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What’s Really Going on with Collection Agencies?
The mainstream media – and even the business press – is all over the place right now in covering the accounts receivable management industry.
Just a month ago, it seemed that nearly every “broadsheet” story on debt collection was framed around how agencies are recession-proof and they were the ones raking in big bucks while the rest of America suffered through a full-blown depression.
But most recently, the narrative has changed. As more collection agencies -- and their spokespeople -- tell their stories, is has become clear that the ARM industry is struggling to get consumers to pay. This was punctuated by the major publicly traded ARM firms in their third quarter earnings. While earnings success was varied, all reported strained collections and increased portfolio impairments as expected collectability was adjusted.
This new debt collection reality does not prevent headlines like the one run in the Houston Chronicle over the weekend, though. Under the banner “Business is up for collection agencies,” one would expect another story like the ones from a month ago. But reading the story reveals the problems that we’ve been discussing on insideARM.com. Clearly the headline was written to draw attention.
So how are collection agencies faring right now? We know that placements are up and collection rates are down. But how is business overall?
This question is important to us. This week, we’ll be revealing the full results of our Quarterly ARM Industry Confidence Survey. The results of current conditions revealed a split in opinion between collection agencies and creditors. Banks were much less rosy on their prospects for success.
Collection agencies, meanwhile, admitted they would be modifying their collection strategies in large numbers. But they still felt that the worst was behind us and that things would get better in as little as six months.
Are collection agency operators overly confident that a change in collection strategy will carry them through the recession? Or are they truly more knowledgeable about consumer payment behavior than even their creditor clients?
Just a month ago, it seemed that nearly every “broadsheet” story on debt collection was framed around how agencies are recession-proof and they were the ones raking in big bucks while the rest of America suffered through a full-blown depression.
But most recently, the narrative has changed. As more collection agencies -- and their spokespeople -- tell their stories, is has become clear that the ARM industry is struggling to get consumers to pay. This was punctuated by the major publicly traded ARM firms in their third quarter earnings. While earnings success was varied, all reported strained collections and increased portfolio impairments as expected collectability was adjusted.
This new debt collection reality does not prevent headlines like the one run in the Houston Chronicle over the weekend, though. Under the banner “Business is up for collection agencies,” one would expect another story like the ones from a month ago. But reading the story reveals the problems that we’ve been discussing on insideARM.com. Clearly the headline was written to draw attention.
So how are collection agencies faring right now? We know that placements are up and collection rates are down. But how is business overall?
This question is important to us. This week, we’ll be revealing the full results of our Quarterly ARM Industry Confidence Survey. The results of current conditions revealed a split in opinion between collection agencies and creditors. Banks were much less rosy on their prospects for success.
Collection agencies, meanwhile, admitted they would be modifying their collection strategies in large numbers. But they still felt that the worst was behind us and that things would get better in as little as six months.
Are collection agency operators overly confident that a change in collection strategy will carry them through the recession? Or are they truly more knowledgeable about consumer payment behavior than even their creditor clients?
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Comment from Scott Darrohn on December 9, 2008 at 6:26PM EST
It appears that the tides are turning in bad debt collections. I am the Director of Operations for Rapid Recovery Collections, Inc. Many of yo may be familiar with our company. (rated #1 by the collectors guild international 7 years in a row.) We are currently seeing a huge increase in ratios on the collected dollar! If I could be of any assistance to anyone who may have questions in regard to their outstanding collections please let me know.
Comment from Martin dorren on December 31, 2008 at 10:41AM EST
I here everyone talk about the economy and say how tuff the market is, if you look at what has happen in the last two years with the housing refinance market as well as the loss of jobs. This is an adjustment to how we should do business as an industry. Agencies and debt buyers need to adopt payer models, they are not as sexy as your traditional balance in full or settlement programs but this is what will pay your bills and maximize your returns. Companies that have been not performed and have had issues in the Buffalo market are blaming the current economic conditions could not be farther from the truth. Don’t get me wrong the economic factors need to be weighed. Take for instance Elite Recoveries the reason for the shutdown was not the economy but poor business decisions. CarVal Investors was their main financer Elite as a company got “greedy” they could not support their debt buying operation and a contingency business and expect to pay the interest monthly and could not support the purchased paper they were buying. In actuality they were liquidating more than they were years previously...What lead me to believe that the economy has nothing to do with the company shutting down. Elite is a clone to another western NY based company with the same model Zenith Acquisitions. The company a debt buyer who has a similar relationship with investor Varde investments, the key to this relationship is they outsource the whole lot. They score it all threw Trak America everything is sued and the wait on their annuity and whatever collectors they do have, they all work “PAYERS”…Pretty simple huh...