SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended           June 30, 2001
                                --------------------------------

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 Number)

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

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

Indicate by checkmark whether the registrant: (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
                                       -----     -----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest practicable date.

                                                             Outstanding at
        Class                                                June 30, 2001
-----------------------                                      --------------
Senior common stock                                             489,795.93
Voting common stock                                           6,088,479.30
Non-voting common stock                                         480,321.30
                                                              ------------
                                                              7,058,596.53
                                                              ============

<PAGE>





                           OUTSOURCING SOLUTIONS INC.
                                AND SUBSIDIARIES



                                TABLE OF CONTENTS


Part I.    Financial Information                                            Page

  Item 1.    Financial Statements (unaudited)

             Condensed Consolidated Balance Sheets
             June 30, 2001 and December 31, 2000...............................3


             Condensed Consolidated Statements of Operations for
             the three and six months ended June 30, 2001 and 2000.............4


             Condensed Consolidated Statements of Cash Flows for
             the six months ended June 30, 2001 and 2000.......................5


             Notes to Condensed Consolidated Financial Statements..............6


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


  Item 3.    Quantitative and Qualitative Disclosures About Market Risk.......13


Part II.   Other Information..................................................14

<PAGE>



OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share amounts)
--------------------------------------------------------------------------------
                                                     June 30,       December 31,
                                                       2001             2000
                                                  -------------    -------------
ASSETS

Cash and cash equivalents                          $   8,260         $ 10,273

Cash and cash equivalents held for clients            23,209           21,970

Accounts receivable - trade, less allowance for       70,404           62,876
  doubtful receivables of  $324 and $447

Purchased loans and accounts
  receivable portfolios                               19,390           24,690

Property and equipment, net                           45,390           46,601

Intangible assets, net                               429,547          417,084

Deferred financing costs, less accumulated            20,889           22,934
  amortization of $6,745 and $4,538

Other assets                                          37,923           30,426
                                                     -------          -------
        TOTAL                                       $655,012         $636,854
                                                    ========         ========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Accounts payable - trade                             $13,836          $14,446

Collections due to clients                            23,209           21,970

Accrued salaries, wages and benefits                  17,039           15,195

Debt                                                 534,841          539,463

Other liabilities                                     74,794           71,080

Commitments and contingencies (Note 2 and 4)

Mandatorily redeemable preferred stock;
  redemption amount of $131,545 and $123,115         113,165          103,455

Stockholders' deficit:
  Senior common stock; $.01 par value;
    authorized 900,000 shares, 489,795.93
    issued in 2001 and outstanding                         5                -
  Voting common stock; $.01 par value;
    authorized 20,000,000 shares, 9,166,728.37
    shares issued                                         92               92
  Non-voting common stock; $.01 par value;
    authorized 2,000,000 shares, 480,321.30
    issued and outstanding                                 5                5
  Paid-in capital                                    223,277          200,537
  Accumulated deficit                               (201,871)        (192,715)
  Accumulated other comprehensive income              (6,621)               -
                                                     -------          -------
                                                      14,887            7,919
  Notes receivable from management for
    shares sold                                       (1,902)          (1,817)
  Common stock in treasury, at cost;
    3,078,249.07 shares                             (134,857)        (134,857)
                                                     -------          -------
        Total stockholders' deficit                 (121,872)        (128,755)
                                                     -------          -------
               TOTAL                                $655,012         $636,854
                                                    ========         ========


               The accompanying notes are an integral part of the
             unaudited condensed consolidated financial statements.

<PAGE>



OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                            Three Months Ended        Six Months Ended
                                                                  June 30,                  June 30,
                                                           ---------------------    --------------------
                                                               2001       2000         2001       2000
<S>                                                        <C>         <C>          <C>        <C>

REVENUES                                                   $ 157,433   $ 137,373    $309,019   $270,623

EXPENSES:
  Salaries and benefits                                       80,566      66,598      154,890    132,604
  Service fees and other operating and
    administrative expenses                                   48,015      43,414       95,634     85,011
  Amortization of purchased loans and accounts
    receivable portfolios                                      5,012       8,109       11,991     14,785
  Amortization of goodwill and other intangibles               4,161       3,979        8,213      7,949
  Depreciation expense                                         3,605       4,098        7,307      8,111
  Nonrecurring realignment expenses                                -       1,000            -      1,000
                                                             -------     -------      -------    -------
      Total expenses                                         141,359     127,198      278,035    249,460
                                                             -------     -------      -------    -------

OPERATING INCOME                                              16,074      10,175       30,984     21,163
INTEREST EXPENSE - Net                                        13,819      15,209       30,080     29,452
                                                             -------     -------      -------    -------
INCOME (LOSS) BEFORE INCOME TAXES                              2,255      (5,034)         904     (8,289)
PROVISION FOR INCOME TAXES                                       175         169          350        294
                                                             -------     -------      -------    -------
NET INCOME (LOSS)                                              2,080      (5,203)         554     (8,583)
PREFERRED STOCK DIVIDEND REQUIREMENTS AND ACCRETION
   OF SENIOR PREFERRED STOCK                                   4,928       4,364        9,710      8,607
                                                             -------     -------      -------    -------

NET LOSS TO COMMON STOCKHOLDERS                              $(2,848)    $(9,567)     $(9,156)  $(17,190)
                                                             ========    ========     =======   ========
</TABLE>





















               The accompanying notes are an integral part of the
             unaudited condensed consolidated financial statements.


<PAGE>



OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                                                       June 30,
                                                                                 ---------------------
                                                                                   2001       2000
<S>                                                                                <C>       <C>
OPERATING ACTIVITIES AND PORTFOLIO PURCHASING:
  Net income (loss)                                                                $   554   $ (8,583)
  Adjustments to reconcile net income (loss) to net cash from operating
      activities and portfolio purchasing:
    Depreciation and amortization                                                   17,727     18,268
    Amortization of purchased loans and accounts receivable portfolios              11,991     14,785
    Non-cash compensation expense related to variable stock options                    741          -
    Change in assets and liabilities excluding the effects of acquisitions:
      Purchases of loans and accounts receivable portfolios                         (6,691)    (5,328)
      Accounts receivable and other assets                                         (11,572)    (8,242)
      Accounts payable, accrued expenses and other liabilities                      (1,943)    (3,322)
                                                                                   --------  ---------

        Net cash from operating activities and portfolio purchasing                 10,807      7,578
                                                                                   -------   --------

INVESTING ACTIVITIES:
  Acquisition of property and equipment                                             (5,657)    (8,955)
  Payment for acquisitions, net of cash acquired                                   (21,254)         -
  Purchases of loans and accounts receivable portfolios for resale to FINCO        (43,629)   (54,306)
  Sales of loans and accounts receivable portfolios to FINCO                        43,629     54,306
  Other                                                                             (3,025)    (1,577)
                                                                                   -------   --------

        Net cash used by investing activities                                      (29,936)   (10,532)
                                                                                   -------   --------

FINANCING ACTIVITIES:
  Borrowings under revolving credit agreement                                      160,800    174,650
  Repayments under revolving credit agreement                                     (160,400)  (165,650)
  Repayments of debt                                                                (5,126)    (1,705)
  Proceeds from issuance of common stock                                            22,004        201
  Deferred financing fees                                                             (162)         -
                                                                                   --------  --------

           Net cash from financing activities                                       17,116      7,496
                                                                                   -------   --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                (2,013)     4,542

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                      10,273      6,059
                                                                                   -------   --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $ 8,260   $ 10,601
                                                                                   =======   ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during period for interest                                             $28,647   $ 27,621
                                                                                   =======   ========
  Net cash paid during period for taxes                                            $   321   $    181
                                                                                   =======   ========

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
  Accrued dividends on mandatorily redeemable preferred stock                      $ 8,430   $  7,366
                                                                                   =======   ========
  Accretion of mandatorily redeemable preferred stock                              $ 1,280   $  1,241
                                                                                   =======   ========
  Notes receivable for common stock                                                $     -   $  1,400
                                                                                   =======   ========
</TABLE>


               The accompanying notes are an integral part of the
             unaudited condensed consolidated financial statements.

<PAGE>

OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands except for share and per share amounts)
--------------------------------------------------------------------------------

NOTE 1.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States 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 accounting  principles  generally
accepted in the United States for complete financial statements.  In the opinion
of management, all adjustments (consisting of normal recurring items) considered
necessary for a fair presentation have been included.  Operating results for the
three and six months ended June 30, 2001 are not  necessarily  indicative of the
results  that may be  expected  for the year ending  December  31,  2001.  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, 2000.


NOTE 2.  LITIGATION

From time to time,  the Company and certain of its  subsidiaries  are 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 businesses.  In addition, as a result of the acquisition
of The Union  Corporation,  certain  subsidiaries  of the Company are 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  responsible party" for certain waste disposal sites. While
the results of litigation  cannot be predicted with  certainty,  the Company has
provided for the  estimated  uninsured  amounts and costs to resolve the pending
suits and management, in consultation with legal counsel, believes that reserves
established for the ultimate  resolution of pending matters are adequate at June
30, 2001.


NOTE 3.  PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS FINANCING

OSI Funding LLC ("FINCO") is a special-purpose  finance company with the Company
having approximately 29% of the voting rights.

The following  summarizes the transactions between the Company and FINCO for the
periods ended June 30:

                                      Three Months Ended      Six Months Ended
                                           June 30,                June 30,
                                      -------------------    -------------------
                                        2001       2000        2001       2000
Sales of purchased loans and
  accounts receivable portfolios
  by the Company to FINCO             $27,007    $37,782     $43,629    $54,306

Servicing fees paid by
  FINCO to the Company                $ 9,170    $ 5,032     $20,169    $ 9,337


Sales of purchased loans and accounts receivable  portfolios  ("Receivables") by
the Company to FINCO were in the same  amount and  occurred  shortly  after such
portfolios were acquired by the Company from the various unrelated  sellers.  In
conjunction with sales of Receivables to FINCO and the servicing agreement,  the
Company  recorded  servicing assets which are being amortized over the servicing
agreement.  The carrying value of such servicing  assets,  which are included in
other assets in the  accompanying  condensed  consolidated  balance  sheet,  was
$10,920 at June 30, 2001 and was $5,612 at December 31, 2000.

At June 30, 2001 and December 31, 2000,  FINCO had  unamortized  Receivables  of
$84,899 and $76,908, respectively. At June 30, 2001 and December 31, 2000, FINCO
had  outstanding  borrowings  of $74,000 and  $67,636,  respectively,  under its
revolving warehouse financing arrangement.

<PAGE>

FINCO's  summarized results from operations for the periods ended June 30 are as
follows:

                                   Three Months Ended        Six Months Ended
                                        June 30,                 June 30,
                                   --------------------     --------------------
                                     2001      2000           2001       2000

Revenues                            $32,220   $14,581        $59,190    $26,902
Income from operations                3,009       997          4,631      1,863
Net income                            1,977       303          2,437        564


NOTE 4:  ACQUISITIONS

On March 12, 2001, the Company through a newly formed limited liability company,
Coast to Coast  Consulting,  LLC,  acquired  certain assets and assumed  certain
liabilities  of Coast to Coast  Consulting,  Inc.  ("CCC"),  a  service  company
providing  highly  skilled  experts to health care  clients to assist with their
on-site,  back office functions such as billing,  collections,  special projects
and other areas.  Total cash  consideration  for CCC was  approximately  $16,300
including  transaction  costs  of  $150.  The  acquisition  contains  a  certain
contingent  payment  obligation  based on the attainment of a certain  financial
performance  target over the next three  years.  The future  contingent  payment
obligation,  if any, is expected to be accounted for as  additional  goodwill as
the payment is made.

On April 30, 2001, the Company through a newly formed limited liability company,
Pacific  Software  Consulting,  LLC,  acquired  (i)  certain  assets and assumed
certain  liabilities of Pacific Software  Consulting,  Inc.  ("PSC"),  a service
company  providing  highly skilled  consultants to banks to assist in their back
office  functions,   and  (ii)  associated   patentable  property.   Total  cash
consideration  for  these   acquisitions  was  approximately   $4,954  including
transaction  costs of $45. In connection  with these  acquisitions,  the Company
agreed to certain  contingent  payment  obligations  based on the  attainment of
certain financial  performance  targets through June 2002. The future contingent
payment  obligations,  if any, are expected to be  accounted  for as  additional
goodwill as the payments are made.

The above  acquisitions were accounted for under the purchase method. The excess
of cost  over the fair  value of net  assets  of  businesses  acquired  is being
amortized on a  straight-line  basis over 30 years.  The  purchase  price of the
acquisitions was financed under the Company's revolving credit facility. Results
of operations  for the acquired  businesses  were  included in the  consolidated
financial statements from their respective acquisition dates.


NOTE 5:  DERIVATIVES AND HEDGING ACTIVITIES

At June 30, 2001 and December 31, 2000,  the Company had interest  rate swap and
collared  swap  agreements  outstanding  in the notional  amounts of $50,000 and
$150,000,  respectively.  Since  December 31, 2000,  there have been no material
changes in these agreements.

On January 1, 2001, the Company  implemented  Statement of Financial  Accounting
Standards  (SFAS) No. 133,  Accounting  for Derivative  Instruments  and Hedging
Activities,  as  amended by SFAS No.  137 and SFAS No.  138  (collectively,  the
Statement).  This  Statement  requires all  derivatives  to be recognized in the
balance  sheet at fair value,  with changes in that fair value to be recorded in
current earnings or deferred in other comprehensive income, depending on whether
the  derivative  instrument  qualifies  as a hedge and, if so, the nature of the
hedging  activity.  The  Company's  transition  adjustment  upon adoption of the
Statement  required the recording of a liability of $3,691 with an offset of the
same amount to accumulated other comprehensive  income. As of June 30, 2001, the
liability is $6,621 and is included in other  liabilities and accumulated  other
comprehensive income. The Company is subject to the risk of fluctuating interest
rates in the normal course of business. From time to time and as required by the
Company's  credit  agreement,  the  Company  will  employ  derivative  financial
instruments as part of its risk management  program.  The Company's objective is
to manage risks and exposures and not to trade such  instruments  for profit and
loss. The Company's  interest rate hedges are primarily  classified as cash flow
hedges.  For a cash flow hedge of an anticipated  transaction,  the  ineffective
portion of the change in fair value of the derivative is recorded in earnings as
incurred,  whereas  the  effective  portion is  deferred  in  accumulated  other
comprehensive income on the balance sheet until the transaction is realized,  at
which time any deferred hedging gains or losses are recorded in earnings. During
the  quarter  ended June 30,  2001,  the Company  recorded,  as part of interest
expense,  a gain of $518 due to the  hedges'  effectiveness.  For the six months
ended June 30, 2001, there was no net impact on interest expense.


NOTE 6:  COMPREHENSIVE INCOME

The components of total  comprehensive  income for the periods ended June 30 are
as follows:

                                     Three Months Ended       Six Months Ended
                                          June 30,                June 30,
                                     --------------------   --------------------
                                       2001       2000        2001       2000

Net income (loss)                     $ 2,080    $(5,203)    $   554    $(8,583)
Other comprehensive income item:
  Net loss on cash flow
    hedging instruments                   (83)         -      (6,621)         -
                                      -------    -------     -------    -------
Total comprehensive income (loss)     $ 1,997    $(5,203)    $(6,067)   $(8,583)
                                      =======    =======     =======    =======


NOTE 7:  STOCKHOLDERS' DEFICIT

In April 2001,  the  Company  completed  a sale of  489,795.93  shares of senior
common  stock for  $24,000  ($22,004  after all related  expenses)  to a private
equity  firm and to certain  members of its  existing  private  investor  group,
including  Madison Dearborn  Capital Partners III, L.P., the Company's  majority
stockholder.

<PAGE>

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

Results of Operations

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000
-----------------------------------------------------------------------------

Revenues for the three months ended June 30, 2001 were $157.4  million  compared
to $137.4  million in the same  period  last year - an  increase  of 14.6%.  The
revenue  increase of $20.0  million was due  primarily to increased  outsourcing
services  revenues  offset  partially  by  lower  portfolio  services  revenues.
Revenues  from  outsourcing  services  increased  99.3% to $43.2 million for the
three months ended June 30, 2001 from $21.7 million for the comparable period in
2000.  The  increased  outsourcing  services  revenues of $21.5 million were due
primarily to new and increased  existing  business and the  acquisitions  of RWC
Consulting Group ("RWC"), Coast to Coast Consulting ("CCC") and Pacific Software
Consulting  ("PSC").  Revenues from portfolio services of $21.7 million compared
unfavorably  to $23.7 million in 2000 due  primarily to the  continued  negative
effect on  revenues  resulting  from the shift to  off-balance  sheet  purchased
portfolios  partially  offset  by  increased  collections  from  the  cumulative
increase in off-balance sheet purchased loans and accounts receivable portfolios
during 1999, 2000 and 2001. The collection services revenues increased slightly,
0.5%,  to $92.5  million  for the three  months  ended June 30,  2001 from $92.0
million in 2000.

Operating expenses,  inclusive of salaries and benefits,  service fees and other
operating and administrative  expenses, were $128.6 million for the three months
ended June 30, 2001 and $110.0  million for the  comparable  period in 2000 - an
increase of 16.9%. The increase in these operating  expenses resulted  primarily
from the RWC, CCC and PSC  acquisitions  and the  increased  expenses due to the
increased  revenues of outsourcing  services.  Operating  expenses for the three
months ended June 30, 2001 also included non-cash  compensation  expense related
to variable stock options of approximately  $0.7 million.  Included in operating
expenses  for the  three  months  ended  June 30,  2000,  the  Company  incurred
approximately $0.2 million of additional compensation expense resulting from the
redemption  of vested stock  options.  For the three months ended June 30, 2001,
amortization and depreciation charges of $12.8 million were lower than the $16.2
million  for  the  comparable  period  in  2000  by  $3.4  million.   The  lower
amortization  and depreciation  charges resulted  primarily from lower portfolio
amortization  as a result of lower  strategic  sales of portfolios and the shift
towards off-balance sheet purchased loans and accounts receivable portfolios.

In the three  months  ended June 30,  2000,  the Company  incurred  nonrecurring
realignment expenses of $1.0 million which included costs for closure of certain
call centers,  severance associated with these office closures and certain other
one-time costs.

Earnings before interest expense, taxes,  depreciation and amortization (EBITDA)
for the three  months  ended June 30, 2001 was $28.9  million  compared to $26.4
million for the same period in 2000. The increase was primarily  attributable to
the three acquisitions and the higher outsourcing services revenues. Adding back
the non-cash stock compensation expense,  EBITDA was $29.6 million for the three
months ended June 30, 2001;  this  compared  favorably to $27.5  million for the
same  period  in  2000  after  adding  back  the  nonrecurring  charges  and the
additional compensation expense.

As a result of the above,  the Company's  operating  income of $16.1 million for
the three months ended June 30, 2001 compared favorably to $10.2 million for the
same period in 2000.

Net interest  expense for the three months ended June 30, 2001 was $13.8 million
compared to $15.2 million for the  comparable  period in 2000.  The decrease was
due  primarily  to lower  interest  rates and  lower  amortization  of  deferred
financing fees.

The  provision  for income taxes of $0.2 million was provided for certain  state
and foreign income tax obligations. The net deferred tax assets at June 30, 2001
are fully  offset by a valuation  allowance.  During the three months ended June
30, 2001, the net deferred tax assets and the valuation  allowance  decreased by
$0.9  million.  The decrease was caused by a reduction of  deductible  temporary
differences  that exceeded the taxable net operating loss  generated  during the
current period by $0.9 million.  The Company  generated a net taxable  operating
loss for  federal  and  certain  state  income  tax  purposes  for  which a full
valuation allowance was provided.


<PAGE>

Due to the factors stated above, the Company had net income for the three months
ended June 30, 2001 of $2.1 million which compared  favorably to the net loss of
$5.2 million for the three months ended June 30, 2000.


Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
-------------------------------------------------------------------------

Revenues for the six months ended June 30, 2001 were $309.0 million  compared to
$270.6 million in the same period last year - an increase of 14.2%.  The revenue
increase  of  $38.4  million  was due to  increased  outsourcing  and  portfolio
services  revenues  offset  partially  by lower  collection  services  revenues.
Revenues from outsourcing  services increased 94.9% to $81.3 million for the six
months ended June 30, 2001 from $41.7 million for the comparable period in 2000.
The increased  outsourcing services revenues of $39.6 million were due primarily
to new and increased  existing business of the acquisitions of RWC, CCC and PSC.
Revenues from portfolio  services of $43.4 million  compared  favorably to $43.2
million in 2000 due  primarily  to  increased  collections  from the  cumulative
increase in off-balance sheet purchased loans and accounts receivable portfolios
during 1999, 2000 and 2001 partially offset by the continued  negative effect on
revenues resulting from the shift to off-balance sheet purchased portfolios. The
collection services revenues decreased 0.8% to $184.3 million for the six months
ended June 30, 2001 from $185.7 million in 2000. The decreased revenues were due
primarily  to lower  bank card,  student  loan and  telecommunications  business
offset partially by increased government and letter series business.

Operating expenses,  inclusive of salaries and benefits,  service fees and other
operating and  administrative  expenses,  were $250.5 million for the six months
ended June 30, 2001 and $217.6  million for the  comparable  period in 2000 - an
increase of 15.1%. The increase in these operating  expenses resulted  primarily
from the RWC, CCC and PSC  acquisitions  and the  increased  expenses due to the
increased  revenues of  outsourcing  services.  Operating  expenses  for the six
months ended June 30, 2001 included  non-cash  compensation  expense  related to
variable  stock options of  approximately  $0.7  million.  Included in operating
expenses  for  the  six  months  ended  June  30,  2000,  the  Company  incurred
approximately $0.2 million of additional compensation expense resulting from the
redemption  of vested  stock  options.  For the six months  ended June 30, 2001,
amortization and depreciation charges of $27.5 million were lower than the $30.8
million  for  the  comparable  period  in  2000  by  $3.3  million.   The  lower
amortization  and depreciation  charges resulted  primarily from lower portfolio
amortization as a result of the shift towards  off-balance sheet purchased loans
and accounts receivable portfolios.

In the six  months  ended  June 30,  2000,  the  Company  incurred  nonrecurring
realignment expenses of $1.0 million which included costs for closure of certain
call  centers,  severance  associated  with these call centers and certain other
one-time costs.

Earnings before interest expense, taxes,  depreciation and amortization (EBITDA)
for the six  months  ended June 30,  2001 was $58.5  million  compared  to $52.0
million for the same period in 2000. The increase was primarily  attributable to
the three acquisitions and the higher outsourcing services revenues. Adding back
the non-cash stock  compensation  expense,  EBITDA was $59.2 million for the six
months ended June 30, 2001;  this  compared  favorably to $53.2  million for the
same  period  in  2000  after  adding  back  the  nonrecurring  charges  and the
additional compensation expense.

As a result of the above,  the Company's  operating  income of $31.0 million for
the six months ended June 30, 2001  compared  favorably to $21.2 million for the
same period in 2000.

Net interest  expense for the six months  ended June 30, 2001 was $30.1  million
compared to $29.5 million for the  comparable  period in 2000.  The increase was
due primarily to higher debt balances offset  partially by lower interest rates.
There was no net impact on interest expense as a result of the Company's hedging
activities.

The  provision  for income taxes of $0.4 million was provided for certain  state
and foreign income tax obligations. The net deferred tax assets at June 30, 2001
are fully offset by a valuation allowance.  During the six months ended June 30,
2001, the net deferred tax assets and the valuation  allowance decreased by $0.4
million.  The  decrease  was  caused  by a  reduction  of  deductible  temporary
differences  that exceeded the taxable new operating loss  generated  during the
current period by $0.4 million.  The Company  generated a net taxable  operating
loss for  federal  and  certain  state  income  tax  purposes  for  which a full
valuation allowance was provided.

<PAGE>

Due to the factors  stated above,  the Company had net income for the six months
ended June 30, 2001 of $0.6 million which compared  favorably to the net loss of
$8.6 million for the six months ended June 30, 2000.


Financial Condition, Liquidity and Capital Resources
----------------------------------------------------

At June 30, 2001, the Company had cash and cash equivalents of $8.3 million. The
Company's  credit  agreement  provides  for a  $75.0  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, 2001, the Company had $32.4 million  outstanding  under the revolving credit
facility leaving $35.8 million,  after outstanding letters of credit,  available
under the revolving credit facility.

In April 2001,  the Company  completed a sale of $24.0  million of senior common
stock to a private  equity firm and to certain  members of its existing  private
investor  group,  including  Madison  Dearborn  Capital  Partners III, L.P., the
Company's majority stockholder.  The net proceeds of $22.0 million from the sale
were used to repay debt under the Company's bank credit facility.

Since  December  31,  2000,  cash and cash  equivalents  decreased  $2.0 million
primarily  due to cash  utilized  for the CCC  and  PSC  acquisitions  of  $21.3
million, debt repayments of $5.1 million, an earnout payment of $3.0 million and
capital  expenditures  of $5.7 million offset by cash from operating  activities
and portfolio  purchasing of $10.8 million and net proceeds from the issuance of
senior  common stock of $22.0  million.  The Company also held $25.9  million of
cash for clients in restricted trust accounts at June 30, 2001.

For the six months ended June 30, 2000, cash and cash equivalents increased $4.5
million primarily due to cash from operating activities and portfolio purchasing
of  $7.6  million  and net  cash  from  financing  activities  of $7.5  million,
primarily  borrowings under the revolving credit facility,  offset by the use of
cash of $10.5 million primarily for capital expenditures.

For the first six months in 2001, the Company made capital  expenditures of $5.7
million  primarily for the replacement and upgrading of equipment,  expansion of
facilities  and expansion of the Company's  information  services  systems.  The
Company anticipates capital spending of approximately $13.8 million during 2001,
which  the  Company  intends  to fund from  cash  flow  from  operations  and if
necessary, borrowings under the revolving credit facility.


Recent Accounting Pronouncements
--------------------------------

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"),  Business  Combinations.
SFAS 141  requires  that  the  purchase  method  of  accounting  be used for all
business  combinations  initiated after June 30, 2001 and  establishes  specific
criteria for  recognition of intangible  assets  separately  from goodwill.  For
business combinations initiated after June 30, 2001, SFAS 141 also requires that
unallocated  negative  goodwill be written off  immediately as an  extraordinary
gain.  Any  unamortized  deferred  credit  arising  from a business  combination
completed  before July 1, 2001 will be recognized as the cumulative  effect of a
change in accounting  principle.  The Company is currently evaluating the impact
of SFAS 141 on its financial statements.

Also in July 2001, the FASB issued Statement of Financial  Accounting  Standards
No. 142 ("SFAS 142"),  Goodwill and Other Intangible Assets. SFAS 142 eliminates
the  amortization  of goodwill  and instead  requires  goodwill to be tested for
impairment  annually at the reporting unit level.  Also,  intangible  assets are
required to be amortized  over their useful lives and reviewed for impairment in
accordance with Statement of Financial  Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. Under SFAS 142, if the intangible asset has an indefinite useful life, it is
not amortized until its life is determined to be finite. The Company is required
to adopt SFAS on January 1, 2002,  and earlier  adoption is not  permitted.  The
Company  is  currently  evaluating  the  impact  of  SFAS  142 on its  financial
statements.  Goodwill amortization recorded for the quarter and six months ended
June 30, 2001 was $4.2 million and $8.2 million, respectively,  compared to $4.0
million and $7.9 million for the respective periods ending June 30, 2000.

<PAGE>

Forward-Looking Statements
--------------------------

The  following  statements  in  this  entire  document  are  or  may  constitute
forward-looking  statements made in reliance upon the safe harbor of the Private
Securities  Litigation  Reform  Act  of  1995:  (1)  statements  concerning  the
anticipated   costs  and  outcome  of  legal   proceedings   and   environmental
liabilities,   (2)   statements   regarding  the  Company's   expected   capital
expenditures  and the funding  thereof,  (3) statements  regarding the Company's
ability  to fund its  future  operating  expenses  and  meet  its  debt  service
requirements as they become due, (4) any statements  preceded by, followed by or
that include the word "believes," "expects," "anticipates," "intends," "should,"
"may,"  or  similar   expressions;   and  (5)  other  statements   contained  or
incorporated  by  reference  in this  document  regarding  matters  that are not
historical facts.

Because such statements are subject to risks and  uncertainties,  actual results
may differ  materially from those  expressed or implied by such  forward-looking
statements.  Factors  that  could  cause  actual  results  to differ  materially
include, but are not limited to: (1) the demand for the Company's services,  (2)
the demand for accounts receivable  management  generally,  (3) general economic
conditions,  (4) changes in interest rates, (5)  competition,  including but not
limited to pricing pressures, (6) changes in governmental regulations including,
but not limited to the federal Fair Debt Collection Practices Act and comparable
state statutes,  (7) legal  proceedings,  (8) environmental  investigations  and
clean up efforts,  (9) expected  synergies,  economies of scale and cost savings
from acquisitions by the Company not being fully realized or realized within the
expected  time  frames,  (10)  costs  of  operational  difficulties  related  to
integrating the operations of acquired  companies with the Company's  operations
being greater than expected,  (11)  unanticipated  realignment  costs,  (12) the
Company's  ability  to  generate  cash  flow or  obtain  financing  to fund  its
operations,  service  its  indebtedness  and  continue  its  growth  and  expand
successfully into new markets and services, and (13) factors discussed from time
to time in the Company's public filings.

These forward-looking statements speak only as of the date they were made. These
cautionary  statements  should be considered  in connection  with any written or
oral  forward-looking  statements that the Company may issue in the future.  The
Company does not undertake any  obligation to release  publicly any revisions to
such  forward-looking  statements to reflect later events or circumstances or to
reflect the occurrence of unanticipated events.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to the risk of  fluctuating  interest rates in the normal
course of business.  From time to time and as required by the  Company's  credit
agreement,  the Company will employ derivative financial  instruments as part of
its risk  management  program.  The  Company's  objective is to manage risks and
exposures and not to trade such instruments for profit or loss.

At December 31, 2000 (the most recent  completed  fiscal year),  the Company had
interest rate swap and collared swap agreements outstanding.  Since December 31,
2000, there have been no material changes in these agreements.

<PAGE>

PART II.  OTHER INFORMATION


Item 1.   Legal Proceedings

          From time to time,  the Company and  certain of its  subsidiaries  are
          involved  in  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.
          Other  information  with respect to legal  proceedings  appears in the
          Company's  Annual Report on Form 10-K for the year ended  December 31,
          2000.



Item 2.   Changes in Securities

          See Note 7 of the Condensed Consolidated Financial Statements included
          elsewhere  herein.  The net  proceeds  from the sale of senior  common
          stock (see Item 4 below) were used to repay debt.



Item 3.   Defaults Upon Senior Securities

          None



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

          The  following  matters were  submitted to a vote of security  holders
          during the quarter ended June 30, 2001:

          (1)  On April 2, 2001, pursuant to written consent of the shareholders
               of the Company's voting common stock,  the shareholders  approved
               an amendment of the Company's  Certificate  of  Incorporation  to
               provide for the  authorization of 900,000 shares of Senior Common
               Stock  and  to  set  forth  the  voting   powers,   designations,
               preferences and other rights,  qualifications and restrictions of
               such Senior Common Stock.

          (2)  On April 16,2001, pursuant to written consent of the shareholders
               of the  Company's  voting  common  stock,  the  shareholders  (i)
               increased the size of the  Company's  Board of Directors to seven
               persons,  and (ii) elected the following  persons as directors of
               the Company to hold office  until the next annual  meeting of the
               shareholders of the Company and until their successors shall have
               been elected and shall have qualified: R. David Andrews,  Timothy
               Beffa,  William Hewitt,  Timothy Hurd, Scott Marks,  Jr., Richard
               Thomas and Paul Wood.

          Both of  these  shareholder  consents  were  executed  by  holders  of
          4,536,367.84 shares of the Company's voting common stock.



Item 5.   Other Information

          None

<PAGE>


Item 6.   Exhibits and Reports on Form 8-K

          (a). Exhibits

               Exhibit 2.1  Asset  Purchase  Agreement and   Patentable Property
                            Purchase Agreement dated April 30, 2001 by and among
                            Outsourcing  Solutions   Inc.,     Pacific  Software
                            Consulting, LLC, Pacific Software  Consulting, Inc.,
                            and Edward F. Lambert.
               Exhibit 2.2  Stock  Subscription  Agreement by and among  Gryphon
                            Partners  II, L.P.,  Gryphon  Partners  II-A,  L.P.,
                            Outsourcing  Solutions  Inc.,   and  the  additional
                            investors, dated April 3, 2001.
               Exhibit 3    Fourth  Amended   and    Restated   Certificate   of
                            Incorporation  of the  Company, as  amended  by  the
                            Certificate of Amendment dated as of April 16, 2001.
               Exhibit 4    Fifth Supplemental Indenture dated  as of  April 30,
                            2001  by   and  among  the  Company, the  Additional
                            Guarantor  and Wilmington Trust Company, as trustee.
               Exhibit 10   2001 Management Incentive Plan.

          (b). Reports on Form 8-K

               There were  no  reports  on Form 8-K  filed for  the  three-month
               period ended June 30, 2001.
<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/ Gary L. Weller
                                       -----------------------------------
                                       Gary L. Weller
                                       Executive Vice President
                                          and Chief Financial Officer


Date:   August 14, 2001