ARM Industry Players Pushing for Role in $700 billion Bailout

Collection firms stand to have a significant presence in the government’s $700 billion Troubled Asset Relief Program (TARP), with both ACA International — the trade association representing 3,500 debt collection, credit grantors and related companies — and a coalition of collection firms seeking to be involved as the government more clearly defines the details of the bailout plan.

Much has been made of the hundreds of billions of dollars that the government will invest in bad bank assets, but the management and disposition of those assets remains a mystery.

“We’ve reached out to the Treasury to offer ourselves as a resource,” said Rozanne Andersen, ACA International executive vice president and general counsel. “Our members are experts in analyzing debt, how it should be segregated, payment plans and the likely results (repayment success). We believe as the industry leader, we can be a part of the solution in this huge process.”

Government officials working in the TARP may not know all of the laws for debt collection, Andersen added. This is where ACA could provide an educational resource.

“A lot of others are coming in and offering their solutions for a fee, we are offering to provide advice for free,” Andersen said.

Anderson said ACA had little role in the Resolution Trust Corporation’s (RTC) disposition of the assets of failed thrifts in the 1990s, but the industry has grown and evolved since then, so the trade group “can be a valuable resource,” though she expects that the government “will be protective of its own turf, but as they dig into this, they will need additional resources.”

A coalition including many firms that had worked with the RTC in the 1980s and 1990s, is positioning itself to be among those resources. Some in the group are active in the accounts receivable management industry.

Eight national firms have aligned to form USA Recovery Group, LLC (USA Recovery), in preparation to advise the Treasury and the FDIC with the implementation of Congress’ rescue program.

USA Recovery plans to work as a “special servicer,” providing services including debt collection, due diligence, loan underwriting, asset management and disposition, financial advisory, asset management, operational, and traditional specialist services to the agents the FDIC and the Treasury selects.

Right now it is very difficult to define what exactly USA Recovery will be doing within TARP because only a broad outline of the asset recovery plan has been devised at this time, said Barry Fromm, CEO of Value Recovery Holding, one of USA Recovery’s founding members. More about the loan management particulars will be known after Nov. 17 when Congress is scheduled to reconvene after the election for a lame-duck session.

USA Recovery firms provide the organization with a national presence, Fromm added, including many that had a strong presence in the RTC’s efforts. Richard Gray, who heads asset management and disposition law firm Gray & Associates, was a lead financial advisor to the RTC, according to Fromm. Gary Silversmith, president of P&L Investments, helped create the government chargeoff program at that time.

According to the P&L’s Web site “when the RTC decided to embark on its most ambitious disposition effort, the sale and transfer of more than 70,000 assets with balances of approximately $9 billion in a single initiative, the principals of Gray & Associates designed and implemented the program.

“This program was the first bulk initiative of its kind and scope. It involved the disposition of assets throughout the country in a compressed timeframe. The program was a significant success for the agency, and served as the model for later similar programs conducted by other governmental agencies.”

P&L has been specializing in the acquisition and sale of non-performing and sub-performing assets for more than a decade.

Similarly, other firms in US Recovery Group have years of experience working with the government in the areas of collections, receivables, disposition of troubled assets and similar work that will be essential as TARP evolves, according to Fromm.

Some collection firms are already seeing some additional chargeoffs since TARP was announced, Fromm added. More is expected, he said, because the program is too expansive for the government to handle on its own, so it will need to work with firms well experienced in the various aspects of receivables management.