As another year passes by, I have been asked to provide my predictions for the future of the ARM industry. Like years past, I will list my top predictions for the coming year in this post. However, I must confess that writing this feels different to me this year.
Perhaps this is because of the significant regulatory, economic, political and operational influences that have been converging upon all facets of credit and collections, but I don’t think that’s the reason. Writing this feels different this year because today is the first week after another unspeakable tragedy has struck yet another small community in America, this time taking the lives of very young, sweet children. When my own children ask me the same question we are all left asking, “Why does something like this happen?”, I am reminded how precious life is and how trivial my predictions are.
I am very fortunate to have meaningful opportunities to interact with professionals from virtually every aspect of credit and collections. Owner/operators share with me their perspective because they know that will maintain confidentiality. An owner’s perspective is critical but it is not the only one that I value or seek. Throughout the year, I spend time with collectors, debt buyers, attorneys, accountants, vendors, economists, recovery managers, those who establish credit policy, regulators, enforcement agents like state’s attorneys general, conference coordinators, reporters and investors. Many of the professionals I interact with reside outside the United States.
Regardless of title, everyone has their own point of view and most people want to share their perspective on matters that impact their businesses. I routinely ask about the challenges they are facing, the opportunities they see, and what keeps them up at night. The answers are eye-opening and informative.
From this vantage point I bring you my 2013 predictions for the ARM industry:
1. Economic conditions will continue to improve overall, albeit at a frustratingly slow pace and therefore I anticipate no significant improvement in liquidation results in the foreseeable future.
2. More and more, state and local governments that are strapped for cash will place accounts with collection agency specialists.
3. The national unemployment rate will continue to hover at current levels throughout the year and recoveries won’t meaningfully improve until more people return to the workforce.
4. State and Federal regulators will continue to ratify legislation that defines the process by which ARM firms can perform their services.
5. Hospitals and other healthcare providers will merge at an accelerated rate to cut costs, combat shrinking government reimbursement and add leverage with private insurers, resulting in more business opportunities for companies equipped to provide revenue cycle management services.
6. The CFPB will conclude its first round of bank audits before focusing their efforts on non-bank financial institutions like debt buyers and collection agencies.
7. Student loans will replace credit cards as the single largest growth segment for ARM.
8. Expect additional consolidation and attrition among collection agencies, collection law firms and debt buyers.
9. A growing number of clients across all industry segments will follow the lead of the credit card issuers and apply a zero tolerance toward complaints, compliance issues or bad press.
10. More and more collectors will utilize social networking sites to track down debtors and market services.
11. Consumers will continue making efforts to reduce and manage their debt loads, except for student loans.
12. Regional banks will move back into the credit card market, presenting a growth area for ARM companies equipped to purchase or service this asset class.
13. The large ARM consolidator will become part of industry history, replaced by large specialists dominant in a particular market segment.
14. Substantial barriers-to-entry for collection agencies and debt buyers will develop due to intense regulatory oversight, compliance requirements, and escalating infrastructure and data security costs.
While circumstances change from year to year, and performance will vary, two things will remains a constant in the ARM industry. First, collection professionals are resilient and will adapt to change. Second, professional recovery of past due accounts receivable will continue to be a vital component of our credit economy.
Mike Ginsberg is the CEO of Kaulkin Ginsberg, the leading advisor to the outsourced business services (OBS) and accounts receivable management (ARM) industry.