Q. Why did you choose the collection industry as the sector to start a business more than 40 years ago?
A. I have always been in the finance and collection business. While attending college in the ’50s, I worked for Seaboard Finance Co., then one of the largest consumer loan companies in the country. I became hooked on the industry and it’s been in my blood ever since. Moving into the collection business was a natural offshoot.
Q. What was the collection industry like in the early years?
A. Compared to the industry now, it was very unsophisticated – there were no large call center operations like today. It was very time intensive – much more difficult in terms of managing data and making actual collections. Also, it was much more difficult to secure financing for portfolio purchases. Very few investors wanted to loan money to companies that purchased charged-off consumer receivables. Their thought was, if the credit originators can’t collect on the charge-offs, how are you going to? We needed to show a long track record of profitable returns to prove to investors that we could succeed in recovering charged-off consumer debt.
Q. If there were no large call center operations back then, how did you make collections?
A. For the people we could not contact by phone, we literally went door-to-door to make collections. In those days, each collector was responsible for approximately 350 accounts in their route. Collections were very labor intensive. Now, with the introduction of computers, each collector has 4000 to 5000 accounts in their route.
Q. Today, Asset Acceptance focuses solely on purchasing debt portfolios as opposed to contingency collections. Was that always the case?
A. That was not always the case. At one time, we owned a collection agency division and a debt purchasing division. We sold the collection agency division in the mid 1970s to focus on purchasing debt.
Q. Why did you focus on purchased portfolios instead of contingency collections?
A. At one time, you made 50 percent of contingency collections, but beginning in the mid- ’70s the recovery percentages began to drop. We ran models with decreasing recovery percentages and came to the conclusion that it would be difficult to make a suitable profit below a 30 percent fee on contingency collections. Once the recovery percentage rates dipped below 35 percent, we decided to sell the contingency collections division and focus solely on portfolio purchase collections, where the profit margin would be greater and more stable over the long-term. Also, I always liked collecting my own accounts over collecting for someone else.