Collection Agency Layoffs Reach Highest Level of Downturn in Q2
Collection agencies and debt buyers reported layoffs at a record pace in the second quarter, according to the results from insideARM's latest Credit & Debt Collection Industry Confidence Survey. But collection performance is improving from late last year.
Accounts receivable management companies reported a record level of layoffs in the second quarter of 2009, according to the latest insideARM Credit & Debt Collection Industry Confidence Survey.
The Summer 2009 survey showed more collection agencies and debt buyers reporting layoffs since the beginning of the survey in mid-2008.
When asked, “Did you eliminate any positions or layoff workers in your company in the 2nd Quarter of 2009?” more than 32 percent of collection agencies answered yes and 41.4 percent of debt buyers said the same, a record high for any group taking the survey.
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In the previous Confidence Survey, 25.7 percent of collection agencies reported layoffs in the first quarter with 33.3 percent of debt buyers cutting positions.
In and open response follow-up question, many survey participants gave their rationale for the increased layoffs:
"60% of our expenses are people. Only place to significantly cut costs."
"Only employees that share the desire to show up on time and produce consistently at a profitable level should expect to remain employed."
"Leveraging technology instead of hiring more staff to cover the inflated business. Although business is up it is uncollectable currently."
"We down sized to align with our revenue flow. We do anticipate improvements in the 1st and 2nd quarter of 2010 and will staff up to accommodate growth."
The Summer 2009 confidence survey was taken by 401 ARM industry professionals from July 17 through August 6. The full results, with all data and comments from the survey, can be found at http://www.insidearm.com/go/survey-results. Results from past surveys can also be found in the new section.
ARM companies did report better levels of performance in the second quarter. Although performance ratings were lower than in the first quarter, they significantly outpaced the performance reported in the fourth quarter of 2008, when the economy was seemingly in freefall and panic was the order of the day.
On a scale of 1 to 5, with 5 being the best performance, collection agencies rated second quarter performance with an average of 3.08, down from the 3.35 reported for the first quarter, but up from the 2.81 reported in the fourth quarter of 2008. Debt buyers gave second quarter performance an average rating of 3.03.
First quarter collection and liquidation performance was likely helped by early tax returns in late February and March, a typically good time for recoveries.
To view the complete results of the survey, including responses from creditors, collection law firms and vendors to the ARM industry, please visit http://www.insidearm.com/go/survey-results.
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Comments
Comment from David Adams on August 17, 2009 at 11:13AM EST
the easiest quick fix to fix costs is staff reduction .. more emphasis needs to be placed on effective managment techniques and collector training ... successful agencies maintain a level turnover ratio... the lenders should never feel the economic "pinch" agencies experience due to inabilities to effectively run a company.
Comment from RSN! on August 18, 2009 at 10:42AM EST
Couldn't agree more!
Comment from Craig Klein on August 18, 2009 at 2:09PM EST
Fortunately we have not had to lay employees off. In fact we are in a hiring mode. It has been difficult to keep recovery rates where they are and not allow them to fall. I think for many in our industry it is a matter of survival until the economy gets back on its feet.
Our business model has enabled us to thrive in this economic environment and that is a blessing.
Comment from KJW on September 8, 2009 at 3:31PM EST
The main problem that has changed the environment of the collection industry is many companies are looking at the short term fix to reduce costs today. They lose sight that today we can increase profit margins momentarily by reducing labor costs, including operations management, but affecting revenue production over time. They worry more about short-term numbers for the stock price or to sell off rather then long-term health of the company.