Debt Buying Professionals See Improvement and Significant Challenges Ahead

Mike Ginsberg

Like many of you reading today’s news, I attended the Debt Buyers Association’s annual conference in Las Vegas last week. I enjoyed spending a few days away from my office catching up with industry friends, making new connections and gaining perspective on the affairs shaping our industry. Fortunately, I did not lose any money at the tables this trip because I was only there for a short while and did not have the time or energy to gamble. Otherwise I would have made my annual contribution to the casino fund raisers (A.K.A., gambling).

I left the conference pondering the state of debt buying, concerned about the future for those involved in purchasing receivables (in spite of current stock performance of the public companies), and the companies providing financing, products, and services to debt buyers.

Here are my Monday musings on this important topic:

• Overall, I left the conference with a somber feeling about the state of affairs of the bank card/credit card sector of the ARM industry. This sector continues to generate the lion’s share of revenue among debt buyers and therefore generates the most scrutiny. Executives from dozens of debt buyers, collection agencies, and collection law firms that I spoke to expressed concern that they continue to suffer from the impact of reduced placement volumes as a result of the significant drop in loan originations among the largest credit card issuers. Data security and compliance costs continue to increase while downward rate pressure continues from their clients in spite of these trends, making it increasingly challenging to generate profits while providing quality service.

• The collectability of accounts across most age portfolios has improved over recent quarters and most collection professionals expect a vibrant tax season. Questions loom about sustainability of such performance, but most believe economic conditions will continue to improve as we have emerged from the bottom of the cycle.

• Unemployment levels remain front and center on the minds of most executives. Some knowledgeable professionals on the topic expressed concern about the accuracy of the reports of reductions in the unemployment rate during an election year.

• On the debt buying front specifically, established and experienced buyers expressed dissatisfaction with high portfolio pricing of the limited product made available directly from issuers.

• As five of the largest buyers have closed their call center doors and sold off remaining portfolios under management, some executives voiced concern over whether this is a trend and which debt buyers might be next.

• A number of new funding sources have emerged from established debt buyers looking to finance other buyers’ purchases and from former executives providing their capital and expertise to smaller and mid-size players. Financing costs are still perceived as high.

• New vendors continue to emerge each year offering the latest variances to technology and information resources designed to improve recoveries and cut costs. I was encouraged by the number of attendees that I spoke to who said their primary reason for attending the conference was to walk the exhibit hall and meet with new and established vendors to discuss the latest and greatest solutions available in the marketplace.

• The most discussed topic during the sessions was regulation, with particular emphasis on the impact of the Consumer Financial Protection Bureau (CFPB), the impact of the upcoming Presidential election on the industry, increased number of fines and amounts levied by the FTC, and the continued scrutiny and actions from a growing number of state Attorneys General. Unfortunately, the exhibit hall remains open during the sessions, encouraging networking instead of attending important sessions.

• I was impressed with the number of attendees overall and I have observed that more decision makers attend association meetings like DBA each year, which is a positive sign. However, can someone please explain to me why the CEOs from the largest debt buyers don’t attend the most important conference of their association?

• I am always amazed by the number of people who camp out at the bar or coffee shop without a badge, armed with excuses why they don’t pay to support the conference. Their excuses are always variances of the same noise including my favorite, “I don’t attend the sessions so why should I pay $1,000 bucks to attend.” My response is always the same, which is if you don’t pay then you should not get the benefits of any meetings with your clients or prospects. No, I don’t get paid by DBA to say that.

• On a much lighter note, I thought the Aria was an excellent change of venue for the conference. I found many attendees stayed at the hotel at night which made for first-rate networking in the casino and at the bar. I love the Mirage but it is also nice to move around the strip. I understand DBA will be at the Aria for the next 5 years. Was it just me or did it feel like the walk from the guest rooms to the exhibit hall got longer as the conference went on? It must be the shoes! (A cup of coffee at the next conference to the first person that emails me which commercial that’s from.)

These are challenging times for debt buyers, those servicing debt buyers, and for the association spending resources on Capitol Hill lobbying against inappropriate regulatory change.  I encourage you to share your feelings on any of the topics I covered above or any additional thoughts that you left Vegas with. What goes on in Vegas should stay in Vegas. Your feelings on the affairs of the industry, however, travel with you and should be shared.

Mike Ginsberg is the president and CEO of Kaulkin Ginsberg Company. You should follow him on Twitter: @mike_ginsberg.