Debt Purchasing Takes Center Stage at ACA International Fall Forum

The debt buying and selling industry has undergone significant changes in the last year as a result of the economy, credit crunch and the regulatory landscape, all of which were touched upon Thursday at ACA International’s Fall Forum in Chicago.

Today’s asset purchase and recovery management business is quite different than it was when we entered it, noted Steve Leckerman, executive vice president and chief operating officer of NCO Financial Systems, Inc.

Only 20 years ago, the average primary fees were in the low 30 percent range; the secondary fees consistently were 50 percent. Recovery percentages were in the mid-to upper 30 percent range and the secondary recoveries averaged about 6 percent, according to Leckerman.

“Average balances at placement were around $400 and insurance recovery could make up more than 60 percent of the dollars collected for clients in primary collections,” Leckerman said.

The industry itself had less focus on compliance; more volume, higher commissions and higher liquidations. More clients were selling and more agencies were in the network receiving business. Money was available for the consumer to borrow.

Debt buying was a robust segment of the business with willing buyers and willing sellers. Both large and small debt buyers did well.

Between 2005 and 2007, the collection industry was flat even though consumer debt and delinquencies had grown to unprecedented levels.

“There’s a perfect storm going on right now,” Leckerman said, pointing to the debt, delinquencies, recession, reduced credit availability, low consumer confidence and the complex regulatory environment.

“If you do business with large banks, utility companies or other large firms, they are looking to cut costs; health care is fearful of rules changing,” Leckerman said. “You’re working with more middle-class debtors. They’re more sophisticated consumers, so they will file more complaints. We have attorney creditors who are like regular customers.”

Competition is fierce in this type of environment, Leckerman said.  “In today’s environment, an agency needs to deliver consistent best performance. Second is not good enough. You have to be able to adapt to clients’ ever increasing demand for data. They want performance metrics down to metrics for the employees.”

Leckerman also encouraged the audience to protect their clients’ brands and to seek to be an industry leader.

To succeed in the industry today, Leckerman said, a firm needs to have a winning attitude; accountability at every level; the right strategy; flawless execution, even on “the small stuff;” face time with regulations and have a self-regulation initiative.