A Model for the ARM Industry: Canadian Sensibility

Allied International Credit (AIC), the Toronto-based debt collection subsidiary of Allied Global Holdings, has a simple corporate philosophy, according to CEO David Rae.

When asked how the company has earned such a positive reputation and track record over the last fifty years, he told insideARM.com, “I think the first thing is the culture and the expectation within our organization and that we very much believe that one of the main objectives is to protect the good will of our clients and not create any reputational risk whatsoever.” The execution of that understanding for AIC comes down to training, monitoring and coaching, with continuous feedback and call-recording proving essential.

“And finally it comes down to our rules,” he says. “If you don’t do what we need you to do, if you do go outside of the boundaries, we terminate and we don’t have any exceptions because you happen to be a top performer or not.”

The strike out policy for the company with a wide variety of private and public sector clients might sound harsh, but Rae says the decision is more about assessing the collector’s character and avoiding many of the ill-advised and often illegal ways of obtaining results.

Slight mistakes, with a commitment to learn from that mistake, are certainly awarded a second chance, barring any irrevocable outcome, “but if it’s at all something we think is part of your character — or the way you think you’ll get results or get ahead or benefit yourself through more commission — then we have a zero-tolerance policy.”

The good standing across the ARM industry and lack of customer or FTC complaints from the company with offices in the United Kingdom, Phoenix, and Richmond, Va., is notable in the midst of poor industry conduct and public relations. (See insideARM.com’s Complaints Issue for more on industry complaints)

“To tell you the truth it really surprises me that I see this kind of behavior, because I just don’t understand how anybody feels that that’s going to get them a more effective outcome,” Rae says, candidly.

Noting the obvious economic downturn, greater unemployment, and greater difficulty dealing with personal financial situations, the company strategy is a foregone conclusion if nothing else.

“You have got to work with people, be able to get them through their stress, and help them solve their problems,” he says, “So dealing with them in way that’s threatening or talking down to them or harassing, all that they’re going to do is avoid talking to you completely or create a complaint for you.”

AIC has spread this philosophy over eight production offices in Canada, the UK and the US, and among its 1,200 employees since the company was founded in 1985. Rae says that forty percent of the company’s revenue comes from US clients in particular.

“I believe that certainly the US market for the collection industry is the biggest opportunity for us to grow,” he says, despite the current economic recession. “Over the last couple of years we did see some programs disappear, where we had some sub-prime clients go out of business, or their volumes went down so much they didn’t have opportunities anymore, or they had smaller amounts of opportunities and they took them in-house.”

Despite the losses and differences between particular markets, Rae says there are still fundamental similarities between the way the Canadian and US debt collection industries reacted to the economic downturn.

“The recession wasn’t as severe in Canada, but certainty there was a recession and since the US is Canada’s largest trading partner we’re impacted by that,” he says. “As it relates to the collection market we’ve seen it more challenging because there was an increase in unemployment and in certain pockets of the country that increase was greater.” Rae cites a city like Ontario, for example, where the strong automotive industry is comparable to that of Michigan and the impact of a decrease in manufacturing was similar.  He also notes how the strong Canadian dollar is also challenging exporters that specialize in similar types of manufacturing over commodities such as oil, for instance.

“It hurts the opportunities for those kinds of companies and further impacts the economy,” he says.

Finally, according to Rae the Canadian credit grantors, following similar examples from around the world, shut down lending which resulted in the decline of volumes of many programs over the last several months.

“I think the one thing that is different in the Canadian market than the US market is we didn’t have the same kind of real estate structure so we didn’t see the same kind of declines,” he says, “and in some areas over the last year prices have still been going up.” Rae says the increase is certainly not at the peek levels experienced over the past decade, but low interest rates are still making growth possible.

“[Canada] didn’t really ever have a sub prime lending market in the same way the US did for real estate and for the most part there wasn’t any really large appreciations in home values like you saw in certain pockets of the US that created a significant amount of paper wealth,” he notes.

Balancing such an international strategy and recognizing solutions for each market is certainly challenging, but it also provides a company like AIC the opportunity to assess its strengths and invest in ways to better serve its clients in preparation for a full recovery.

“I think we are at the point where we’re pretty much at the bottom of the cycle,” he says of the economic downturn, pointing to minor indicators such as acquisitions or growth initiatives from companies that might have been on hold previously.  As a result, “lots of things that are happening with Allied that are very positive and we’re excited about.”

One such example is the AIC-backed voice messaging company, Neptune Innovations. Founded in 2005 the company started to take off over the last two years and currently offers AIC clients a new service and opportunity for the company itself to differentiate.

With sales and business development on the agenda and a solid internal philosophy in place, the reputation for AIC across the ARM industry appears in good hands from a CEO that started with company after graduating university in 1985. “It goes to the overall type of arrangement we’re trying to create with each client,” Rae says of the recent developments, “and if we can drive cost out of their business even if it’s at our expense then we believe longer term that puts us in a better position with those organizations.”