What the ARM Industry is Currently Up Against
What is the biggest threat to the accounts receivable management industry today? An unfriendly political environment in Washington? Populist rage against collectors infiltrating state politics? The economy?
All of those factors have created an operating environment that requires uncommon dexterity to navigate, no doubt. But an old threat to debt collection agencies is rearing its head with a vengeance.
A small town business and lifestyle magazine is currently running a solicitation looking for debt collectors, or former debt collectors, to come forward with official documentation detailing illegal company policies. In other words, they are trying to find written proof that collection agencies encourage their employees to break the law. And they’re offering a cash reward.
It’s just a small indicator of what faces the ARM industry in the media throughout the rest of the year, and going forward. News outlets have figured out that the “debt collectors = evil people” paradigm is stale and needs updating. I think that the solicitation is the opening salvo in a reenergized attack on the industry.
The remainder of 2010 appears to be a wash for the industry on the regulatory front. The FTC’s various outstanding information requests and reports may come to a close this year, but it’s not likely based on history. So expect the media to really attack the industry as unemployment lingers, the recovery stagnates, and charge-offs across all credit types continue to soar.
There is also a pretty good chance we’ll see a rise in enforcement actions this year. State attorneys general will be busy as always. But the FTC has already shown this year that they are going to be more aggressive. The agency will use rising consumer complaints to justify their actions, regardless of whether it’s warranted (“Exploring Rising Complaints Against Debt Collectors,” March 5).
This activity will feed the media. With more and more $1 million+ settlements, a narrative will be easy to find.
The debt collection industry has never been popular with the media, because the industry is understandably unpopular with the general public. But this year may be the year all-out war is declared.
Patrick manages all content for insideARM.com. Contact him with your news and comments at editor@insidearm.com , or call 240-499-3828.
Top 30 Things to Do at EXPO 3.0
Please note: links to the booths will not work until Tuesday, February 16, 2010 at 9am est.
Learn
- Expert predictions at Kaulkin Ginsberg’s State of the ARM Industry webinar – 1 PM ET in the Webinar Center
- Changes affecting the healthcare market in the Spotlight on Healthcare Collections webinar – 10 AM ET in the Webinar Center
- 2009 ARM M&A activity and what to expect in 2010 – 2 PM ET in the webinar center
- The latest on ARM industry legislation with Rozanne Anderson, Mike Ginsberg, Adam Peterman, and Patrick Lunsford – 3 PM ET in the Webinar Center.
- 20 things about the credit card collection market like you’ve never heard before, in Pardon the Interruption, – 11:30 AM in the webinar center
- 12 AR Best Practices Essential to Every Organization – a white paper available at The Accounts Receivable Network booth
- Five Ways to Improve Your Collection and Recovery Rates: key guidelines for the integration of C&R systems, networked communications and analytics to help you achieve better results – at the FICO booth
- The Top 100 Movers and Shakers in the UK credit industry - Download this popular supplement at the Credit Today booth
- Solving the Blended Challenge: Controlling your highest value calls to maximize recoveries – a free whitepaper available at the LiveVox booth
- “10 Ways to Save on Your Mail Costs in 2010” and “10 Questions to Ask Every Letter Vendor” – two tip sheets that could save you thousands of dollars, available at the DANTOM Systems booth
- Collection laws for all 50 states – a complimentary summary available at the National List of Attorneys booth
- Free portfolio estimator tool – download it at Senex’s booth
- Brand new charts comparing employee satisfaction in collections vs. firms nationwide, plus data about what makes a Best Place to Work in Collections– in your Briefcase
- Primer on the legislative agenda facing Congress and the ARM Industry in 2010 – in your Briefcase
Win
- Netbooks, premium research, free job postings, and more -- random tokens of appreciation throughout the day from insideARM
- $100 AMEX Card – register at The Edge Consulting booth
- Canon 10 MP digital camera - Stop by CR Software’s booth to learn about Titanium Ore and be entered to win
- Apple iPod Touch 8GB - Visit the Teleperformance/Alliance One booth and enter to win
- $50 AMEX gift card - Visit LiveVox’s booth and get a chance to win
- AMEX $100 Gift Card - Drop by the Southwest Credit booth for the chance to win
- and discover who referred the most attendees to EXPO 3.0 and will win the grand prize of a free Dell netbook from insideARM.
Network
- Healthcare analyst Michael Klozotsky will host a live Q&A – 10:30 AM ET at the Kaulkin Ginsberg booth
- Interior Concepts president David Kendrick will chat live about “Furniture & Site Design for the New Decade” --10:30 AM ET or 2 PM ET at the Interior Concepts Booth
- Phillips & Cohen president & general counsel Howard Enders will chat live about “Deceased Care in Today’s ARM Market” - 12:30 PM ET at the Phillips & Cohen Booth
- Industry M&A experts Mark Russell and Michael Lamm will answer your questions – 2:45 PM ET at the Kaulkin Ginsberg booth
- Weltman, Weinberg & Reis managing partner Alan Weinberg will chat about “The New Kind of Debtor: Why Please and Thank You Just Doesn’t Work Anymore” – 4 PM ET at the Weltman Weinberg & Reis booth
- Greystone Alliance president Tony Frisicaro and chief operating officer Rick Corica will be available to chat all day at the Greystone Alliance booth
- Senex President and VP of Sales and Marketing will be available to chat all day at the Senex booth
- Zenith Acquisition’s CEO, CFO or Director of Client Relations will be available to chat about upcoming debt sales and recovery projects – all day at the Zenith Acquisition booth
…and as a Bonus, View Hot Videos at these Booths!
DAKCS Software Systems (our TOP PICK!)
http://events.unisfair.com/rt/insidearm/index.jsp?id=46&seid=29
West Asset Management
http://events.unisfair.com/index.jsp?eid=458&seid=29
Teleperformance Accounts Receivable Management /AllianceOne Receivables Management
http://events.unisfair.com/rt/insidearm/index.jsp?id=295&seid=29
FMS Inc.
http://events.unisfair.com/rt/insidearm/index.jsp?id=351&seid=29
insideARM.com
http://events.unisfair.com/rt/insidearm/index.jsp?id=164&seid=29
Merlin Information Services
http://events.unisfair.com/rt/insidearm/index.jsp?id=31&seid=29
Kaulkin Ginsberg
http://events.unisfair.com/rt/insidearm/index.jsp?id=49&seid=29
ACA International
http://events.unisfair.com/rt/insidearm/index.jsp?id=147&seid=29
Resource Management Services
http://events.unisfair.com/rt/insidearm/index.jsp?id=268&seid=29
IAT
http://events.unisfair.com/rt/insidearm/index.jsp?id=35&seid=29
PCI Group
http://events.unisfair.com/rt/insidearm/index.jsp?id=155&seid=29
CR Software
http://events.unisfair.com/rt/insidearm/index.jsp?id=48&seid=29
Sentinel - eCollections
http://events.unisfair.com/rt/insidearm/index.jsp?id=157&seid=29
Stephanie Eidelman is the publisher of insideARM.com and also oversees all operations for Kaulkin Ginsberg. She has more than twenty years of experience in operations management and consulting, both for start-ups and large established firms. She can be reached at 240-499-3806 or by email.
Tap Dancing on a Debt Collector’s Grave
In a business column dated January 20, Baltimore Sun writer Jay Hancock takes the unusual step of reveling in the bankruptcy of a prominent accounts receivable management firm in the midst of an unemployment-driven recession. He may have even called for violence against debt collectors.
Hancock begins his piece, “If anybody was to have made a killing in the economic crisis, it should have been debt collectors. With consumers going bust at the worst rate in decades, who likelier than the debt hounds to score a big recession payday?” (“Debt hounds wind up chasing their own tails,” Baltimore Sun).
A sound premise to those who know little about the business. But for those of us steeped in the minutiae of ARM governance, a laughably absurd notion.
The ARM industry, like any other, depends on the financial stability of consumers. Yes, debt collectors get much more work when consumer credit defaults surge. And yes, consumer credit defaults surge in times of economic crisis. But ultimately, consumers need to have cash to pay off the accounts the “debt hounds” are calling on.
In the last recession – what we now know as a “mini” recession in the early 2000s – consumers had vast balances of home equity to tap. And tap it they did. Every collector in the country was given a talkoff that included at least a suggestion of a home equity loan to free up some cash. But that all went away in a hurry. Now with no equity and in many cases no income, how are consumers to pay their debts? It makes sense that the ARM industry is struggling like any other.
But a discard of solid economic fundamentals is not the major sin of this piece.
Later in the article, when discussing the bankruptcy of debt collection law firm Mann Bracken, Hancock seems to suggest that violence against debt collectors might be an acceptable path to justice.
Mann Bracken, based in Rockville, Md., was last week forced by the state to cease debt collection activities while it, and its parent company, wind down operations in bankruptcy (“State Issues Suspension Order to Debt Collector Mann Bracken,” Jan. 15). As a result, thousands of cases filed by the firm against consumers will be tossed out.
A most welcomed result for Hancock. In fact, so welcomed that he said, “A firebomb tossed into the company's offices could not have been as effective.”
Now, I’m no dummy. Being in the publishing business, I know that populism always sells (even in an insular industry such as ARM). But to suggest that violence – or at the very least, extreme property damage – could actually achieve a desired effect is insanity.
People take their interactions with collectors very personally. Some handle it well, some do not. But I cannot believe that there are droves of consumers out there wishing physical harm to debt collectors and their offices. But maybe I’m wrong and Hancock is right: we’re at a stage where people are simply hungry for blood.
Collection Industry Adding Jobs in Difficult Environment
Despite a labor market in the U.S. that has not shown much sign of improvement, the accounts receivable management industry has quietly ramped up hiring over the past quarter as clients flood collection offices with work.
In insideARM’s latest Quarterly Credit & Debt Collection Industry Confidence Survey, only 11 percent of collection agency respondents anticipated laying off workers in the fourth quarter of 2009, the lowest rate since the recession began. In contrast, 55.1 percent of collection agencies thought their employee headcount would be larger in six months, with only 8 percent expecting a smaller staff.
A couple of publicly traded ARM companies have also announced staff additions. Portfolio Recovery Associates said that its collection staff grew from the second quarter to the third, while Asset Acceptance Capital Corp. said in its third quarter earnings release that it has “made solid progress in achieving our goal of increasing collection account representative headcount.”
We had certainly caught plenty wind regarding third party collection agencies hiring over the past several months. But it really hit home hard when an ACA International public relations representative contacted me about a month ago looking for data to share with the mainstream media. Their membership had been reporting pretty strong growth and they wanted to make sure the media knew the story.
Should we expect a headline soon along the lines of “Collection Agencies a Jobs Safe Haven in Recession”? Probably not.
But it is an interesting development.
We’ve known for quite a while that performance at collection agencies, along with nearly every other type of company in this country, was struggling. So how can they afford to bring on new people?
“Afford” is a difficult word to define in this situation, so let’s just say ARM executives are adding collectors out of necessity.
Credit issuers have been forced into a strategic liquidation strategy that sees them placing more accounts with third party debt collectors. Debt portfolio pricing has steadily eroded over the past couple of years, culminating in a market that – in some cases – is 50 percent lower than just a year ago. This has understandably led to issuers refusing sales at depressed prices.
As recovery executives at credit issuers have adjusted to a new reality, they’ve had to deal with more debt. Chargeoffs are at record highs in nearly every consumer credit category, with the average credit card chargeoff rate hitting 10.24 percent in the third quarter.
While many collection agencies that count debt buyers as clients have struggled, with fewer accounts and a difficult collection environment, firms that cater to issuers have only had to deal with poor collections as accounts have been flying their way. So they need more workers.
This is the perfect opportunity for the ARM industry to show traditional media the impact our businesses have on the broader economy by helping banks in a difficult time. As a bonus, the debt collection industry is one of a few that’s actually in expansion mode as jobs are continuously shed elsewhere.
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It Wasn’t a Collection Agency that Caused His Death, CNN
CNN ran a story last week with the headline, “Woman sues debt collector over husband's death.” That seems pretty dramatic.
Honestly, this is a rehashing of a story that’s been around for a few weeks. I dismissed it when I first read it, and forgot about it. But then a co-worker forwarded it to me after one of his friends forwarded it to him, with the comment, “look at what these guys do,” intimating that we work for the “bad guys.”
I decided to read the story and see what all the fuss was about. Maybe it would make for an interesting story: the headline certainly makes it seem like a debt collection agency took things too far, literally harassing a debtor to death.
But that’s not what the story is about. In fact, a collection agency isn’t involved at all in this story.
A woman in Florida is suing her mortgage company over calls it made when she and her husband fell behind on their mortgage payments in 2002. He died in 2005 from a heart condition. Not only are the details in the story very sketchy (it does not indicate when, exactly, the offending phone calls were made), but it horribly conflates actions taken by a creditor collection operation with those made by third party debt collection agencies.
Indeed, the CNN article – and those like it – launches into a description of FTC complaints against debt collectors to bolster its point. They even get a stock quote from ACA International about “bad apples” in the industry. The article mentions the FDCPA governing collectors, but makes no mention of the nuance involved in regulating original creditors under the law.
And this is what we have learned to live with. The real truth is so complicated and takes so many words to explain that writers have no real choice but to gloss over details. I do not blame ACA for their quote in the story, because they probably spoke about the actual case but that was cut because it was so boring, and the stock “most collectors are good, bad apples give us a bad name,” quote was used instead.
We as an industry have to do a better job of explaining why a headline of “Woman sues debt collector over husband's death,” in this case is just plain wrong. We have to educate the media on why their current framing is incorrect. When you’re doing a story about a mortgage company harassing a debtor, it’s not a “debt collection” story in the traditional sense. It’s a story about a mortgage company harassing a debtor.
