212       20,762
  Accrued compensation                                  13,834        8,332
  Other current liabilities                             50,792       26,131
  Current portion of long-term debt                     16,713       15,445
                                                     ----------   ----------
    Total current liabilities                          115,898       77,647

LONG-TERM DEBT                                         510,222      309,521
OTHER LONG-TERM LIABILITIES                             23,903            -
STOCKHOLDERS' EQUITY (DEFICIT):
  8% nonvoting cumulative redeemable 
    exchangeable preferred stock; authorized 
    1,000,000 shares, 973,322.32 and 935,886.85
    shares, respectively, issued and outstanding,
    at liquidation value of $12.50 per share            12,167       11,699
  Voting common stock; $.01 par value; authorized
    7,500,000 shares, 3,477,126.01 shares issued
    and outstanding                                         35           35
  Class A convertible nonvoting common stock; 
    $.01 par value; authorized 7,500,000 shares,
    391,740.58 shares issued and outstanding                 4            4
  Class B convertible nonvoting common stock;
    $.01 par value; authorized 500,000 shares,
    400,000 shares issued and outstanding                    4            4
  Class C convertible nonvoting common stock; 
    $.01 par value; authorized 1,500,000 shares,
    1,040,000 shares issued and outstanding                 10           10
  Paid-in capital                                       66,958       66,958
  Retained deficit                                     (90,397)     (84,188)
                                                     ----------   ----------
    Total stockholders' equity (deficit)               (11,219)      (5,478)
                                                     ----------   ----------
TOTAL                                                $ 638,804    $ 381,690
                                                     ==========   ==========
</TABLE>

See notes to the unaudited condensed consolidated financial statements.



<PAGE>



<TABLE>


                  OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                 (In thousands)
<CAPTION>
                                      Three Months Ended     Six Months Ended
                                            June 30,             June 30,
                                        1998       1997      1998       1997
                                                           
<S>                                   <C>       <C>         <C>       <C>     
REVENUES                              $123,905  $ 66,284    $238,731  $130,126
                                                                     
EXPENSES:                                                            
  Salaries and benefits                 58,601    32,538     113,153    64,800
  Service fees and other operating                                   
    and administrative expenses         34,317    16,315      69,970    33,568
  Amortization of loans and accounts                                 
    receivable purchased                13,318     9,490      22,358    18,036
  Amortization of goodwill and other                                 
    intangibles                          4,048     7,965       7,543    15,976
  Depreciation expense                   3,350     2,533       6,477     5,057
                                      --------- ---------   --------- --------
     Total expenses                    113,634    68,841     219,501   137,437
                                      --------- ---------   --------- --------
                                                                     
OPERATING INCOME (LOSS)                 10,271    (2,557)     19,230    (7,311)
INTEREST EXPENSE - Net                  13,166     7,274      24,390    13,797
                                      --------- ---------   --------- --------
LOSS BEFORE INCOME TAXES                                             
    AND MINORITY INTEREST               (2,895)   (9,831)     (5,160)  (21,108)
INCOME TAX BENEFIT                           -    (3,333)          -    (6,829)
MINORITY INTEREST                            -         -         572         -
                                      --------- ---------   --------- --------
NET LOSS                                (2,895)   (6,498)     (5,732)  (14,279)
PREFERRED STOCK DIVIDEND REQUIREMENTS      243       225         477       420
                                      --------- ---------   --------- --------
NET LOSS TO COMMON STOCKHOLDERS       $ (3,138) $ (6,723)   $ (6,209) $(14,699)
                                      ========= =========   ========= =========
                                                                     
</TABLE> 

See notes to the unaudited condensed consolidated financial statements.


<PAGE>




<TABLE>


                  OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                      (In thousands except share amounts)
<CAPTION>
                                                          Six Months Ended
                                                               June 30,
                                                       -------------------------
                                                          1998         1997
<S>                                                    <C>          <C>      
OPERATING ACTIVITIES:
  Net loss                                             $ (5,732)    $(14,279)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
  Depreciation and amortization                          15,400       21,945
  Amortization of loans and accounts receivable
    purchased                                            22,358       18,036
  Deferred taxes                                              -       (6,829)
  Minority interest                                         572            -
  Change in assets and liabilities:
  Other current assets                                    6,490       (2,971)
  Accounts payable and other current liabilities         (8,411)     (10,053)
                                                       ---------    ---------
    Net cash provided by operating activities            30,677        5,849
                                                       ---------    ---------

INVESTING ACTIVITIES:
  Payments for acquisitions, net of cash acquired      (167,208)           -
  Purchase of loans and accounts receivable
    portfolios                                          (23,258)     (24,928)
  Acquisition of property and equipment                  (7,145)      (3,597)
                                                       ---------    ---------
    Net cash used in investing activities              (197,611)     (28,525)
                                                       ---------    ---------

FINANCING ACTIVITIES:
  Proceeds from term loans                              225,469       21,450
  Borrowings under revolving credit agreement           116,500        5,000
  Repayments under revolving credit agreement          (132,350)      (5,000)
  Repayments of debt                                    (28,121)      (4,816)
  Deferred financing fees                                (2,963)        (420)
                                                       ----------   ---------
     Net cash provided by financing activities          178,535       16,214
                                                       ---------    ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     11,601       (6,462)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD            3,217       14,497
                                                       ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD               $ 14,818     $  8,035
                                                       =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during period for interest                 $ 18,823     $  8,609
                                                       =========    =========

</TABLE>

SUPPLEMENTAL  DISCLOSURE OF NONCASH INVESTING AND FINANCING  ACTIVITIES - During
the six months ended June 30, 1998 and 1997,  the Company paid  preferred  stock
dividends  of $468 and $433,  respectively,  through the  issuance of  37,435.47
shares and 34,611.20 shares of preferred stock, respectively.

See notes to the unaudited condensed consolidated financial statements.



<PAGE>


OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands)

NOTE 1.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the three and six months  ended June 30,
1998 are not necessarily  indicative of the results that may be expected for the
year ended December 31, 1998. For purposes of comparability,  certain prior year
and prior quarter amounts have been reclassified to conform with current quarter
and year to date presentation. These Condensed Consolidated Financial Statements
should be read in conjunction  with the  Consolidated  Financial  Statements and
notes thereto  contained in the Company's  Form 10-K for the year ended December
31, 1997.


NOTE 2.  ACQUISITION

On January 23, 1998, the Company acquired  through a tender offer  approximately
77% of the outstanding shares of The Union Corporation's  ("Union") common stock
for $31.50 per share.  The merger was completed on March 31, 1998. The aggregate
purchase price of the Union  acquisition was  approximately  $230,000  including
transaction fees, assumed liabilities, and certain adjustments to conform to the
Company's accounting  policies.  The Company financed the acquisition with funds
provided  by the Second  Amended  and  Restated  Credit  Agreement  (as  defined
herein).  Union  furnishes  a broad range of credit and  receivables  management
outsourcing   services  as  well  as  management   and  collection  of  accounts
receivable.  The  acquisition  was  accounted  for under the purchase  method of
accounting.  Accordingly,  the purchase price has been  preliminarily  allocated
based upon the estimated fair value of the net assets  acquired.  This treatment
resulted in  approximately  $214,025 of goodwill that will be amortized  over 30
years  using the  straight-line  method.  Union's  operating  results  have been
included  in  the  Company's   consolidated  results  since  January  23,  1998,
recognizing the minority interest through the completion date of the merger.

The unaudited proforma consolidated  financial data presented below gives effect
to the Union  acquisition  as well as the North  Shore  Agency  and  Accelerated
Bureau of Collections  acquisitions that occurred in the fourth quarter of 1997,
as if  such  acquisitions  had  occurred  as of the  beginning  of  each  period
presented.  The pro forma  adjustments are based upon available  information and
certain assumptions that management  believes are reasonable.  The unaudited pro
forma  consolidated  financial  data  does not  purport  to  represent  what the
Company's  financial  position  or  results  of  operations  would  have been if
consummation of the  acquisitions  of Union,  North Shore Agency and Accelerated
Bureau of Collections had occurred on the date indicated or what may be achieved
in the future.  Except for the elimination of costs  associated with duplicative
administrative  functions and facilities based upon actions actually taken as of
the close of the transactions,  anticipated cost savings have not been reflected
in this presentation. The unaudited pro forma consolidated financial data should
be read in conjunction with the historical consolidated financial statements and
accompanying  notes for the Company,  Union,  North Shore Agency and Accelerated
Bureau of Collections.

<PAGE>

<TABLE>
<CAPTION>

                For the three months              For the six months
                   Ended June 30,                    Ended June 30,
                1998           1997                 1998         1997

<S>             <C>            <C>                 <C>           <C>     
 Revenues       $123,905       $114,220            $246,085      $228,321
                ========       ========            ========      ========

 Net loss       $(2,895)       $(7,238)            $(6,853)      $(15,920)
                ========       ========            ========      ========
</TABLE>



NOTE 3.  DEBT

On January 26,  1998,  the Company  entered  into a Second  Amended and Restated
Credit  Agreement  ("Agreement")  with a  group  of  banks  to  fund  the  Union
acquisition. This Agreement amended the Company's existing credit agreement. The
Agreement  consists of a $412,422  term loan  facility  and a $58,000  revolving
credit facility.

The term loan  facility  consists  of a term loan of $62,500  ("Term Loan A"), a
term loan of $124,922  ("Term  Loan B") and a term loan of $225,000  ("Term Loan
C"), which mature on October 15, 2001, 2003 and 2004, respectively.  The Company
is required to make quarterly principal  repayments on each term loan. Term Loan
A bears  interest,  at the  Company's  option,  (a) at a base rate  equal to the
greater of the federal funds rate plus 0.5% or the lender's customary base rate,
plus 1.5% or (b) at the reserve adjusted Eurodollar rate plus 2.5%. Term Loans B
and C bear interest,  at the Company's  option,  (a) at a base rate equal to the
greater of the federal funds rate plus 0.5% or the lender's customary base rate,
plus 2.0% or (b) at the reserve adjusted Eurodollar rate plus 3.0%.

The revolving  credit  facility has a term of five years and is fully  revolving
until October 15, 2001. The revolving  credit  facility bears  interest,  at the
Company's  option,  (a) at a base rate equal to the greater of the federal funds
rate plus 0.5% or the  lender's  customary  base  rate,  plus 1.5% or (b) at the
reserve adjusted Eurodollar rate plus 2.5%.

The  Agreement  is  guaranteed  by  all  of  the  Company's   present   domestic
subsidiaries  and  is  secured  by all of the  stock  of the  Company's  present
domestic  subsidiaries  and  by  substantially  all of  the  Company's  domestic
property assets.  The Agreement  contains certain covenants the more significant
of which limit dividends, asset sales, acquisitions and additional indebtedness,
as well as requires the Company to satisfy certain financial performance ratios.

On April 17, 1998 and May 27, 1998,  as required by the  Agreement,  the Company
entered into interest rate collar agreements with a notional  principal value of
$35,000 and $33,000,  respectively,  for the purpose of managing  interest  rate
risk on a portion of floating-rate long-term debt. The collar agreements fix the
interest rate on certain  variable-rate  debt to a range of 6.50% to 8.58%.  The
contracts  have a  maturity  date of April  17,  2001  and  February  27,  2001,
respectively.   The   Company  is  exposed  to  credit  loss  in  the  event  of
nonperformance by counterparties to the collar agreements.


NOTE 4.  LITIGATION

The Company is subject to various  investigations,  claims and legal proceedings
covering a wide range of matters that arise in the normal course of business and
are routine to the nature of the Company's business. In addition, as a result of
the Union acquisition,  the Company is a party to several on-going environmental
remediation  investigations  by  federal  and state  governmental  agencies  and
clean-ups  and,  along  with  other  companies,  has been  named a  "potentially

<PAGE>

responsible  party" for certain waste disposal  sites.  Each of these matters is
subject to various uncertainties,  and it is possible that some of these matters
will be decided  unfavorably  against the Company.  The Company has established,
with input from  environmental and legal experts,  accruals for matters that are
in its view probable and reasonably  estimable.  Based on information  presently
available,  management believes that existing accruals are sufficient to satisfy
any known environmental liabilities.


NOTE 5.  COMPREHENSIVE INCOME

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," which established standards
for the reporting and display of  comprehensive  income and its components.  The
adoption of this statement did not affect the Company's  consolidated  financial
statements  for the three  month and six month  periods  ended June 30, 1998 and
1997.  Comprehensive loss for the three month and six month periods ended June
30, 1998 and 1997 were equal to the Company's net loss.


<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Results of Operations

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997

Revenues for the three months ended June 30, 1998 were $123.9  million  compared
with $66.3  million in the same period  last year - an  increase  of 86.9%.  The
revenue  increase  of  $57.6  million  was due to  increased  fee  services  and
portfolio  sales  revenues of $5.3 million - an increase of 7.9% over last year,
and $52.3  million  from the  acquisitions  of Union,  North  Shore  Agency  and
Accelerated Bureau of Collections. Revenues from fee services were $87.7 million
for the three  months  ended  June 30,  1998  compared  to $38.8  million in the
comparable  period  in 1997.  The  increase  in fee  revenues  was due to a 7.2%
increase in existing  business and $46.1  million  from the three  acquisitions.
Revenues from  purchased  portfolios  increased to $21.3 million for the quarter
ended June 30, 1998  compared  to $17.5  million in 1997 - an increase of 22.1%.
The increased revenue resulted from both higher collection revenue and strategic
sales of portfolios. The outsourcing revenue of $14.9 million compared favorably
to prior year of $10.0 million due primarily to the Union acquisition.

Operating  expenses for the three months ended June 30, 1998 were $113.6 million
compared  to $68.8  million for the  comparable  period in 1997 - an increase of
$44.8 million.  Operating  expenses,  exclusive of amortization and depreciation
charges,  were $92.9  million for the three months ended June 30, 1998 and $48.9
million for the comparable  period in 1997. The increase in operating  expenses,
exclusive of  amortization  and  depreciation  charges,  resulted from the three
acquisitions.  Of the $113.6 million in operating  expenses for the three months
ended  June 30,  1998,  $20.7  million  was  attributable  to  amortization  and
depreciation  charges  compared to $19.9  million for the same period last year.
The higher amortization and depreciation charges were due to increased portfolio
amortization  resulting  from increased  portfolio  revenue as well as increased
depreciation  and  amortization  of goodwill  related to the three  acquisitions
offset partially by no account  placement  inventory  amortization in 1998 since
account placement inventory was fully amortized as of December 31, 1997.

As a result  of the  above,  the  Company  generated  operating  income of $10.3
million for the three months ended June 30, 1998  compared to an operating  loss
of $2.5 million for the comparable period in 1997.

Earnings before interest expense, taxes,  depreciation and amortization (EBITDA)
for the quarter ended June 30, 1998 was $31.0 million  compared to $17.4 million
in 1997. The increase of $13.6 million  consisted of $8.9 million as a result of
the three  acquisitions  and $4.7 million  primarily  from the increased fee and
portfolio revenues of $5.3 million.

Interest expense, net for the three months ended June 30, 1998 was $13.2 million
compared to $7.3  million for the  comparable  period in 1997.  The increase was
primarily due to additional  indebtedness  incurred to finance the Union,  North
Shore Agency and Accelerated Bureau of Collections acquisitions.

Consistent with management's  assessment made in the fourth quarter of 1997, the
potential tax benefits  generated by additional net operating loss carryovers or
the future  reversal of the net deductible  temporary  differences for the three
months  ended June 30, 1998 were fully offset by  valuation  allowances  of $1.2
million.

Due to the factors  stated  above,  the net loss for the quarter  ended June 30,
1998 was $2.9 million compared to $6.5 million for the comparable period in 1997
- an improvement of $3.6 million.

<PAGE>

    Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

Revenues  for the six months  ended June 30, 1998 were $238.7  million  compared
with $130.1  million in the same  period  last year - an increase of 83.5%.  The
revenue  increase  of $108.6  million  was due to  increased  fee  services  and
portfolio  sales  revenues of $9.2 million - an increase of 7.0% over last year,
and $99.4  million  from the  acquisitions  of Union,  North  Shore  Agency  and
Accelerated  Bureau of  Collections.  Revenues  from fee  services  were  $170.5
million for the six months ended June 30, 1998  compared to $77.2 million in the
comparable  period  in 1997.  The  increase  in fee  revenues  was due to a 6.5%
increase in existing  business and $88.3  million  from the three  acquisitions.
Revenues from purchased portfolios increased to $39.8 million for the six months
ended June 30, 1998 compared to $33.2 million in 1997 - up 20.2%.  The increased
revenue  resulted from both higher  collection  revenue and  strategic  sales of
portfolios. The outsourcing revenue of $28.4 million compared favorably to prior
year of $19.7 million due primarily to the Union acquisition.

Operating  expenses for the six months  ended June 30, 1998 were $219.5  million
compared  to  $137.4  million  for the  comparable  period  in  1997.  Operating
expenses,  exclusive  of  amortization  and  depreciation  charges,  were $183.1
million  for the six  months  ended  June 30,  1998 and  $98.4  million  for the
comparable  period in 1997.  The  increase in operating  expenses,  exclusive of
amortization  and  depreciation  charges,  resulted  primarily  from  the  three
acquisitions as well as higher collection-related  expenses due to the increased
revenues.  Of the $219.5 million in operating  expenses for the six months ended
June 30, 1998,  $36.4 million was  attributable to amortization and depreciation
charges  compared to $39.1  million  for the same  period  last year.  The lower
amortization  and  depreciation  charges  resulted  from  no  account  placement
inventory  amortization in 1998 ($12.1 million in 1997) since account  placement
inventory  was fully  amortized  as of December  31, 1997  offset  partially  by
depreciation and amortization of goodwill related to the three  acquisitions and
increased portfolio amortization resulting from increased portfolio revenue.

As a result  of the  above,  the  Company  generated  operating  income of $19.2
million for the six months ended June 30, 1998 compared to an operating  loss of
$7.3 million for the comparable period in 1997.

Earnings before interest expense, taxes,  depreciation and amortization (EBITDA)
for the six  months  ended June 30,  1998 was $55.6  million  compared  to $31.7
million in 1997.  The increase of $23.9 million  consisted of $17.6 million as a
result of the three  acquisitions and $6.3 million  primarily from the increased
fee and portfolio revenues of $9.2 million.

Interest  expense,  net for the six months ended June 30, 1998 was $24.4 million
compared to $13.8 million for the  comparable  period in 1997.  The increase was
primarily due to additional  indebtedness  incurred to finance the Union,  North
Shore Agency and Accelerated Bureau of Collections acquisitions.

Consistent with management's  assessment made in the fourth quarter of 1997, the
potential tax benefits  generated by additional net operating loss carryovers or
the future  reversal of the net  deductible  temporary  differences  for the six
months  ended June 30, 1998 were fully offset by  valuation  allowances  of $2.1
million.

Minority  interest in earnings in 1998 resulted from the Union  acquisition.  On
January 23, 1998,  the Company  acquired  approximately  77% of the  outstanding
common stock of Union  through a tender offer.  The purchase of all  outstanding
common stock of Union was  completed on March 31, 1998.  The Company  recognized
minority  interest in earnings of Union  during the period from January 23, 1998
to March 31, 1998.

<PAGE>

Due to the above,  the net loss for the six months  ended June 30, 1998 was $5.7
million  compared  to  $14.3  million  for the  comparable  period  in 1997 - an
improvement of $8.6 million.


Financial Condition, Liquidity and Capital Resources

At June 30, 1998, the Company had cash and cash equivalents of $14.8 million. In
addition,  the Company has a $58.0  million  revolving  credit  facility,  which
allows the Company to borrow for working capital, general corporate purposes and
acquisitions,  subject to certain  conditions.  As of June 30, 1998, the Company
had outstanding  $16.0 million under the revolving credit facility leaving $40.4
million,  after  outstanding  letters of credit,  available  under the revolving
credit facility.

Since  December 31, 1997,  cash and cash  equivalents  increased  $11.6  million
primarily due to cash provided by operations  and financing  activities of $30.7
million and $178.5 million, respectively,  offset by cash utilized for the Union
acquisition  of  $164.7  million,  purchases  of loans and  accounts  receivable
portfolios  of $23.3  million  and capital  expenditures  of $7.1  million.  The
Company also held $27.2 million of cash for clients in restricted trust accounts
at June 30, 1998.

For the first six months in 1998, the Company made capital  expenditures of $7.1
million  primarily for the  replacement and upgrading of equipment and expansion
of the Company's  information services systems. The Company anticipates spending
approximately $18.0 million for 1998.

All of  the  statements  in  this  document  other  than  historical  facts  are
forward-looking  statements made in reliance upon the safe harbor of the Private
Securities  Litigation  Reform Act of 1995.  There can be no assurances that the
Company's actual results will be materially consistent with such forward-looking
information.  Factors and  uncertainties  that could  affect the outcome of such
forward-looking   statements   include,   among  others,   market  and  industry
conditions,  increased competition, changes in governmental regulations, general
economic  conditions,  pricing pressures,  and the Company's ability to continue
its growth and expand  successfully  into new markets and services.  The Company
disclaims  any  intention  or  obligation  to  update  publicly  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise.



<PAGE>


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is subject to various  investigations,  claims and legal proceedings
covering a wide range of matters that arise in the normal course of business and
are routine to the nature of the Company's business.

As  described  in the  Company's  March 31, 1997 10-Q and December 31, 1997 10-K
filings,  Transamerica  Business  Credit  Corporation  ("Transamerica")  filed a
cross-claim  against  the  Company's  wholly-owned   subsidiary,   Payco-General
American  Credits,  Inc. seeking  judgment against them for any liability,  loss
cost or  expense  Transamerica  has or will  occur in  connection  with  alleged
violations  of the Fair Debt  Collection  Practices Act and Alabama State law by
Payco-General American Credits, Inc. in performing collection services on behalf
of Transamerica.  Payco-General  American Credits, Inc. in turn, filed a similar
claim against  Transamerica.  On July 1, 1998,  Payco-General  American Credits,
Inc. and  Transamerica  entered into a settlement  agreement  whereby each party
released the other from any claims and pursuant to which Payco-General  American
Credits, Inc. paid $1.5 million.


Item 2.  Changes in Securities

         None


Item 3.  Defaults Upon Senior Securities

         None


Item 4.  Submission of Matters to a Vote of Security Holders

         None


Item 5.  Other Information

         None


Item 6.  Exhibits and Reports on Form 8-K

         (a).   Exhibits

                Exhibit 27 Financial Date Schedule (Unaudited)

         (b).   Reports on Form 8-K

                Form  8-K/A  filed  April 8,  1998  amending  the Form 8-K filed
                February 6, 1998. The Form 8-K/A amended Item 7 and included pro
                forma financial information reflecting the Union acquisition.


<PAGE>




                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                      OUTSOURCING SOLUTIONS INC.
                                      (Registrant)



                                      /s/   TIMOTHY G. BEFFA
                                      -------------------------------
                                      Timothy G. Beffa
                                      President and Chief Executive Officer



                                      /s/   DANIEL J. DOLAN
                                      -------------------------------
                                      Daniel J. Dolan
                                      Executive Vice President
                                      and Chief Financial Officer


                                      /s/   DANIEL T. PIJUT
                                      -------------------------------
                                      Daniel T. Pijut
                                      Vice President, Corporate Controller
                                      and Chief Accounting Officer

Date:    August 13, 1998