Editor's Note: This article previously appeared on the Ontario Systems Blog and is republished here with permission.
No one has a crystal ball, but some people have more experience reading tea leaves than others. As we ring in the new year, let’s see how close I come with my 2019 ARM industry predictions.
1. Consumer debt will continue to rise during the first quarter as the U.S. slips into a recession. Many believe the Federal Reserve will be forced to halt any rate hikes and could even lower interest rates to stop the recession. ARM professionals should brace themselves for increased charge offs and in turn increased inventory of debt less than 36 months old.
2. The flood of new debt will support current collection agency business valuations and possibly drive sale prices even higher.
3. Equity investors representing completely new markets will find a new interest in the accounts receivable management industry. Telcom, cable and EBOs may all find collection agencies to be a perfect complement to their current business.
4. Agency valuations will hold at all time high levels through Q2. The collections industry is, by definition, a responsive industry. It reacts to changes in the credit cycle and is typically the last segment of the credit cycle to suffer the impact of a recession.
5. The Consumer Financial Protection Bureau (CFPB), enjoying the fall back to its original name, will publish the new proposed rules for debt collection. This will trigger a compliance scramble much like we experienced when the CFPB launched its Larger Market Participant collection agency, debt buyer and collection law firm examination program in 2012.
6. Robocalling restrictions imposed by the Federal Communications Commission (FCC), and the marketplace’s corresponding response with new, robust consumer call access controls will make text messaging programs the #1 contact system of choice for debt collection purposes.
7. Payment portals will explode, as will the lawsuits claiming noncompliance with the Americans with Disabilities Act (ADA), Fair Debt Collection Practices Act (FDCPA), and Electronic Funds Transfer Act (EFTA). Small fonts, pictures without captions, unauthorized disclosures of a debt, improper disclosures of fees, and payments will all drive portal litigation.
8. Data privacy statutes will become the collection industry’s new Health Insurance Portability and Accountability Act (HIPAA). Just as HIPAA turned agencies and their clients’ upside down and inside out about privacy and security responsibilities in 2003, so too will new state and Federal laws regarding data privacy impact how consumer data is collected, stored, shared and sold. This means the reckless, cross pollination of consumer data, including demographic data among and between accounts and creditors, will come to a screeching halt.
9. Maxine Waters (D-CA), Chair of the House Financial Service Committee, will not rock the boat. Armed with subpoena power, Waters is more likely to launch investigations into banking, lending and payday loan practices rather than drive a legislative agenda that has no hope of passage. She is no stranger to the Committee however, and this may just be the calm before the storm.
There is no formula to help us predict events. There is no fairy dust to help us see into the future. But educated guesses about how economic, political and societal pressures will impact the credit and collections industry are possible. Use these nine predictions to stimulate thoughts and discussion about your 2019 business strategy, collections strategy and market position. Happy New Year!